Ola Electric’s plan to build the world’s largest electric scooter (e-scooter) factory — 500-acre plant by 2022 in Tamil Nadu’s Krishnagiri — could dent the market share of Indian two-wheeler majors. A key advantage for e-scooters is a replaceable battery. This should help bring down the cost of the vehicle. Cost, say analysts, is the biggest determinant deciding the pace of adoption, followed by government incentives, cost of ownership, and relevant infrastructure.
The Rs 2,400-crore factory will have an annual capacity of 10 million. This is significant, given that the annual sale of the domestic two-wheeler market is pegged at 15-17 million. While the details of the company’s strategy related to the roll-out are still unclear, analysts believe the initial adoption could come from food delivery and rental applications. While the share of e-vehicles is less than 0.4 per cent of the overall volume, the pick-up in the retail segment will be disruptive for the current players.
Mitul Shah, head of research at Reliance Securities, believes that Ola’s large capacity (product on the market) will lead to a few consumers shifting from the traditional internal combustion engine or ICE-based two-wheelers to electric versions over the next three to five years, which, in turn, will result in a market share loss for the existing two-wheeler makers to some extent.
Though Ola Electric will be a formidable opponent, analysts believe the current players are not blindsided by the new competitor, given most already have an electric version of the same — be it Bajaj’s e-Chetak, Ather 450, or the TVS iQube.
In addition to its investment in Ather Energy, Hero MotoCorp is also building its own electric two-wheeler. If Ola Electric can price the product at an attractive level, compared to the current pricing of Rs 1.2 lakh, it can take away a sizeable share from the existing players. Most analysts expect a meaningful dent in the existing market share to play out by 2024.
The reason it will take some years before it becomes mainstream is the gradual adoption — first in the urban centres, followed by the rural ones. The latter accounts for more than half of the two-wheeler sales. An analyst at a foreign brokerage believes that battery costs, which account for 40 per cent of the cost of an electric two-wheeler, will come down 30-40 per cent by 2025. This could help the sector overcome the pricing hurdle vis-à-vis the ICE-powered vehicles.