India: The Real E2W Market is Just Starting
With Ola Electric now traded and Ather Energy to follow, we are sure that India has space for more high quality E2W manufacturers
Last week, we looked at why big money finds the Indian E2W lucrative. The extremely consolidated market favors big players and squeezes out the smaller ones.
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This is Week 23 of this newsletter. Connect with us at editor (at) insightev.com
The Indian E2W market
There is a similarity in how developing-world electric two-wheeler markets evolve. They start with low-quality Chinese imports, which soon flood the roads, at least in some cities. Then, the governments wake up to the potential and start rewarding localization. This is followed by a few enterprising local startups developing products that are often better than the Chinese imports. In most cases, the low-quality Chinese are then edged out.
This is what has happened in India, is happening in Vietnam, and will happen in Indonesia.
The Indian electric two-wheeler industry started in the early 2000s by importing kits and fully-built scooters from China. These were early days, and the scooters were Lead-Acid. The only innovation in the system was negotiating the best container rates. Hero Electric (not to be confused with Hero MotoCorp) and Okinawa were the most significant players. There were dozens more, but they are unimportant to us or this write-up.
Most of these products were low-speed (under 25 kph) and escaped regulatory scrutiny (homologation) and registration or riding license requirements. They carved out a niche for themselves in what may be best described as the underbelly of the Indian two-wheeler market. Volumes were never recorded, but local market experts put sales at up to 500k scooters a year. Most did not last long, built as they were with low specs and low-quality parts.
Ather Energy Changed Everything.
Actually, it didn’t. Ola and the Indian government changed things.
Ather Energy was created in the mid-2010s and spent time developing and industrializing its scooter. For a few years after its commercial launch, Ather went unnoticed. Traction was slow. The media praised the scooter for its engineering and build quality, but the almost small-car equivalent pricing (in India) did not attract many buyers.
Not to mention that Ather had this weird strategy of selling through only a single company-owned experience center in their home city of Bangalore. It was the equivalent of a farmer selling produce at his farm shop at the front of his patch.
Ather started gaining traction only after 2021 when it opened more experience centers in other cities. After that, it moved to a franchise and regular dealership model, which has helped.
What has also helped is a moderation in prices due to a combination of subsidies, falling battery prices, VaVe, and better purchasing.
FAME - 2, the Biggest Change
The Indian government drove the biggest change in the Indian E2W market. Since 2015, the government has subsidized electric two-wheelers under the Faster Adoption and Manufacturing of Hybrid and Electric Vehicles (FAME) rules. These norms were universal and applied to all vehicles at the point of sale. The biggest gainers were Chinese imports. De facto, the Indian government was subsidizing Chinese imports.
FAME-2 norms changed that. Introduced in 2019, the new norms were more generous, subsidizing almost all battery costs. At the same time, they linked the subsidy to high localization levels, mandating the key components—motor and battery. Real startups like Ather Energy and later Ola Electric benefited as they focused on localizing and developing the Indian supplier base.
Ola Electric, especially, was an outlier. They did not develop the scooter, acquiring the design and a nearly finished product at the soft-tooling level from a heading-for-bankruptcy Etergo. However, driven by its zeal for reducing BoM costs, Ola Electric localized relentlessly and was one of the prime beneficiaries of FAME-2.
At this point, we shamelessly reproduce this chart from last week.
This chart is essential. It shows the transformation of the E2W industry in India. The question that arises from here is, if FAME-2 arrived in 2019, why did Chinese-kit importers like Okinawa and Hero Electric continue to be market leaders until FY 23 (Apr 2022-Mar 2023)?
There are two reasons: first, Ola Electric started delivering scooters in December 2021, and its market leadership was established only in FY 2023. Second, companies like Hero Electric and Okinawa fudged localization data and continued to get subsidies. They would be caught only in mid-FY 2023, after which their subsidies would be withdrawn and penalties imposed. A huge price delta would be automatically created between Ola/TVS/Chetak and Okinawa/Hero Electric.
The latter died.
Heading to Natural Consolidation
As we mentioned in our last post, the Indian market is attractive because it is consolidated. The top seven players capture 93 percent of the ICE two-wheeler market.
The above chart also indicates that while the E2W market was fragmented between FY 2021 and FY 2022, it is finding a natural consolidation of sales amongst the leaders. Over the last 18 months, we have seen the pecking order reduced to the top four—Ola, TVS, Bajaj, and Ather—followed by two significant players—Vida and Ampere—and many also-rans that don’t matter today.
The intensifying consolidation means that staying at the top would become difficult for slow companies. Apart from brand and distribution, the key differentiation would be product freshness - in short, customers would expect more products and a faster churn.
That is the nature of the beast, that is electric.
This begs the question - is Ather too slow for an electric scooter manufacturer?
Ather’s Strength is also its Weakness.
Ather’s long development time for its debut product is understandable - it was a full-stack development. The company ended up developing the entire scooter, the charger, the battery pack, a two-stage reduction, and the software stack. This takes time, especially when the scooter has a die-cast aluminum frame and a 7” touchscreen for display.
In comparison, Ola had it easier, as the scooter was almost production-ready when Ola acquired Etergo. The majority of Ola's work went into industrialization, localization, and battery pack development, which resulted in a faster time to market.
But Ola Electric is a Pandora’s box and we are definitely not opening it here in this writeup. Some other day…
Ather’s product prowess is a strength, but the development times are also a concern. From the outside, we can see that Ather has a no-compromise approach to product design and development. The 450X is much acclaimed, and the internet does not have too many dissatisfied users. It appears fresh and polarising after six years of hitting the roads. This is reassuring in a world where manufacturers are working hard to make electric scooters a commodity, often at the expense of quality. However, we estimate the company spends 33-39 months on new product development. That is long by any measure.
