Ola's entry triggers price war in electric two-wheeler sector

Industry Outlook Team | Wednesday, 22 September 2021

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Ride-hailing firm Ola's entry into the electric two-wheeler sector has triggered a price war in the segment.

EV players like Ather, Okinawa, Pure EV, Simple Energy and traditional two-wheeler manufacturers such as TVS Motor Co, Hero Electric and Bajaj Ltd are retailing e-scooters in the Rs 70,000 to Rs 1.13 lakh range, aided by state subsidies.

Models such as Ather 450X/Plus, Okinawa Praise, Pure EV Pluto, Simple Energy One, TVS iQube and Bajaj Chetak are witnessing an interesting price play after Ola said its S1 and S1 Pro models would be sold for 99,999 and 129,999, respectively.

Existing players in the e-scooter space are holding on to their price points regardless of competitive pressures, experts said.

The Indian electric two-wheeler sector is presently dominated by a handful of players and the entry of Ola has charged up the e-scooter landscape further, they said.

India has the potential to turn into a global EV manufacturing hub and Ola's EV ambitions hinge on its make-or-break pricing.

Affordability could assist achieve scale in a vehicle segment where scooters with traditional engines cost around Rs 75,000 to Rs 80,000.

At the time of proclaiming his e-scooter's pricing in August, Ola chief executive Bhavish Aggarwal had said that low running costs and inexpensive maintenance could assist it take on traditional two-wheeler makers.

"Ola's scooter pricing comes from a known disruptor. Competition will have to counter it on pricing, technology and efficiency as their USPs for e-scooters," stated VG Ramakrishnan, MD of Avanteum Advisors. "Ola has managed to establish its brand and sourcing efficiently to cater to large volumes."

EV companies will compete on technology and performance in addition to price, said Jeetender Sharma, managing director of Okinawa.

"The benchmark is the Honda Activa and it should be easy to transform it into an e-scooter. Consumers are preferring e-vehicles due to lower operating costs," Sharma stated.

Tarun Mehta, CEO of Ather Energy, said automotive purchasers do not decide purchases "by a small price delta". The market is poised to grow and will gain traction in the subsequently couple of years.

"Unlike the conventional engine two-wheeler market, the EV industry is only 1% of the segment and artificially reducing prices will not help growth, but only lead to further cash burn, which isn't in the interest of any player," stated Naveen Munjal, MD of Hero Electric, one of the early entrants in this space which retails its e-scooters in the Rs 60,000- Rs 70,000 price bracket.

Numerous e-scooter models saw a substantial price reduction thanks to various state subsidies which have been passed on to customers, making the products affordable, manufacturers said.

"Our prices have come down due to state subsidies," Mehta stated.

The price war comes in the backdrop of the government's decision to boost subsidies on electric two-wheelers by 50% to Rs 15,000 per kWh under the government's FAME II scheme, which came into effect in 2019 to help hasten the transition to electric vehicles.

While demand is rising for electric two-wheelers, the supply of parts from China has been hit, which is hampering volumes.

"We are import dependent, and localisation is currently at 50% with supply constraints," said Anjali Rattan, founder, Rattan India Enterprises, which recently invested Rs 150 crore in electric motorcycle maker Revolt Intellicorp. "Large scale electric two-wheeler adoption is still plagued by cost and infrastructure issues," she stated.

Munjal of Hero Electric said the firm is reskilling "roadside mechanics, putting portable batteries in two-wheelers, thereby aiding consumers."

Firms in the EV space need scale, a robust supply chain and dealer network, he added.

Experts said government subsidies will increase adoption, encourage research and development and innovation to bring it closer to the target of 30% share of the two-wheeler market in five years, up from just 1% at present.

In 2020-21, electric two-wheeler sales reached at 140,000 units, while conventional two-wheeler sales were at 17 million.

India's electric vehicle market could touch $206 billion in a decade, with over 100 million units sold, as per Delhi-based think tank CEEW Centre for Energy Finance.