The Hero MotoCorp pavilion at Auto Expo, the Indian auto industry’s schmoozefest, has a busy crowd – most of them attracted by the XPulse 200 adventure bike. The ushers in their bright red dresses beside the scooters and bikes are a striking contrast against the white facade, decorated with thousands of green saplings.
Everything looks perfect, except that Hero, the world’s largest bike maker by volumes, doesn’t have an electric vehicle – not even a concept – on display. This at a time EVs are becoming cheaper faster than ever before and a practical alternative to petrol-fired vehicles. The pivot towards EVs is expected to be sharper in the months and years ahead as prices of lithium-ion (Li-Ion) batteries plummet, while its efficiency and longevity increases.
At the heart of this upcoming change is India’s two-wheeler industry – the largest in the world selling 18 million vehicles every year – which few are talking about. Much of the limelight in electric mobility is hogged by a few car and bus makers. “It’s not only in EVs, the media tends to write more about four-wheelers. That’s the general trend, (even though) the larger part of mobility in India is two-wheelers,” says Pawan Munjal, chairman and managing director of Hero MotoCorp.
Munjal, who wants to build Hero MotoCorp into a transportation technology company rather than just be a commuter bike maker, EV is the segment to bet on — Hero’s investment of over Rs 200 crore in Ather, an electric two-wheeler startup from Bengaluru, is a promise in that direction. “We have close to 30% stake in that company, we are putting our money where the mouth is. We believe in the future of EVs around the globe and in India,” says Munjal.
Inside its own stable, too, Hero MotoCorp is working on a few models. “We are experimenting. It is just not enough to have the electric vehicles in the showrooms. It should fulfil customer needs otherwise people won’t buy them,” says Markus Braunsperger, its chief technology officer.
On his EV to-do list are: fully electric bikes, hybrid two-wheelers, boosting power through capacitors, and new technologies like recharging the battery while riding or braking the vehicle. “It is not about a single solution… you need a bunch of solutions,” says Braunsperger, a BMW veteran of more than two decades.
For Hero, in the EV segment, the focus will largely be on the commuter segment. “This gives us additional opportunities, but it has to make business sense,” Braunsperger says, without fussing much on the lack of infrastructure.
Market watchers believe that two-wheelers will help grow the EV segment – after all, sales of two-wheelers in India outpace those of cars 5:1 (cars sell about three million a year). “We will see electric two-wheelers as a way to adapt proclivity of electric mobility in India, instead of forced adoption through four-wheelers,” says Rebecca Lindland, senior director and executive analyst at California-based vehicle valuation and auto research firm, Kelley Blue Book.
Others agree. “It will take some time but two-wheelers will take off much faster than cars,” says Abdul Majeed, partner at audit and consulting firm PwC India. “In the next two to three years, a lot of electric scooters will be sold.”
Niti Aayog in a May 2017 report, mentioned that two-wheelers – both private and fleet – will have a quicker adoption of electric mobility. Consultancy KPMG suggests that electric two-wheelers’ adoption will precede that of buses and cars.
According to industry group Auto Component Manufacturers Association and Munich consultancy Roland Berger, 44,000 electric two-wheelers were sold in 2016-17, more than double the previous year, in India. A lot of the credit goes to Li-ion batteries.
‘Low Maintenance’, not ‘No Maintenance’
Hero Electric, started by Pawan Munjal’s cousin Vijay Munjal and not a subsidiary of Hero MotoCorp, rolled out its first electric bicycle in 2001. It bombed. “The mopeds were going out of the market. We hoped to bridge the gap between cycles and scooters,” says Vijay’s son and Hero Electric managing director Naveen.
The prices were very high and they were powered by lead-acid batteries, which were not only expensive but also had a lower power output and a shorter lifespan. Result? A stunted adoption.
Seven years later, there was a false start. In 2008-09, Naveen remembers, India sold 80,000 electric two-wheelers – most of the bikes with top speeds of 25 kmph but selling because of the low running cost. Buyers thought these bikes would be maintenance-free but they were not robust and broke down often. Another reason for the demand was that two-wheelers running at speeds below 25 kmph are not covered by the Motor Vehicle Act and don’t need to be registered or need a driving licence.
In 2010, three things happened. After the collapse of the Lehman Brothers in 2008, beginning 2010, troubles started in the auto industry in India. The dollar appreciated from Rs 44 to Rs 54 between 2010 and 2011, oil prices crashed, and the government pulled out a subsidy of Rs 34 crore extended by the ministry of non-conventional and renewable energy.
Just like the mobile phone market, which was cluttered by unknown players, the electric vehicle market was also full of fly-by-night companies. When the market collapsed, they pulled out.
“In 2007, we launched our first electric scooter, and positioned it as technology product… In 2009, everyone started jumping in,” Naveen adds, who interned with Landrover and spent time in the Silicon Valley in 2000.
Thankfully, Hero Electric had set up service stations. “The vehicles were of low maintenance, but not no maintenance as people thought… So that people didn’t suffer, we started supplying parts to our competitors’ products to keep the market alive,” says Naveen.
