Are Electric 2 Wheelers The Leaders Of India’s EV Expedition?

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By Neeraj Kumar Singal   – Director, Semco Group

India is one of the world’s largest importers of fossil fuels which puts undue strain on India’s foreign exchange reserves and extensive use of these fuels also has negative impacts on health & environment.

India’s E-mobility initiatives for pollution-free commercial and private transportation have prompted many established vehicle manufacturers and new entrants to begin manufacturing the e-vehicles in the last mile connectivity and personal use space. In India, 1,52,000 electric two-wheelers were purchased in 2019-20 against 1,26,000 in 2018-19. FY 2020-21 was a tough year for sale of PVs because of Covid19 pandemic has badly impacted the economy & purchase preferences and only 1,43,821 electric two-wheelers were sold with a decline of 6% from last year ( Society of Manufacturers of Electric Vehicles) but was much better as compared to decline of 30% for the total vehicle registration in 2020-21.

Considering the ease of operation & maintenance, improved charging infrastructure, increased home delivery of purchased items & services, ease of commuting in crowded
areas, preference of youngsters to use two wheeled EVs for short distance & workplace commuting- it is believed that India’s electric vehicle revolution would be led by two wheelers which already are being used in India to the extent of 81% of the total vehicles on roads and progressively will also have a short payback period.

Although e-scooters and bikes cost more than conventional ones, the rising fuel prices, reduction in lithium-ion battery prices, many large manufacturers like Tata & Reliance
planning to establish Gigawatt level lithium ion battery manufacturing facilities as well as subsidies offered under FAME II and also by state governments, are narrowing the gap. With an investment of Rs 2,400 crore, Ola plans an escooters factory with a capacity of one Cr by 2022 which will be the equivalent of 20% of the global two-wheeler production capacity.

A Motilal Oswal recent research report estimates that, for two wheeled EVs , there is a potential to change the competitive landscape of the Rs 34,000 crore scooter segment with a market size of around 5.6 million units. McKinsey has also estimated that the Indian e-two-wheeler market would hit 4.5 million-5 million in the 2025 financial year, accounting for 25%-30% of the total market, and nine million by 2030 (around 40% of the total market). KPMG too estimates market penetration of 2 wheeled EVs at 7-10%
in 2025 & 25-35% in 2030. These estimates are further strengthened by the Government’s 2019 FAME II policy, GST reduction to 5% and incentives extended under State Government Policies. On 11 June 2021, the FAME II scheme was further extended by another two years to March 31, 2024 from the earlier planned closure of 31 March 2022. For new electric two-wheeler customers, the scheme has increased the demand incentive by 50 percent to Rs 15,000 per kWh (earlier it was Rs 10,000 per kWh) and the maximum subsidy cap was also increased to 40 percent from the earlier 20 percent cost of the e-two-wheeler cost. With these changes, the cost of the 2 wheeler EVs is expected to be down by upto Rs 20000. As of June 26, 2021, only 59,984 electric two-wheelers have got the benefit under the FAME II scheme against the target of 2 million 2 wheelers & so, a huge expansion potential exists.

Reducing total cost of ownership (TCO- acquisition too running cost per km upto disposal)) gap for 2WEVs is important for better acceptability, especially for bulk operating commercial segment. TCO for an ICE scooter (indicative) is Rs 5.7/km which for E-2W is around Rs 7.2/km considering average monthly running of 500 km and with
the additional incentive of Rs 5,000/KWh this will further reduce to Rs 6.5/km.

Rajiv Bajaj , managing director of Bajaj Auto, blames the introduction of low-speed, poor-quality products for the slow adoption of EVs. He indicated that “When you introduce new technology, it has to be aspirational . The electric vehicles need to be higher speed & higher quality for faster adoption so that scales of production are achieved to standardize product & reduce prices.” Further, as out of 52,959 high speed bikes sold since January 2019, only 31,813 vehicles were given subsidies under the FAME II scheme until December 2020 and the rest were disqualified- the clarity of terms of policy and transfer of subsidy at the sale point is important for promoting use of EVs. Localization of the imported components is also an important issue needing action.

Further, EESL has plans to supply 2 lakh e-two-wheelers and 3 lakh e-three-wheelers at half their current prices using incentives offered under FAME II scheme, state government subsidies, support from EV manufacturers and carbon credits earned from the UN Clean Development Mechanism (CDM). The Centre has goals to make India an “EV manufacturing hub” and has offered Rs 18,100 crore to the sector under the production l inked incentive (PLI) scheme and additional Rs 45,000 crore to attract investments for advanced chemistry cell battery manufacture.

It is expected that the incentives will encourage delivery service providers like those engaged in food delivery, ecommerce logistics and courier services to switch to using
electric two-wheelers which are more reliable in performance, are almost maintenance free, comfortable to ride & have low running cost. Apart from being environment
friendly, these features & attributes of two wheeler EVs will ensure that the timely deliveries are made at low operational costs and the extent of savings are used in innovatively improved & reliable service delivery as well as better employee remuneration with higher degree of customer satisfaction.

With the enhancing support of government through policies, incentives, soft loans, manufacturers fore-sighting the rising sunshine with their record investments and consumers getting EV ready progressively with their increased awareness to protect environment, improved performance and reducing “pricing & running cost gap” of EVs- the “2W EVs” are no doubt bound to the future of e-mobility especially within the small community clusters, towns & cities. However, to ensure the full success of market
penetration -simultaneously, the issues of consistent quality, free maintenance support inbuilt in vehicle pricing, battery swapping & long term warranties, easy availability &
affordability of spares, trained mechanics, charging infrastructure and at par TCO need to addressed & resolved.

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