India’s e-Scooter revolution

Prime Minister Narendra Modi’s government has set a target of electric vehicles making up 30 per cent of new sales of cars and two-wheelers by 2030 from less than 1 per cent today. Despite incentives for electric cars, India’s EV manufacturers are choosing to produce e-Scooters instead which have fewer regulations...

India’s Prime Minister Narendra Modi’s government has set a target of electric vehicles making up 30 per cent of new sales of cars and two-wheelers by 2030 from less than 1 per cent today.

Despite incentives for electric cars, India’s EV manufacturers are choosing to produce e-Scooters instead, which have fewer regulations.

Background

An electric vehicle, also called an EV, uses one or more electric motors or traction motors for propulsion. An electric vehicle may be powered through a collector system by electricity from off-vehicle sources or may be self-contained with a battery, solar panels or an electric generator to convert fuel to electricity. EVs saw a resurgence due to technological developments, and an increased focus on renewable energy.

Government incentives to increase adoptions were introduced, including in the United States and the European Union. E-Scooters are two-wheeled Electric vehicles which are primarily used for personal transport.

Analysis

In May 2017, India’s economic policy think tank began discussions to form a new policy that suggested electrification of all new vehicles by 2030 by mainly offering subsidies to buyers. The proposal faced resistance from carmakers and auto parts companies that considered the shift too sudden and ambitious, and the target was dialled back to 30 per cent.

However, its efforts to convince carmakers to produce electric vehicles have flopped, mainly because of no clear policy to incentivise local manufacturing and sales, lack of public charging infrastructure and a high cost of batteries. Cost-conscious two-wheeler buyers are a more secure market for manufacturers. It would also open up a new market for global companies like Japan’s Yamaha Motor and Suzuki Motor that are drawing up initial plans to launch electric scooters and motorcycles in the country.

The potential is huge. India is the world’s biggest market for scooters and motorcycles with annual domestic sales exceeding 19 million in the fiscal year ended March 31, 2018 – six times that of car sales over the same period. The next biggest market is China, with annual motorcycle sales of about 17 million in 2017.

Electric scooters make up a fraction of the total but the segment is growing fast. In fiscal 2017-18, sales more than doubled to 54,800 from a year ago while electric car sales fell to 1,200 from 2,000 over the same period, according to data from the Society of Manufacturers of Electric Vehicles (SMEV). By 2030, sales of electric scooters are expected to cross 2 million a year, even as most carmakers resist bringing electric cars to India.

The roadblocks for scooters are fewer. Compared with cars, scooters are lighter, which means they can use less powerful, and hence cheaper, batteries. The scooters can also be charged quickly and more easily, often using existing plug points in homes, and their price is similar to petrol-powered models.

The challenge is that most electric scooters sold today are utilitarian and not as powerful as models that run on petrol that can go faster and climb gradients easily. The supply chain is not robust which means manufacturers need to rely on imported components. Most importantly, electricity supply in smaller towns and cities, where demand is picking up, is irregular - although frequent power shortages in India are a thing of the past.        

The government also wants to push the use of electric vehicles for public use, a revolution already led by three-wheeled autorickshaws. Sales of these vehicles, ubiquitous on Indian city roads, are expected to double to 935,000 units a year by 2023, according to consulting firm P&S Market Research.

Assessment

Our assessment is that India’s large market potential will ensure a competitive EV market for domestic manufacturers. We believe that the government must enact more incentive-based legislation for domestic manufacturers to promote the use of electric vehicles in the country.

 

Comments