E2W Penetration Rises To 5% In Last 2 Years: Report
Since the introduction of electric two-wheelers (E2W) in India, multiple companies have entered into the segment driven by consumer interest and Total Cost of Ownership benefit (TCO) vis-à-vis an ICE counterpart. During the last 2 years, E2W sales have expanded from 13k units on average per month to 60k units. E2W penetration has risen from 1 per cent in 2021 to 5 per cent YTDCY23. The E2W industry is in a nascent stage as companies are still tweaking their offerings to fix issues.
JM Financial Institutional Securities' report on electric two-wheeler states that four brands account for over 3/4th of E2W sales in India with product offerings priced between INR 120k-150k. These include Ather, Bajaj Auto, Ola and TVS.
Feedback on key players: While E2W penetration in India has reached 5 per cent; the industry is at a nascent stage. Companies are still testing the technology, tweaking their offerings and introducing new generation products to fix issues. To understand the drivers of demand buoyancy and issues/challenges faced by customers, they visited 30+ outlets (incl. sales and service stations) covering these four OEMs across three EV hubs - Bengaluru, Pune, and Mumbai (Maharashtra and Karnataka form ~1/3rd of E2W sales). The report indicates that build quality, service reliability, styling & features and TCO are some of the key drivers of customer decision making. However, customers are also facing numerous issues related to software glitches, product quality (features not working, uneven panel gaps, etc.), delays in delivery and long wait for service attention (due to inadequate manpower at service stations) etc. While OEMs have acted upon some of the issues (for instance: Suspension design flaw, battery overheating, etc.), issues still remain with new generation models. Dealers indicated that distribution is also one of the drivers of higher sales for players like Ola (800+ touch points vs. 650+ for TVS, Bajaj and Ather combined).
The study also indicates that there are two kinds of approaches adopted by E2W companies. While some companies have decided to take an aggressive ‘fix-on-the-go’ approach, others have adopted a slow but steady ramp-up approach. The traditional 2W companies are focusing on R&D, after-sales service and test marketing products in limited regions before expanding to pan-India presence. Setting up local vendor ecosystem and manufacturing at scale, will eventually come in place. The ‘fast’ approach reminds of Tesla’s initial days with some calling it - ‘deliver now, fix later’. Tesla, despite a breakthrough product launch, initially faced multiple issues around product quality, thermal management, etc. Over a period of time, focus and investment in R&D, vendor base expansion, thorough product testing, and service/charging ecosystem helped it overcome product and software-related challenges. However, Tesla had enough time to fix the issues as competition was limited. In the Indian context, incumbents / start-ups with slow but thorough approach are rapidly catching-up and may leave some ‘fast’ start-ups squeezed eventually.
Learning from the past: Renault Kwid is a classic case study. The model was introduced in India in 2015. Basis its styling and pricing, it created significant consumer interest. However, Renault had extremely limited sales and service network. Hence, as an industry-first, the company opened the bookings on an app. The strategy worked and Kwid raced to 10k units/month giving healthy competition to the Suzuki Alto. However, an engine related issue and subpar after-sales network dealt a severe blow to the model.
Similarly, looking at current EV market share has no meaning. In a growing market, initial breakthrough is no barometer or pointer of eventual success. Traditional wisdom suggests long-term winners can be created by ticking all the right boxes: Technology & R&D + Right product + Right pricing + Sales & Service network + Resale value + Local vendor base.