The government had to act. In 2013, the UPA-II government came up with the National Electricity Mobility Mission Plan where Rs 13,500 crore would be given as subsidy on EV purchases and for building infrastructure.
In 2015, the Narendra Modi government put its heft behind EVs and released the so-called FAME Scheme aimed to provide a subsidy for electric vehicles to boost EV adoption in the country. By now, globally, lead-acid batteries were being replaced by Li-Ion batteries. It was a beginning of a new era that would completely change electric mobility.
The Li-Ion Revolution
Naveen agrees that the market is changing. “The companies coming into this space are much more serious… most of them are making vehicles, which run on lithium-ion batteries,” he added.
Hero Electric will launch two Li-Ion battery scooters, will have Li-Ion variants in its already existing five models, and is planning to launch eight Li-Ion-battery operated bicycles.
In a country where infrastructure is lacking, lead-acid batteries were heavy and could not be taken out to charge. A 1 kilowatt per hour battery would weigh more than 25 kg. A comparable Li-Ion battery is about two-thirds lighter: seven to nine kg. The life of the lead-acid battery in automotive use is one to two years, while a Li-Ion battery lasts four to five years.
“Electric two-wheelers are much more viable as far as charging in houses are concerned compared to cars as the batteries are lighter and can be carried into the house,” says Deepesh Rathore, London-based analyst and director of Emerging Markets Automotive Advisors, an auto consultancy firm.
Most of the large two-wheeler makers are also drawing up their Li-Ion-battery vehicles. Hero MotoCorp’s Munjal says that at a recent board meeting, the main question from the directors was “what is going on in EVs”.
Munjal had his answer. Two years ago at the Auto Expo, Hero MotoCorp had showcased the e-Duet. “It was more to say that we are starting work in our R&D on EV products. This time we have not shown because we are not fully ready,” says Munjal.
Hero MotoCorp rival, Bajaj Auto, has plans to launch a new brand, Urbanite, for EVs by 2020. TVS Motors is developing an e-scooter (codename U218) to be launched in 2018. Honda Motorcycle and Scooters India, the unit of Honda Motors Co. of Japan, is in discussions with stakeholders to bring down cost and ensure infrastructure availability to launch products in India.
TVS and Honda declined to comment for this story. However, a source in TVS gave some details. The company showcased the Creon concept motorcycle at the Auto Expo. “It is an eight kilowatt-hour (kWh) lithium-ion battery powered vehicle, which can reach top speeds up to 115 kmph,” says the senior executive, on condition of anonymity.
TVS has no plans to introduce lead batteries. If the lead battery gets completely drained, its life comes a fourth of the actual life. “In India, people have the tendency to nearly drain the battery before putting it on charge,” the TVS executive says. “In case of lithium, even if you don’t take care of the battery, it will last for five years.”
Many among TVS’ 700-strong R&D team work on electric technology like battery, motors and controllers. “All the design development and technology is indigenous and developed in-house,” the executive explains.
Still, Li-Ion batteries cost 2.5 times the cost of lead-acid batteries, even after the rapid drop in the price of Li-Ion battery packs. Munjal is contemplating if Hero MotoCorp should invest in battery pack manufacturing. It makes sense. “From Hero’s point of view, 40% (government’s target of electric vehicles share) by 2030 will be five million units a year for us… We are not at the stage where we can say that we have fixed our battery suppliers – whether we will get it from outside, or we will make it ourselves, which can be done with our kind of volumes,” he says.
Some of the established automakers are differentiating in building the product. For example, Mahindra and Mahindra is not making a bike but is developing a three-wheeler that will seat two people. “You will see new ways of mobility. In UDO, there are two front wheels and one rear wheel,” says Mahesh Babu, CEO of Mahindra Electric. UDO is short for Unique Driving Object, which was unveiled at Auto Expo.
But it’s not just the Heros and the Bajajs who are at the centre of the action. Several startups are elbowing their way into electric mobility. Two-wheelers are easier to make compared to cars, after all, and Li-Ion vehicles have a lot to leverage from the new technology and design.
A new crop of bike makers
Let’s look at the demand. The ACMA-Roland Berger report mentions that by 2025 – seven years from now – 34.5% of total two-wheelers can potentially be electric. That number is about 11.6 million vehicles. But, does India have the capacity? “Production capacity would be the major limiting factor for EV penetration in two-wheeler segment,” the report says.
The opportunity is big, in other words. Ather, Okinawa Scooters, Twenty Two Motors and a bunch of other newbies have opened shop in the past three to four years to tap into this opportunity.
For Jeetender Sharma, founder and MD of electric bike makers Okinawa Scooters, the future is in electric mobility. He believes that he can build a business that his son, now six and half years old, will be able to run in the coming years.
Sharma launched two electric scooters during Auto Expo. The cost of running bikes is why he believes people will change to electric. His bikes, both running on lead batteries, cost 10 paise per km. A petrol bike costs Rs 1.70. His battery vehicles run over 80 kms with a single charge. Each bike has two batteries giving a range of over 160 kms.
