This post starts with conversations I have had with industry veterans over the last five years. No names of people or organisations are mentioned, as we regularly face legal notices and police complaints for our writing. While the notices, when nicely framed, make good wall decorations, they are a temporary nuisance. So, anonymity has to be suffered.
When Replacement Costs an Arm and a Leg
A recent chance conversation with a senior vehicle service professional at one of the top five E2W manufacturers went like this:
“…the first-generation scooter that has spent more than three years in the market is coming back frequently for battery replacement,” said the guy.
“Three years…is a bit early. Batteries should last longer,” I quipped.
“Yes, they should. But they don’t. These were Gen-1 batteries. They have optimised now, and the new ones should last longer.”
“How much is the pack replacement?”
“It is around INR 65,000 (USD 720).”
“That’s a lot!” I winced, but did not say it out loud.
In the Indian market, INR 65,000 gets you two-thirds of the way to a new ICE 110cc scooter, which would go on for 10 years with just regular maintenance. Sure, it would guzzle fuel, while the electric scooter would run on relatively cheap electricity, but for the customer to pay literally for nearly a new scooter in three years is not something that is considered while calculating TCO benefits at electric scooter startups.
Financial Analysts Don’t Look Beyond Next Quarter
“Why are you bullish for the future?” I asked, sipping coffee with a financial analyst. We were talking about one of the top five electric scooter brands in the Indian market.
“We are not bullish. Just a tad more optimistic in the coming quarters. As the Gen-1 products move out of service warranty protection, the company’s warranty costs outflow would reduce. Burn would be tempered,” he responded.
“Not for the customer.”
He did not respond.
“The brand would be irreversibly damaged.”
“The used market for the brand would collapse,” I continued my rant. “New customers derive confidence from resale prices. That’s the brand going down a slippery rabbit hole with no scope of clawing back.”
He sipped coffee in silence.
Sales Guys Have More Wisdom
This took me back to a conversation that I had with one of the legends in the Indian two-wheeler market. This guy has spent years in the sales function, rising through the ranks of a large two-wheeler manufacturer. He knows the Indian customer more than anyone else.
“Is the Indian two-wheeler buyer headed for a cultural shift? Look, the buying behaviour has changed for white goods and home electronics. My parents expected their refrigerator to last twenty years. I am happy with ten years and may upgrade in five,” I was arguing why the Indian two-wheeler market may be ready for disruption.
“The two-wheeler is the first big purchase in any middle-class and lower-middle-class two-wheeler buyer’s life,” he responded.
“I thought that was the phone?”
“Not the phone. Android devices are available for less than INR 10,000 (USD 110). Within three years, they are lost, damaged, or obsolete, to be replaced by a new one, costing a similar amount.”
“Why not the two-wheeler? I knew the answer, but his perspective was gold.
“At the price that popular two-wheelers are sold in India (about USD 1000-1200), a lower-middle-class family is spending a significant part of its savings on acquiring one. They have to because life won’t run without that two-wheeler. There is no public transport. The two-wheeler becomes the only mode of conveyance for a small family. In most cases, it is not just the transport, it is the employment, and the livelihood.”
“That’s why, when the masses buy two-wheelers, they look around, talk to family and friends, and still put their money on something that may look outdated but has built a reputation of lasting 10-15 years. They want longevity and dependability, more than anything else.”
As a result, when buyers start liking a product, it stays at the top of the pyramid for a long time. It is hard-earned trust that is selling things, not a spec sheet. This is very apparent in the Indian ICE scooter market. The Honda Activa, once the benchmark, has been surpassed on specs and styling by similarly able vehicles like the Suzuki Access and the TVS Jupiter. Yet on the sales charts, the Activa is still miles ahead of them.
It is even more apparent in the Indian electric scooter market. The TVS iQube and the Bajaj Chetak are very mediocre on paper. The Chetak, if you don’t indulge in the software add-on package, has a top speed of 63 kph only, about half that of an Ola S1 Pro.
It still manages to sell more than 2X of the Ola.
The Story is the Same in All Major Two-wheeler Markets
Across the world, most large two-wheeler markets have similar characteristics. From India to Indonesia, Vietnam, sub-Saharan Africa, and many LatAm countries, they are all developing economies where livelihoods depend on the humble two-wheeler. If the machine fails, it’s not just the cost of repair but also the cost of livelihood loss. Customers value fail-safe dependability more than anything else.
