For a market that is yet to gather sales momentum, electric two-wheelers (e2w) have no dearth of interest, skepticism or target manoeuvrings. According to the Society of Manufacturers of Electric Vehicles (SMEV), the e2w market in India stood at 1,10,000 units in 2008-09, or roughly Rs 350 crore in value. While it is still a puny 1.5% of the entire two-wheeler market in India, it is expected to grow at 15-20% this year, even if there are no significant favourable stimuli, say analysts. And if the required regulatory and policy support is in place, the market has the potential to register a 35-40% growth for the next two-three years.
The key forces driving the e2w market growth are improvements in battery technology, strong local regulatory support and deteriorating public transit service. Not to mention the cost savings that will accrue to consumers. There are close to 14 organised electric vehicle manufacturers in India and together they command about 70% of the market. The balance comprises unorganised players and importers/traders. While competition is bound to hot up, the market will remain with the traditional players. Smaller players would be wiped out once stricter certification and testing processes are implemented, says Naveen Munjal, chief executive of Hero Electric, a serious contender in the market.
In terms of manufacturing criteria, the e-bikes can be classified into two segments. The first segment comprises up to 250-w motor power capacity (up to 25 km per hour speed) e-bikes that do not require a driving licence, and the second segment would be the over 250-w motor power bikes that are equivalent to a petrol two-wheeler with high power and high load capability. Most of the manufacturers in India entered the e2w market via the 250-w-plus motor power segment, which contributes to nearly 65-75% of electric bike sales, says Shailesh Bhandari, managing director of Electrotherm India, Indias first and largest-selling e2w company. Its brand, Yobyke, probably enjoys the highest recall in the segment.
It is the fantastic growth potential that has forced the existing players to enhance their product line up and to broaden their network. For instance, Ultra Motor, which severed ties with its Indian partner Hero Electric in April 2008, has gone solo and sells battery powered two-wheelers in the country. It has committed to invest about Rs 150 crore in marketing, manufacturing and distribution, technology and product development. The company is looking at expanding its dealership network across India to about 300 by September 2009.
Similarly, Electrotherm, which entered the e-bike category in 2006, is working on high-powered and high-performance e2ws that would compete with 100 cc to 125 cc two-wheelers in the market. The company already has a strong line up of productsit has five models in the sub-250-w motor capacity segment and two in the over 250-w motor power segment.
BSA Motors, a division of Tube Investments of India, part of the Murugappa Group, is also planning to enhance its product range post October 2009. The company had trial launch of five models in south India and, in the next phase, plans to look at Gujarat, Maharashtra, Delhi and Rajasthan for growth.
Hero Electric, which currently has a competitive line up with low-speed electric two-wheelers, is looking at launching a range of high-speed electric vehicles soon across the country. The company is reportedly planning to add 90 dealers to take up the network to 350 by the end of March 2010.
Pure play two-wheeler makers TVS Motors and Kinetic are also taking a keen interest in the segment. TVS Motor has rolled out Scooty Teenz Electric, the electric version of its Scooty model, a few months ago targeting teen-age girls who use vehicles to travel short distances ranging between 15km and 25 km per day. For its part, Kinetic Motor Company that had put in a lot of investment in research to develop e-bikes has put the plan on the back burner for some time, probably due to other investment commitments.
Most of these players are working at localisation of critical components by tying up with local vendors. According to Munjal of Hero, because of the 8% countervailing duty (CVD) levied on the indigenous components, its localisation plan has been put on hold. The government has to abolish this CVD to encourage indigenisation, which will help generate employment, he says.
KB Srinivasan, vice-president, BSA Motors says that local content at BSA Motors is above 20%. We are targeting 80% localisation over the next two years. The company is developing parts with various local vendors to achieve this, he adds.
There are, however, strong forces resisting vehicle electrification, including battery cost, charging infrastructure, and inherent complications with large battery systems. At present, there is no uniform value added tax (VAT) structure across the country. Government support would play a critical role for the growth of the electric two-wheeler segment.
States such as Madhya Pradesh, Chhattisgarh, Orissa, West Bengal, Kerala, Andhra Pradesh and Karnataka have reduced VAT on electric vehicles from the earlier 12.5% to 4%. In Delhi and Uttarakhand, e-vehicles are exempted from VAT. Delhi also provides a 15% subsidy on such vehicles. Hero Electrics Munjal says the industry is looking forward to a uniform VAT structure across the country.
The government can also look at reduction of import duty on key components such as battery, motor, controller, providing special incentives or tax benefits to companies that are investing heavily in R&D (research and development) and technology to develop India-centric products. The category, which is still at a nascent stage, has also seen some fly-by-night operators who simply import the kits and dump the assembled vehicles in the market without providing after sales service support. And that is a serious issue. Current rules and regulations should also be made more stringent to prevent mushrooming of unscrupulous players, suggests Bhandari of Electrotherm.