In the coming months, Sharma will launch an existing bike with Li-Ion batteries. Ridge, the bike that is currently priced at Rs 42,000, will cost Rs 55,000 with Li-Ion batteries (as much as the popular Honda Activa scooter) and will run up to 120 kms per battery on a single charge. “We will have both lead and lithium variants… India is a price sensitive market,” says Sharma, who says he is not fazed by Hero MotoCorp or its like.
Others believe that everyone is starting on a fresh slate, too. Gurgaon-based Twenty Two Motors has launched two Li-Ion-battery-powered smart and connected scooters, bookings of which can be done online. “We have tried to apply intelligence to the vehicles and gather data using sensors,” says its CEO and co-founder Praveen Kharb.
Each vehicle has more 60 sensors, which sends data back to the servers. Algorithms in the backend run a simulated model of the scooter. “The simulated models run 50-100 kms ahead of the real vehicle, and help predict the condition of the battery and the overall scooter based on riding behaviour, acceleration, road conditions, among other data,” Kharb explains. The scooters come equipped with cruise control, reverse gear, and a so-called ‘drag mode’ in which the scooter can be rolled alongside the rider slowly without pushing like when with a flat tyre.
Emflux Motors unveiled the Emflux ONE, a superbike that can touch 100 kmph in three seconds, at the Auto Expo. The product is being tested before certification and an ambitious April launch date. “The design and circuits are developed in-house and the bike is 70% to 80% production-ready bike,” Ankit Khatry, co-founder of Emflux Motors, says.
Emflux and Twenty Two Motors will open experience centres in major cities for people to look up and test the bike before placing orders online. Another company that has been at it is Ather, perhaps the biggest of all the electric two-wheeler startups and is funded by Hero MotoCorp.
Ather began its journey in 2013 at the IIT-Madras Research Park. IIT-M alumnus Tarun Mehta and Swapnil Jain had set out to build India’s first smart electric scooter. But they faced a unique problem. Unlike an ICE (internal combustion engine) scooter company that could go to its manufacturers and give them the specs and specific design requirements even when the core subsystems remained unchanged, Mehta and Jain had to build everything from scratch.
Finally, they came up with the S340 which has a range of about 60-65 km on a full charge and is fitted with a touchscreen console with inbuilt apps like maps. The scooter is also connected to Ather’s system and supports features like breakdown alerts and over-the-air firmware updates for the two-wheeler like is done by the storied Tesla Motors.
Mehta feels two-wheelers will lead the EV adoption because of the economics. “A consumer is more probable to pay a Rs 30,000 increment to buy an electric 2 wheeler than the few lakhs (extra) for an electric 4 wheeler,” he says.
There are other advantages, too. “On the production side, it is also a shorter development cycle for an electric two-wheeler as compared to an electric 4 wheeler, and you are also looking at more cash committed,” adds Mehta.
Bumpy ride ahead
No matter how promising electric two-wheelers look, there are many challenges like the price of the battery, the lack of supplier and component ecosystems, and funds to set up large distribution networks. Roland Berger lists the challenges:
- Announced and existing EV models in India can compete with vehicles in less than 125cc segment only.
- Customer affinity towards 125-250cc segment is increasing in motorcycles, therefore it is expected that by 2025 only 49% of motorcycle segment would be less than 125cc.
- Rural market, which accounts for 50% two-wheeler sales in India, would not be impacted by EVs.
- Total urban sales that can potentially be impacted by 2025 is about 11.6 million units, but production capacity would be the major limiting factor for EV penetration in the two-wheeler segment.
Then, there are people problems. “When we started, our first challenge was to find good and experienced people… Then there weren’t many good suppliers. The ones that were, were already loaded up with huge orders and our orders were just for prototyping of 2-3 units. No one was actually ready to entertain these small quantities,” says Khatry of Emflux.
For Hero MotoCorp, the challenges are different. CTO Braunsperger says that the electric vehicles at comparable prices of a petrol bike should give the same performance and have the same capabilities. “It is also important to bring the cost down and have the supplier base and battery technology in place.”
Add to that, the government is yet to come out with the EV policy and give guidelines to build charging infrastructure – both of which is critical for widespread of EVs.
Munjal ends on a pragmatic note. Companies like Hero, which already have large volumes in the IC engine, cannot shift to electric mobility overnight, he says. “It will be a slow and steady ramp-up. IC engines slowly ramping down and EVs ramping up. Enough time needs to be given of the infrastructure to be set up. Enough time should be given for the manufacturing to be set up. If there is a quick switchover, it is going to lead in a drop of sales volumes to a large extent, which in turn could hurt the industry.”
The government, which is pushing its Make in India agenda, would also not like India to lose its status of the world’s largest two-wheeler industry.
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Anand Murali contributed to this story. Visuals by Rajesh Subramanian.
Disclosure: FactorDaily is owned by SourceCode Media, which counts Accel Partners, Blume Ventures and Vijay Shekhar Sharma among its investors. Accel Partners is an early investor in Flipkart. Vijay Shekhar Sharma is the founder of Paytm. None of FactorDaily’s investors have any influence on its reporting about India’s technology and startup ecosystem.