December 22, 2020

Insights into the Electric Vehicle Market and Emerging OEM Landscape in India


Ridhish Talwar

The Electric Vehicle story in India has started getting a lot of attention from the startup ecosystem and in this article, we try to provide a robust overview of the EV OEM sub-segments in India, expected adoption cycle by category and development & insights from key players in the market.

EV Sales Breakdown by Segment in India FY19 and FY20

Electric Vehicle sales in India grew at 14.6% in FY20 to reach 872,000 units from 761,000 units in FY19. 3Ws have led the way in EV penetration in India with the category accounting for over 82% of all EVs sold in FY20. The 3W category consists of both E-rickshaws and E-autos. However, E-rickshaws have been the dominant product, operating mostly in an unorganised manner and mainly running on lead acid batteries. The electric 2W sub-segment made up 17.4% of the total sales volume in FY20 with 4Ws and CVs making up the balance volumes for the industry.

In order to form a hypothesis around how Electric Vehicle penetration will happen in India, we considered few key factors for adoption of EVs. These factors included the upfront vehicle cost, total cost of ownership (TCO), Government policy support, local OEM presence, model availability and charging infrastructure issues (certain other factors such as spares, range, charging time, top speed and pickup have not been included in this analysis). We have rated each key factor on an adoption rating scale from favourable (5) to unfavourable (1) and built out phases of adoption of EVs in India.

Factors Affecting EV Adoption in India by Electric Vehicle Category
EV Adoption Phases in India

We are currently in Phase I of this adoption cycle, with the E-rickshaw sub-segment showing the way. The category has grown rapidly, organically without any large organised OEM driving the market, with over 1.5mn of these vehicles operating on Indian roads. The 2W sub-segment has seen the most activity recently and for B2B use cases, the economic benefits are clear. Infact, one of the leading OEMs, Hero Electric has launched a B2B focused product in the Nyx-HX series very recently as well.

We expect rapid adoption in the 2W category and the market has seen emergence of new players, as well as increased activity by the incumbents and this will help in increasing the amount of models available, which will drive further penetration.
Growth Drivers for Electric 2Ws in India

In Phase II, 2W for personal mobility and E-autos are expected to drive the market. Electric buses are also expected to remain in focus due to the emphasis given by the Government in providing demand side subsidies under FAME II. However, the personal 4W market is anticipated to be the last segment to see large scale product acceptance, due to lack of models, government support and the requirement for a robust public charging infrastructure to be in place before adoption.

Let's start by looking at the electric 2W market in more detail, as this category is seeing maximum activity recently, especially the low and medium speed vehicles. For many use cases, depending on the vehicle, Electric 2Ws already make economic sense relative to ICE 2Ws. Low and medium speed electric 2Ws achieve TCO parity at even low utilisation levels and commercial use cases of these vehicles benefit from high utilisation and also allows for better management of the ecosystem and their charging requirements.

Electric Two-Wheeler Market in India

Given the above, the category saw over 100% year on year growth rates in the previous two years. However, growth slowed to 20% in FY20 due to the FAME II transition, which altered regulation to mandate additional conditions for claiming demand side subsidies under the program. This caught the industry unprepared with the introduction of various criteria like min local component sourcing (50%), min speed (40 kmph) and range criterias (80 km).

Overall, electric 2Ws sales grew at a CAGR of over 60% between FY16 and FY20 to reach 150k units, which was just under 1% of the total 2W market in FY20. Over 90% market share is with the low speed and medium speed electric scooters (under 60kmph) below a price point of Rs 1 lakh.

As all of us are aware, the Covid pandemic and subsequent lockdown has led to a spurt in home deliveries and we believe that despite an overall degrowth in the 2W market in FY21, EVs as a percentage of 2W sales should increase. Early indications of this are visible from commentary by the management at Hero Electric, which has indicated a six-fold increase in its sales in the first four months of the current FY.

We expect the market to grow at a much faster CAGR over the next 5 years to reach 3mn+ electric 2Ws by 2025 driven by demand from commercial use cases and fleet operators.

