Can India lead in electric two-wheelers?

January 11, 2021 7:30 AM

The government’s push towards localising battery manufacturing can provide an edge

Legacy and new-age businesses alike such as Hero Electric, Ather Energy, Ampere, Okinawa, and several others are also establishing similar units pan IndiaImage used for representation.

By Snehil Singh & Aishwarya Raman

Imagine a day when every other two-wheeler in the world is electric, and made in India at that! This is not wishful thinking. Instead, we’re predicting a pragmatically optimistic year 2030. India is firing on all cylinders to phase out internal combustion engine vehicles. What is propelling its electric vehicle (EV) ambitions is an energising combination of political vision and the entrepreneurial drive of India Inc—the ingredients essential to turn India into a superpower.

India is quintessentially a two-wheeler country—for over one-third Indians, it is the preferred mode of personal mobility. Over the years, a rapidly urbanising India witnessed a growing propensity towards affordable, accessible motorised two-wheelers. Catering to this demand, automakers have succeeded in building performance-oriented and purpose-built two-wheelers.

India’s position as a global two-wheeler hub is incontestable. Against this backdrop, the question is whether India will establish and sustain international leadership in e-mobility, too? The answer is a resounding ‘yes’.

Two-wheelers, especially electric, have demonstrated resilience during the pandemic. Bloomberg NEF estimates that while the global car market is shrinking by nearly 25% due to Covid-19, the global electric two-wheeler market has been green and bullish. In India alone, electric two-wheeler sales increased by 20% to 1.95 lakh units in 2019-20, helped by innovative business models such as battery swapping, wherein a battery is delinked from an EV. Unlike the West, India’s e-mobility transition is hinged on affordable and zero-emission mobility.

Recently, Ola Electric signed a MoU to establish the world’s largest electric scooter factory in Tamil Nadu. Legacy and new-age businesses alike such as Hero Electric, Ather Energy, Ampere, Okinawa, and several others are also establishing similar units pan India. Policymakers are promoting auto clusters in Tamil Nadu, Delhi NCR, Maharashtra, Gujarat and elsewhere. This can create 65 million additional jobs by 2026, as envisioned in the Automotive Mission Plan.

To catalyse manufacturing and propel green economic recovery, the Union government recently approved a production-linked incentive (PLI) scheme worth Rs 1.45 lakh crore for 10 key manufacturing sectors. Of this, the largest share of Rs 57,000 crore is allocated to automobiles and auto components. This places the sector at an advantage as it leapfrogs to an e-mobility future powered by supply (manufacturing) and demand (purchase) incentives under PLI and FAME II schemes.

With the intent to boost global competitiveness of India’s auto sector, PLI mandates only auto businesses with Rs 1,000 crore turnover, Rs 200 crore of exports and Rs 350 crore investment in fixed assets as eligible for incentives. This will have a ripple effect on MSMEs in auto component manufacturing, further growing their businesses, nurturing them into world-class champions.

The government’s push towards localising battery manufacturing provides another edge. The scheme outlays Rs 18,100 crore for advanced chemistry cell batteries.

This is advantageous to both large-scale battery manufacturers and MSMEs. The latter control nearly 50% of the lead-acid battery market and this scheme can help them transition to a sustainable, profitable future. India does not manufacture lithium-ion cells, and hence remains import-dependent (a lot on China, home to about 70% of the global lithium cell manufacturing capacity). Li-ion batteries can also catalyse the growth of the renewable energy sector by offering energy storage solutions. Thus, all efforts to locally manufacture li-ion batteries are crucial to the success of Indian mobility and energy industries.

The pandemic has not only revealed our interdependencies and vulnerabilities, but also compelled us to build back better on pillars of sustainability and resilience. This shift in thinking and the geopolitics redefining the global supply chains reinforce that India cannot afford to miss this opportunity.

Undoubtedly, India has the will and the capacity to show the world how to get the electric two-wheeler revolution right.

Singh is manager, Policy & Advocacy, and Raman is head of Research, Ola Mobility Institute

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