Indian EV Two-Wheeler Technology Market, 2023

The Indian Electric Vehicle two-wheeler (E2W) market is growing at a significant pace with a range of technologies, revenue streams and business models available to companies and investors operating in this space. EVs at a larger scale have also become a viable, sustainable and cost-effective mobility option.

This is driven strongly by the demand from a growing section of people willing to adopt E2Ws in the hopes of getting eco-friendly and affordable modes of transportation. This demand trajectory is further fueled by government incentives, technological advancements, and changing consumer preferences.

In this article, we will explore the current state of the Indian EV two-wheeler market, its growth potential, and some business opportunities available.

Highlights:

• E2W accounts for 55% of the total EV sales in FY2022 alone in the country, against a share of 32% in FY2021.
• The E2W market segment is set to reach 67.14 lakh vehicles by FY2027.
• The total volume of investments made in the Indian E2W market so far accounts to ~INR 14,000 Crore. In H1 FY2023 (April to September 2022), investments of ~INR 3,844 crore were made into the E2W market.

As per industry reports and market research, the E2W market is projected to grow at a CAGR of over 40% from 2021 to 2026. The growth is being fueled by a number of significant factors when viewed from a market perspective, here are some of them;

1. Government Support: The Indian government has been actively promoting the adoption of EVs through various policy measures, including tax incentives, subsidies, and the implementation of stricter emission norms.

• E2Ws account for about 90% i.e., ~4.2 lakh units of the FAME3-2 subsidized EVs sold until 11th July 2022, signifying a gap of 58% from the FAME 2 sales target (10 lakh units).
• Over the course of last year, new initiatives have been proposed and these include the Production-linked Incentives (PLI) Scheme for automotive sector (INR 25,938 crore) and the PLI scheme for Advanced Chemistry Cell (ACC) (INR 18,100 crore).
• New guidelines for battery swapping and battery safety norms, along with amendments to EV battery testing standards, and Draft Battery Swapping Policy (2022) have also been issued.

1. Rising Demand: General growing awareness and concern towards environmental issues among consumers, coupled with rising fuel prices, seems to have a big impact on the E2Ws demand in India. In addition, the growing availability of EV charging infrastructure and the convenience of electric vehicles is also contributing to the rising demand.
2. Cost-Effectiveness: With advancements in technology and increased production, the cost of E2Ws is becoming increasingly competitive against gasoline-powered vehicles. Moreover, the low operational and maintenance costs of electric vehicles make them an attractive option for cost-conscious consumers.
3. Innovative Business Models: Several startups and established players in the Indian market are introducing innovative business models to promote the adoption of E2Ws. This includes offering subscription-based services, flexible financing options, and building a network of charging and battery swapping infrastructure.
4. Potential for Domestic Manufacturing: The Indian government’s push towards domestic manufacturing is also contributing to the growth of the E2W market. Several Indian companies are investing in developing and manufacturing electric vehicles, which is expected to create employment opportunities and contribute to the growth of the domestic economy.

Growth:

There are several emerging revenue streams and business models in the Indian E2W technology market that are promising. These include;

1. Battery swapping services: Battery swapping is an emerging model in the market, where customers can swap depleted batteries for fully charged ones at dedicated stations. This can be a profitable business model for companies that offer battery swapping services, several established players like Honda already operate these in metros.
2. Charging infrastructure services from creating stations to developing tightly integrated fast chargers depending on the battery and chemistry are showing a lot of promise. Oil marketing companies that have a broad network of charging stations for EVs.
3. Leasing and rental services E2W have wide applications from delivery partners to casual renters without owning the vehicle. Models based on usage time/distance, subscription usage are actively being tested.
4. Financing is lagging behind as loan providers are in early stages of setting up necessary in-house capability for evaluating value and getting data needed for underwriting.
5. Component Manufacturing is also an opportunity for manufacturers to supply parts to OEMs. Existing automotive clusters across the country show promise to take advantage of this opportunity.

Government policies, rising consumer demand, cost-effectiveness, innovative business models, and the potential for domestic manufacturing are the current driving factors that are invested in the growth of the E2W market. Although the market is slated for growth, it still needs to overcome several challenges such as physical infrastructure in charging and support, digital infrastructure like vehicle diagnostics data and financial aids.

References:

1. PrivateCircle reports on EV 2W 3W Private Companies and EV Charging and Components Private Companies
2. Jmkresearch.com
3. Psmarketresearch.com