Electric Two-Wheeler Key Model Mapping in India

In the above chart, we have mapped key models by a few key players in the electric 2W space including Hero Electric, Okinawa, Ampere, Revolt, Ather, Bajaj and TVS. On the X-axis is the ex-showroom price per unit in Rs in Delhi and the Y-axis has the Top speed in kmph. Low speed segment (under 25kmph) is the most crowded and majority of the models under Rs 50k are having lead acid batteries (marked in blue). This category also has multiple other players like Avon, BattRe, Electrotherm (Yobykes), etc, which are not mapped here.

The high speed segment (over 60kmph) has seen many incumbent OEMs launch models like the Bajaj Chetak or TVS iQube. This category also has many under development bikes mostly backed by large industry players like Tork Motors backed by Bharat Forge, Twenty Two Motors backed by the Taiwan based KYMCO, Ultraviolette backed by TVS, etc. Ather also operates in the category, which has Hero MotoCorp as their major investor.

Electric Two-Wheeler Key OEM Sales and Market Share FY20

As seen above, the top 5 players command 97% market share with Okinawa and Hero Electric leading the way. In Fact in FY20, Okinawa was the leader in the 25kmph+ categories with over 10k vehicles sold during the year and Hero Electric was second with 7.4k units (although they apparently sold over 50k units, but the vast majority were low speed vehicles) and Ather came in third with 2.9k units. However, YTD FY21 data suggests Hero Electric has taken the lead now with 35% market share having already sold 7,552 medium and high speed vehicles in the April-Sept period.

Let’s move on to the Electric 3W segment, where sales grew at a CAGR of 38% between FY16 and FY20 to reach 720k units. We expect a significant drop in sales in the current financial year due to the Pandemic, which has affected the use-case of vehicles for first and last mile commutes. However, growth should return next year and the market is expected to grow at 16% CAGR to reach 1.5mn units by 2025.

Electric Three-Wheeler Market in India

The 3W category has over 80% market share in the electric vehicles industry in India and 97% of it is from the E-rickshaw sub-segment. E-rickshaws have been the unsung hero of electrification in the country with over 1.5mn of these vehicles plying on the road.

The E-rickshaw market is highly fragmented and dominated by unorganised OEMs who supply mainly vehicles driven by lead acid batteries. Currently, only 2% of E-rickshaws sold are with lithium-ion batteries mainly to organised fleets. The severe negative impact of Covid on the E-rickshaw use case should accelerate the shift to lithium-ion batteries, as many drivers may not have sufficient capital to purchase new lead acid batteries. Hence, we expect battery swapping models with LI-ion to penetrate faster and the shift from unorganised and unbranded players will also help this transition.

We expect the share of lithium-ion batteries to increase significantly over the next 5 years in the E-rickshaw market with penetration up to 50% possible.​

The auto-rickshaw market on the other hand is dominated by only 3 players and Bajaj has almost 65% market share. This sub-segment of the electric 3W market is slow off the blocks, as major players like Bajaj and TVS have not yet even launched an electric version of their products (Bajaj for example has announced an electric version of their top selling RE auto-rickshaw, but this is yet to be launched). Electrification of auto-rickshaws as a category may also get delayed, as the 3 large incumbents may push out releases to focus on core products in the wake of the impact of Covid.

We have tried to map the electric 3W market in India below, however, this mapping does not include many other unorganised sellers present in the market who have local presence and who are mainly assembling CKDs from China.

Electric Three-Wheeler OEM Landscape in India

Mahindra Electric is the market leader among the legacy OEMs and has presence in both the E-rickshaw and E-auto sub-segments. It sold 4,042 Electric 3-Wheelers in FY20 vs 559 in FY19. Volumes of their flagship Treo product had dropped to 0 due to Covid, but is back up to pre-covid levels at around 300 units per month.

We would like to highlight Piaggio here, which has launched its product, the Ape E-city in December 2019 in collaboration with Sun Mobility. The vehicle comes with the option to charge or swap the battery with a range of 68 kms per swap and is currently available in 3 cities in Kerala.