There is a reason why Honda has a huge market share in Indonesia, leads the scooter segment by far in India, and is the king in many other similar markets. Even the ones following Honda have aped the characteristics, just with a different badge.
If China appears different today, it is only because its per capita GDP growth has been driven by the government’s infrastructure push, and the traditional commuter two-wheeler has partially lost its relevance.
Economies Grow and Characteristics Change
While growing up in India, I recall the time a few decades back, when fuel costs were the biggest concern of a two-wheeler rider. This was the time when Honda and Kawasaki, and everyone else, were trying to upend each other by the claimed fuel economy of their machines. That was the big talking point. That’s what was pulling in the customer.
But then things changed. The Indian economy opened up. GDP/capita started rising. Public transport never kept pace, and the two-wheeler became even more important. Sales exploded, and nearly everyone was doing well. However, the customer evolved. Maybe just a bit. The customer was still value seeking, but sheer fuel efficiency numbers were no longer important. That was replaced by dependability.
What is the saving of INR 100 if a machine failure costs INR 1000 per day in lost livelihood?
Worse, what if the machine lasts for only 5-7 years, against the 10-12 years the customer expects? That’s like paying for two when you should have paid for one.
The Market is the Biggest Teacher
One of the other common factors in the above-mentioned two-wheeler markets is that they are all highly populous countries. In any country with an upwardly mobile large population, there is always an incredibly large number of early adopters and fashionistas. They would be willing to try a new product. That gives any new entrant, as long as they can get their distribution in place, an early user base of tens of thousands of customers. When initial sales hit home, often riding the wave of a paid social media blitz, the numbers give a sense of false euphoria.
Except, these sales are fluff. This is not the real customer. That guy is still servicing his nine-year-old Honda Activa without stopping to think. The dependable ICE commuter scooter has become a habit.
But the EV-startup believes they have made it.
Financial analysts celebrate.
No, you haven’t made it. Your knife is still navigating the layers of lard. It is a postal code away from finding flesh.
Two Trajectories and One of Them has your Future
Then two things are likely to happen, depending on how well your product engineering and quality have stood the test of time.
As the newcomer EV startup continues to find fluff, the knife wiggling through lard, the vehicle parc builds up. With the parc, the noises increase. Positive voices are subdued; we always need many of them to cause any echo.
So even when a brand does things right, it takes time for momentum to build up. There is no fast, long-term success in this industry. Case in point is Ather Energy, which has taken more than seven years to build some momentum.
To make this interesting, this is a doodle I did on my iPad
Meanwhile, negative voices have inbuilt amplifiers. Every customer who faces a problem with a new product feels cheated in the biggest first big purchase of their life. When he faces stonewalling in complaint resolution, he feels let down even more. It’s USD 1500 of someone’s money, someone who, at times, makes less than USD 5000 in a year. Against him is a billionaire. It always is. That’s how a wronged customer feels.
The negative voices form an echo chamber, an ever-expanding one. More people would join as the volumes and negative voices increase.
Meanwhile, positive voices are few and always subdued. When was the last time you made an Instagram reel on your properly working scooter? Or went to X to celebrate a service turnaround of one hour?
If you did that, it’s probably because the brand has paid you to do so.
In a market where customer feedback is the biggest sales driver, negative feedback would lead to a sales collapse that becomes very difficult to maneuver out of.
Is the First Stage of the Industry Always Bad?
Large-volume markets often go through stages. The first generation of electric startups in India, Indonesia, and Vietnam imported kits from China. These often resulted in poor-quality products. The respective local entrepreneurs did not have much skin in the game and did not build on the service and support infrastructure. The result was a bitter first experience with a new technology. This normally dials back the industry by a few years, as we had seen in India. The first-generation startups that sprouted up in the early 2000s have all but disappeared.
The real industry won’t start for another 15 years.
Therefore, it is usually the next wave that has to do the heavy-lifting in the market. The early electric startups in Indonesia and Vietnam were of low quality, and it is only now that both markets have found relatively high-quality manufacturers.
The Problem is If the Second Wave Fails.