Ather Rizta family scooter program: As an illustration, the first Ather design patents for a maxi-style scooter surfaced in mid-2021. While this may not have been the start of the Rizta family scooter program, the side panels have a striking resemblance. It is okay to say that design work started at least six months before the patents surfaced. The Rizta deliveries only started in July 2024.
Remember, the Rizta is not all new. It shares the pack, the motor, the E&E, the display, and the main frame with the 450 range. Would it be right to say that the development time would have been even longer if everything had been ground-up development, like what the 450 was a few years back?
That indicates that Ather’s engineering team has not matured to shorten development times. In its DRHP filed with SEBI, Ather mentions working on two new E2W product platforms.
The first is a cost-effective scooter platform, EL. This development is likely aimed at lowering the price of the 450 and Rizta. The current Ather scooters use too many expensive aluminum die-cast aggregates. The second is the motorcycle platform Zenith, which may still be 30 months away.
That may be at par for Ather but not fast enough for a market under constant churn.
The Giants are Awakening
Apart from their sheer size, we cannot discount the engineering prowess of Indian incumbents like Bajaj Auto, TVS, or Hero MotoCorp. Bajaj plays a large part in engineering KTM-Husqvarna and Triumph’s single-cylinder range. The Chetak electric scooter may appear like a terribly mediocre product on paper, but sales have been improving. In a market like India, an organic rise in sales means high customer satisfaction.
The Chetak’s mediocre specs don’t imply that Bajaj is incapable of higher and bigger. Until it went into limbo, the Husqvarna Vektorr electric scooter was also developed in India by Bajaj. While the Chetak started with a lot of content from BOSCH, Bajaj has been localizing rapidly, and the battery packs are now assembled in-house.
Rival TVS Motor’s mainstay is the iQube scooter. It has the image of a silent, dependable workhorse. Like the Chetak, it falls short on paper comparisons, but the strength of distribution, right pricing, and dependability have kept it in the second-third spot.
TVS’s engineering capabilities are even less questionable than those of Bajaj. It owns Norton Motorcycles and also has a 43 percent stake in Ultraviolette. This Bengaluru-based startup makes the F77 electric sports motorcycle the fastest in the Indian market. Ultraviolette sales are low because of high prices, but that does not remove the fact that TVS-Norton would have access to the technology and platform when needed.
The weakest amongst the incumbents has been Hero MotoCorp. It set up a separate brand, Vida, to tackle the E2W market. HMC has typically been a slow-moving elephant, facing a lot of inertia with sales. Its mainstay remains the sub-125cc motorcycle range, primarily inherited from its erstwhile joint venture with Honda.
The Vida has been a slow starter for various reasons - quirky styling, high prices, etc. However, Hero MotoCorp is the biggest shareholder in Ather Energy and also a significant shareholder in Zero Motorcycles. With Zero, it is developing a range of motorcycles that will hit the road in 2026.
Where is Honda?
Honda is the scooter market leader in India by far. Its Activa scooter nearly outsells all its major rivals combined—in FY 2024, Honda accounted for 47 percent of all scooters sold in India. However, it has yet to launch an electric scooter. We covered Honda’s deliberate slowness in a two-part series a few weeks back.
This would likely change within the next few months as Honda launches at least one electric scooter in the Indian market. The Japanese manufacturer may be arriving late for the party, but anyone controlling nearly half the market is not entering a party; they are going to hijack the party.
We reproduced another chart from last week. The E2W market is still settling, and market shares are rapidly changing. With Honda’s entry in early 2025, it isn't easy to fathom that the Japanese manufacturer would not be in the top three in the pecking order soon. The above charts would change some more.
Is there space for more?
A twenty million pie split between 7-8 major brands means that even the crumbs would be important enough. As Ather and Ola have shown, Indians are not averse to new brands. The country remains the most promising E2W market for new entrants as long as new brands cater to the Indian needs of value for money and great build quality. There still exists the opportunity to create new flavors, target niches and micro-niches. With these in mind, we focus on some new entrants that we feel have the potential to carve a meaningful slice of the pie.
River Mobility
River Mobility is a Bangalore-based startup that launched the Indie scooter in early 2023. Sales have been slow as network rollout and production ramp-up are taking time. River’s network is only available in four cities, so its reach is very limited. Monthly sales touched 300 units in September.
While the take-off may be slow, River’s product is undeniably good. With 14” wheels and large under-seat and front boot spaces, the Indie is unlike any other scooter in the market. While priced at the premium end of the market, the Indie has potential.
River Mobility has raised over USD 72m in five funding rounds (source: Traxn). These include USD 2m seed capital from Trucks VC and Maniv Mobility in 2021. This was followed by a USD 11m Series A from Lowercarbon Capital and Toyota Ventures in July 2022. These were followed by a USD 15m Series B led by Al-Futtaim Group and participation by existing investors in June 2023.
In February 2024, Yamaha entered Series B with USD 44m funding, followed by Marubeni Ventures and Mitsui in June 2024. That’s significant capital from high-quality investors and indicative of investors' confidence level in River.
Zeno
Zeno just emerged from stealth mode, and we have some indication of the product—a sports utility motorcycle targeted at the African and Indian markets. These are undoubtedly the two hottest markets in the E2W world currently, and Zeno has picked up good names on its capable side. Early investors include Lowercarbon Capital, Toyota Ventures, Day Zero Ventures, Red Blue Capital, and Active Impact.
Zeno is yet to unveil the product, but the assembled team is high quality, and the venture looks promising.
InsightEV’s upcoming Global Landscape and Prospects—Electric Two-Wheelers and Urban Mobility details River, Zeno, and 214 more manufacturers/startups. Please message us to request a sample.