Moving on to the electric 4W market, which actually saw degrowth of 5.5% in volumes to 2,400 units in FY20 due to lack of demand from bulk purchasers mainly EESL, a JV between 4 PSUs. Historically, volumes in this market have mainly been driven by 2 OEMs, Tata and Mahindra with their fleet targeted vehicle variants. However, the launch of a few premium models by Hyundai, MG and TATA in 2019, targeting end users and their positive offtake should see growth re-emerging again in FY21.

Electric Four-Wheeler Market in India

Mahindra eVerito is the oldest EV still on sale in India and in fact it sold 3x more than the diesel version of the vehicle in 2019 (839 units vs 266 units). This along with the TATA Tigor EV are fleet focused models and hence have smaller batteries with lower ranges, as range anxiety is not that great for these fleet operators, relative to end customers.

Electric Four-Wheeler OEM Landscape in India

The launch of Hyundai Kona Electric in August 2019 and then the TATA Nexon EV and MG ZS EV, finally gave end customers some realistic options in the electric 4W segment. The Tata Nexon EV has the largest market share in this category at 60% and the product seems to provide the right balance in terms of price, range and design. However, the volumes are still small at about 300 units in August 2020.

Electric Four-Wheeler Key OEM Sales and Market Share in FY20

There are over 20 electric cars lined up to be launched over the next few years including the Porsche Taycan, Jaguar I-Pace, Tata Altroz EV, Mahindra eKUV100, AUDI e-tron and even the Tesla Model S will be launched in India in the next 2 years. Despite this action, we do not expect electric cars to make up more than a few % points in the overall 4W market in the near future.

On the CV side, the Electric bus segment is seeing the most action, mainly on account of public sector demand due to the FAME II push, despite TCO not being favorable and the upfront price differential being significant.

Electric buses have also had a curious past in terms of Government policy. The category was initially not included for demand side incentives in the original FAME I policy launched in 2015. They were finally added via modifications in 2017 and two levels of incentives were provided on the basis of minimum localisation norms upto Rs 1 cr. Under Fame I, Electric buses were sanctioned both, under a capex (outright purchase) and an opex (cost per km) model. However, a majority, 74% of the buses were under an outright purchase model and given the lack of expertise within the state and city transport undertakings, many struggled. Under FAME II, all buses are operated only under an opex model, where the supplier or operator is responsible for procuring, operations, maintenance, etc and the state or city transport undertaking pays on a cost per km basis.

FAME I provided insights and the way forward for Electric buses to become one of the main focus points of the FAME II policy.​

Electric bus sales in India took off after the category was included for demand side incentives under FAME I in September 2017. Total of 425 buses were sanctioned in FY18 & FY19 under FAME I and those are the volumes we broadly see in those years.

Electric Bus Market in India

FAME II has an allocation of upto Rs 35.45 bn for providing demand incentives for 7,090 buses. Unlike FAME I, under FAME II demand incentives are also linked to the length of the bus.

The Government in response to their EoI received proposals for deployment of 14,988 buses and 5,595 electric buses (5,095 intra-city / 400 inter-city / 100 DMRC) have been sanctioned to various state and city transport undertakings. Infact, 2,450 Electric buses have already been approved under FAME II for demand subsidy by the end of FY20. The balance 4,640 Electric buses are expected to be approved under FAME II in FY22.

Electric Bus OEM Landscape and FAME II Orders

The Electric bus market has the presence of the large Indian OEMs like Tata, Ashok Leyland and Volvo Eicher. But, two of the main OEMs, Foton PMI and Electra BYD, which have won almost 60% of the orders under FAME II have JVs with Chinese players. Given the current geopolitical situation, we will need to keep an eye out to see how things progress here.

Similar to Piaggio for 3Ws, Ashok Leyland has also adopted an interesting model and tied up with Sun Mobility for providing battery swapping instead of charging. The swappable batteries have a range of 40-50kms (vs 150-300kms for others) and take under 4mins to be swapped. They are currently operating in Ahmedabad BRTS.

Globally, as well as in India, there is now an agreement around a transition from an ICE to an EV platform for automobiles. However the debate everywhere has centered around the timelines for this transition. As an auto and mobility focused fund, we have been tracking the development of the EV ecosystem in India carefully over the past few years and believe that now the transition from ICE to EV can truly begin, as it has started making economic sense for many use cases in the Indian context.