Bumps and humps in electric two-wheeler adoption

A vast majority of Indians depend on two-wheelers to fulfil their mobility needs. As per Census 2011, 37% people using motorised modes to commute to work relied on two-wheelers compared to 33% for buses and 8% for private cars.

This use of two-wheelers would have gone up by now, given the sales of two-wheelers have been going through the ceiling. In 2017, India became the largest two-wheeler market, leaving behind China. In 2018-19, 21.1 million two-wheelers were sold in India, constituting 80% of total domestic automobile sales.

The government has been encouraging the adoption of electric vehicle (EV) technology; the recent budget also announced a bouquet of incentives for EVs. Recently, the NITI Aayog also proposed a ban on internal combustion engine (ICE)-powered two-wheelers (below 150cc) and three-wheelers by 2023-24. While a shift towards cleaner technology is inevitable, the key to transitioning to EVs will be to develop a plan palatable to consumers, industry and policymakers alike.

A TERI survey of electric and ICE two-wheeler users highlights stark differences in their choices. The current electric two-wheeler users are technology and environment enthusiasts who use e-two-wheeler for non-work commutes. However, ICE two-wheeler use is associated with low and middle-income individuals, for making subsistence trips. The ICE technology users point to the lack of charging infrastructure, high battery cost and unreliable battery life for not opting electric two-wheelers.

Currently, the base price differential of ICE two-wheelers and similar performing e-two-wheelers is almost three times. Despite current policy incentives that help reduce this gap to two or 1.5 times, the differential is still a barrier for e-two-wheeler uptake. The analysis shows that home and work charging will remain the most popular modes of charging e-two-wheelers for personal use.

Other options like public charging stations is a feasible option for personal use while battery swapping stations are expected to find adoption only for high utilisation commercial applications. While the impact of EVs on power demand may not be substantial, managing peak-hour loads will be critical to support electric mobility in Indian cities.

As the upfront cost of e-two-wheelers remains prohibitive, the opportunity lies in exploiting the fact that the operational cost of e-two-wheelers is nominal. In fact, the Total Cost of Ownership (TCO) for some high vehicle utilisation applications like parcel/food deliveries is lower than ICE two-wheelers from the start.

Easy financing options with a low down payment can easily accelerate the adoption of electric two-wheelers for commercial applications. For personal use, high upfront cost and battery replacement make the electric two-wheelers financially unattractive. However, attractive business models or financing options covering both battery replacement and upfront cost can make electric two-wheelers attractive for personal use too.

Lack of high-performance EV products in the market is a key challenge. One of the few EV products that can compete with Honda Activa, the highest selling two-wheeler in India, is the Ather 450, available only in Bengaluru and Chennai. Currently, Ather Energy has an installed capacity of 20,000-25,000 units and this is expected to expand to 5,00,000 units by 2020. Even then, it will form a small proportion of India’s 20 million-plus two-wheeler market.

The current EV penetration in India lies where the cell phone adoption was in 1995, and it might easily take another decade for EVs to become mainstream.

Given the constraints faced by the industry and consumers, here are some suggestions to promote e-two-wheelers. Firstly, given the existing financial viability, e-two-wheelers should be promoted for high utilisation–commercial applications through enabling easy financing with low down payment requirement. As financial viability is established for commercial operations, the government should issue electric two-wheeler procurement mandates for commercial operations in the subsequent years.

India would be shifting to BS-VI vehicles, including the two-wheelers, 2020 onwards. The automobile-makers, auto-part makers and oil refineries have made huge investments for this transition. A time period of 3-4 years should be provided to the industry to recover its investments through the sale of BS-VI vehicles.

Competitive products

A majority of the announced and existing electric two-wheeler models can compete with vehicles in less than 125cc segment only, whereas the customers are more inclined towards 125-250cc segment in motorcycles. The 3-4 years’ time period will also allow two-wheeler manufacturers to develop competitive electric two-wheeler products, expand production capacities and allow time for supply chains to evolve to support after-sales service and skeletal public charging infrastructure to be set up in cities.

As a next step, cities should take strong action to encourage the use of zero-emission vehicles (ZEVs).

Location-specific ZEV mandates should be developed, allowing only ZEVs to operate within certain zones/cities. During this time, the government should push for 100% electric two-wheeler adoption for commercial applications and for personal use in some of its polluted cities.

Eventually, it is expected that highly
competitive electric two-wheelers would be available in the domestic market and consumer preference would naturally tilt towards electric two-wheelers. At this point, there will be a disruptive adoption of electric technology.

As our cities reel under air pollution apocalypse, transitioning to EVs is absolutely inevitable. However, this transition is best undertaken in a gradual manner. The industry needs time to develop competitive products and ramp up production capacities. Other enabling conditions like charging infrastructure, EV supply chains, and business models are also expected to evolve in the next 3-4 years.

The government should then focus on stringent actions like ZEV mandates and ban ICE vehicles from certain zones in the cities or from certain cities entirely.

(Megha Kumar is Area Convenor, Centre for Sustainable Mobility, TERI; Shri Prakash is Distinguished Fellow, Centre for Sustainable Mobility, TERI and former Member (Traffic), Railway Board)