India is starting to love electric vehicles with two wheels

When most people think of electric vehicles, they think of cars.

From brands like Tesla and Rivian in the United States, for Neo and XPeng in China, global sales of electric vehicles are on the rise. Two million EVs were sold in the first quarter of 2022 alone – that’s a significant jump from a decade ago when sales of just 120,000 cars worldwide, the International Energy Agency reported.

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India is different. The United States and China have focused on the adoption of EV cars. But in India, two-wheeled vehicles such as scooters, mopeds and motorcycles dominate the market.

James Hong, head of mobility research at Macquarie Group, said two-wheeled vehicles are in demand more than cars in India, and that should not come as a surprise.

Less developed road infrastructure and lower personal incomes make it more convenient and affordable for people to own a scooter, motorcycle or moped, rather than a car, Hong said.

However, adoption remains low.

EVs account for only 2% of total car sales, but the Indian government has ambitious targets to increase EV adoption over the next decade, focusing on increasing purchases of two-wheelers.

Sales in India are expected to increase between 40% and 45% by 2030, where 13 million new vehicles will be sold annually, according to projections from Bain & Company published in December.

India’s four-wheeler sector will grow by only 15% to 20% by 2030, with 1 million new vehicles sold annually, a consultancy firm said.

Growth in the four-wheeler EV segment in India is expected to be smaller as the cars are mostly owned only by drivers traveling out of town on longer routes, said Arun Agarwal, senior vice president of equity research at Kotak Securities.

Bain & Co. predicts total revenue in the complete supply chain of the Indian EV industry to reach $76 billion to $100 billion by 2030.

People in India have long preferred two wheels to four, and the country is home to more than 10 startups serving the market, said Agarwal.

For India to increase its two-wheeler purchases, it needs to be cheaper, and more charging infrastructure, Jinesh Gandhi, equity research analyst at Motilal Oswal Securities, told CNBC.

Gandhi said 90% of two-wheelers with internal combustion engines cost between 70,000 rupees ($845) and 140,000 rupees ($1,690). The starting price of the electric two-wheeler can go up to 160,000 rupees.

EV costs will come down if battery prices come down, says Kotak’s Agarwal.

High inflation and disrupted supply chains will push dough prices higher in 2022, Bain & Co said. Costs must drop by an additional 20% to 30% for EVs to compete with internal combustion engine vehicles.

Arun Kumar, chief financial officer of two-wheeler EV maker Ola Electric, said it was a “myth” that EVs are more expensive than internal combustion vehicles because “the cost of ownership of an EV is lower” than two or four. fuel-burning wheeled vehicles.

That means the amount of money EV owners can save on fuel and maintenance costs can offset the higher initial purchase price, he said.

Ola’s two-wheeled scooters, future motorcycles, and four-wheeled passenger cars cost between $1,000 and $50,000, he said.

“No one is coming back [internal combustion engine] vehicle. It is one-way,” Kumar added.

Central and state governments in India have provided incentives to encourage consumers in India to switch to EVs, Kotak’s Agarwal said.

According to the International Energy Agency, the government’s program provides funding to increase production of EV public buses and taxis, as well as increase charging stations across India.

EV owners are also exempt from road tax on purchase, and will get income tax deductions, Accelerated e-Mobility Revolution for India’s Transportation said.

Including taxes, owners of two-wheeler internal combustion engine vehicles in India typically pay 3,000 rupees a month for the vehicle, Kumar said. The government initiative coupled with the money saved on petrol means that the monthly installment of the vehicle becomes free for customers, he said.

While the adoption of electric vehicles will increase, the charging infrastructure across the country will. This remains a factor holding people back from switching from carbon-intensive vehicles, says Kotak’s Agarwal.

“If you’re stranded on the road, you have no choice but to have your vehicle towed to the nearest charging station, which is time-consuming as well as costly,” Gandhi said.

India’s charging infrastructure will need to expand significantly to support the number of EV companies coming on the road, says a Bain & Co. report.

One of them is Power Management, India’s largest private power generation company.

Tata Power claims to have built around 2,500 charging stations in 300 towns and cities across India. They can be found on 350 of the country’s 600 highways, said Virendra Goyal, the company’s head of business development.

Many EV owners suffer from “range anxiety” when the distance between power stations is too far, and bridging the gap will encourage more drivers to migrate to e-mobility, he said.

The company aims to have 25,000 chargers in India by 2028, Goyal said.