Incumbents strike back: How will electric 2W game play out for Ola, others?

Niranjan Gupta, chief executive officer (CEO) of Hero MotoCorp, said in Jaipur last week that the company was going to step up its presence in electric vehicles by launching three e-scooters by Decem­ber this year — one each in “mid”, “affordable”, and “business-to-business” segments.

Currently, India’s largest two-wheeler maker sells only one electric scooter, Vida, which was launched in October 2022.

Hero will also open EV-exclusive stores, each spread over 500 square feet, but will not confine its electric two-wheelers to these; they will also be sold at its revamped stores and premium showrooms.

With this, it is clear Hero is not content to be an investor in Ather Energy, in which it holds nearly 40 per cent equity, but wants an EV play of its own. Hero is not alone in this.

Startups — Ola Electric, Ampere, Okinawa, and others, in addition to Ather — led the initial charge in electric two-wheelers, armed mostly with electric scooters, which are simpler to manu­facture and easier to sell than e-motorcycles. Bene­fitting from government support, they obtained technology wherever they could find it and led the charge, unabated in spite of the early concerns on safety.

They no longer have a free run. Hero and its age-old rivals in the two-wheeler industry, Bajaj Auto and TVS, are ramping up their game in electric. Honda Motorcycle and Scooters India (HMSI), which redefined India’s two-wheeler mar­ket years ago by focusing on scooters at a time everyone was talking motorcycles, is mounting its own assault on electric. Its management re­sh­u­ffle last year was seen to be a preparation for this.

That said, TVS and Bajaj have moved faster.
 

According to the Society of Manufacturers of Electric Vehicles (SMEV), 728,054 electric scoot­ers were sold in India in 2022-23, of which 642,557 were sold during April-December 2023. Sector ex­perts project the total sales for 2023-24 to surpass 900,000 units. Bajaj and TVS are among the top five companies — Ola, Ather, and Ampere are the other three. Together, the top five have 80 per cent of the market. That leaves Hero to play a bit of catch-up, though there is Ather.

“I am not worried at all,” Gupta said in Jaipur. “Electric vehicle is like a marathon and not a 100-metre race... In a marathon, seldom you will see the winner is ahead during the first 100 metres. EV is that race.”

There is indeed a lot of the race left. Electric, for all the hype, is just about 15 per cent of the scooter market. So, what is on the cards?

Trusted brand, proven product

“The incumbent players do have an edge as they have been present in the market for more than four decades and have built trust,” says Hemal Thakkar, director of transport logistics and mobility sector, CRISIL Market Intelligence and Analytics. “The new-age players have just started selling over the last two to three years.”
 

Indeed, social media is replete with grievances about the after-sales service from new-age comp­a­n­ies. Interest rates on loans to purchase electric scooters from these companies remains high.

“I think 2024 is going to be the year for tradit­i­o­nal ICE companies. More and more market share is shifting in favour of them. Among the startups, Ola and Ather are sustaining,” says Anirudh Ravi Narayanan, CEO of BNC Motors, a Coimbatore-based EV company.
 

ICE companies — ICE means internal comb­us­t­ion engine, the technology that fuels tradition­al vehicles running on petrol — have the advan­tage of their nation-wide distribution networks, cash piles, proven products, and trusted brands. New-age players need a new strategy. “It cannot be the same marketing and same product strategy like them,” says Narayanan.

ICE players, not surprisingly, exude confidence.

“We are talking about an industry that is going to be long-term, strong, and sustainable. We are not so worried. We are continuously doing better than the industry,” says K N Radhakrishnan, CEO, TVS Motor. 
 

TVS, since entering the e-scooter market in January 2020, has been on an upswing. Its cumulative e-scooter sales touched 100,000 units in April last year, 150,000 in August, and 200,000 in October. For the December month alone, it was seen to be in second place after Ola, selling 12,244 units, 31 per cent more than December 2022.

Bajaj Auto has sold a cumulative 100,000 elec­t­­ric-Chetak scooters since its launch in early 2020. Chetak Technologies is Bajaj Auto’s EV arm.

Rakesh Sharma, executive director, Bajaj Auto, said during the third quarter analyst call that e-Chetak (which has two models) is available in 140 cities through 160 exclusive outlets. Its market share has risen to 14 per cent, from 5 per cent in 2022-23.

“We rank number three now, according to Vahan registration data. We have plans to add to the Chetak portfolio in the first quarter of 2024-25 fiscal. From 3,000-4,000 per month sales in the beginning of this fiscal, Chetak volumes have climbed to 10,000 per month levels now, and we see this going further up to 15,000 per month in the fourth quarter of 2023-24,” Sharma said.

Analysts say the advantage incumbents have is not only their dealer networks within the coun­t­ry but also their presence abroad. Bajaj, for inst­a­n­ce, is in nearly 100 countries. The company had earlier said e-Chetak could be exported as well.

“Product durability and support will now start taking the front seat. It will be interesting to see how both new-age players and incumbents handle this,” says Thakkar of CRISIL.

Kinetic energy

Kinetic Green, the EV arm of Pune-based Kinetic Group, which was once a prominent scooter maker in a thriving partnership with Honda — the Japanese giant had a motorcycle joint venture with Hero and a scooter joint venture with Kinetic for years but walked out of both to focus on HMSI — is reviving its moped brand Luna in an electric avatar.

“We have the best of the two worlds — the advantage of being an incumbent with strong brands like Kinetic and Luna, and also with Kinetic Green we have an asset-light company,” Sulajja Firodia Motwani, founder and CEO of Kinetic Green, told Business Standard. 

The Luna moped used to sell close to 2,000 units per day at its peak. Motwani says Kinetic did market research before deciding to launch the e-Luna. “Our research shows the e-Luna has the potential to repeat what it did in the 1970s and 1980s,” says Motwani.
 

Hoping to recreate its old suc­cess, Kinetic is also reviving its “Chal Meri Luna” advertising campaign, while expanding 

its network to 1,500 dealers, of which 400 will be for three-wheelers, in the next three years.

Kinetic will find itself fa­c­ing old rivals in a new market.

TVS Motor, which enjoyed a good run in mopeds while Luna was running, is stepping up further in e-scooters. TVS iQube, its e-scooter, was sold through only 20 dealerships when it first entered the market. It now has 400 dealers across the country and will have 800 within three months. TVS Motor already has a dealer network of more than 3,800 outlets.

“All of us need to understand that there are some tactical actions, which we can expect from competition. What we should look at as an indus­try is how we are going to focus on the customer, deliver products in a sustainable way,” says Radhakrishnan of TVS.

So, it is once again Hero, Bajaj, TVS and Kinetic. Will Ola and others let them bring back the old times?