India is expected to be the world’s third-largest automotive market in terms of volume by 2026. The industry currently manufactures 26 mn vehicles including Passenger Vehicles, Commercial Vehicles, Three Wheelers, Two Wheelers and Quadricycles in April-March 2020, of which 4.7 mn are exported. The Automobile sector contributes 49% to India’s manufacturing GDP and 7.1% to India’s GDP.
Electric Vehicles (EV) and their ecosystem
The EV market is expected to grow at a CAGR of 44% between 2020-2027 and is expected to hit 6.34 million-unit annual sales by 2027. The EV industry will create five crore direct and indirect jobs by 2030. The government of India targets 30% electric vehicles by 2030. The electric vehicle market in India is expected to be valued at $2bn by 2023. FDI inflows into automobiles are 5% of the total FDI inflow in 2020.
Key features which will accelerate this shift
- As prices of EV starts matching Internal Combustion Engines (ICE), and the total cost of ownership matches regular bikes, there should be no reason for vehicle owners not to shift.
- EVs will bring a massive shift in complementary businesses like Fuel Bunks, Vehicle Service Shops and technology solution providers.
- Servicing and failure issues should reduce with advance warning systems and modular drive management systems.
- The Electricity Act 2003 that charging an electric vehicle is classified as a service and that no licence is required for this business activity
The known friction points in the movement from ICE to EV
- Distance covered on a single charge
- Re-charge facilities and techniques
- High Torque Vehicle technology
Spaces for bets
- EV Vehicle manufactures
- Battery Manufacturers
- Vehicle software developers
- Battery Charging services
- Bikes on hire for feeder services
India leads in the two-wheeler market, not only because of domestic consumption but also because of exports.
The two-wheeler segment is 80% of the passenger vehicle market. Expected to be valued at $200 mn by 2023 and penetration of 34.5% by 2025. Here we are not looking at the conventional bicycle which in many European and East Asian countries are counted as electric bikes. This is primarily because in India motorised transport is also a reflection of arrival in society and bi-cycles even if automated are seen as ones which were used by earlier generations which were both poorer and rural.
The upside for Two Wheelers
The two-wheeler market should see a speedy uptick in volumes for reasons;
- Public transport in India being underdeveloped there is a demand for low-cost personal mobility devices and motorbikes are the first entry point in the personal automobile ownership space.
- The cost of running an electric vehicle will be much lower than an ICE bike
- Electric bikes can easily manage mobility within cities on a single charge
- Post-COVID there is bound to be an uptake both because of safety and pent-up demand
Startups to watch out for
1. Ather S340 – https://www.atherenergy.com
Engineered ground up, this vehicle has been designed in India and gets manufactured here. Very steeply priced compared to a regular scooty is a big penetration barrier.
2. Charjet Electric Vehicle Solutions – https://charjet.in/charjet
Operates a network of Electric Vehicle Charging Stations. Are they future petrol stations of India? There are many entrants in this space, including Ola who will be a big player in this space. The limitation to these charging stations is the lowest time required to recharge a motorbike or a vehicle will be around 30 minutes. Compared to the time required to refuel an old ICE vehicle, this will be a hurdle in its penetration.
3. Sunmobility – https://www.sunmobility.co.in
Offers battery swapping stations, reducing wait time for charging. This is an exciting business model, as it will have a high impact on vehicles plying for long hours, like vehicles used in public and goods transport. This model reduces the wait time at the charging station as well as the capacity to go on long runs without having to come back to a charging point.
4. Ebikego – https://ebikego.in
E-bikes on rent. A useful hire service for people who don’t want to invest in buying. Similar to self-driven rented cars, this business model has promise in many service instances, like tourist spots and multiple visits in high-density cities. This model can scale up if it can be used for short transit like metro stations to business/university hubs.
The automotive sector has been the prime mover of industrialisation for a century now and will continue to do so for the foreseeable future. This industry through consolidation has come to be dominated by a limited set of companies which are large conglomerates. EVs are shaking up the industry with a completely new set of players like Tesla, Apple and many smaller new entrants trying to create new models. While EV penetration reaching at least 15% of the automobile market is still a couple of years away, this will be the right time for investors to enter this space. I believe that in the Indian market EV two-wheelers should capture at least 30% of the urban market by 2023 with multiple brands and Chinese assembled models awaiting COVID conditions to abate before unleashing their models.
While any EV two-wheeler start-up should be able to gain quick traction as long as they are able to get their pricing closer to ICE motorbikes my pick is an adjacent service providing company-Sun Mobility. It will be the ubiquitous petrol stations of the future, with much lesser space and manpower requirements. While it has much lesser Capex requirements as compared to the charging station model, the bigger feature is that an EV owner can just swap the battery and move on, a very similar ion practice to the current fuelling stations model used for ICE vehicles. Its founder Chetan Maini was the founder of Reva, the earliest electric car in India. In September 2020 Bosch, the German automotive component manufacturer picked up a 26% stake in this company. On 25th March 2021, they launched swap points in Delhi, which is the largest automobile market of India.
Appendix: Investments in Electric Two-Wheeler Space
|Date||Company name||Company type||Deal type||Acquirer/ Investor(s)||Deal value (in $ Mn)|
|Jan-18||RentOnGo||Online vehicle rental marketplace||Equity||TVS Motor||0.8|
|Jan-19||Rapido||Bike taxi aggregator||Equity||Integrated Capital, Skycatchr, AdvantEdge and Astrac Ventures||10|
|Jan-19||Vogo||Bike rental||Equity||Matrix Partners India, Stellaris Venture Partners, Kalaari Capital, Pawan Munjal’s family office||8.8|
|Jan-21||Simple Energy||Electric scooter OEM||Equity||Vel Kanniappan and four other investors||Undisclosed|
|Jan-21||Tresmoto||Electric scooter OEM||Equity||Angel Investor and professional CEO Raaj Kumar||Undisclosed|
|Feb-21||eBikeGo||EV-based logistics startup||Equity||Bollywood singer Sukhbir Singh, Quess Corp Ltd CEO Vijay Sivaram, Asian Institute of Technology’s Brahmanand Mohanty, and Mungo Befestigungstechnik AG chairman Alparslan Kutukcuoglu||1.5|
|Feb-21||Vogo||Bike rental||Equity||Lightrock, Kalaari, Matrix Partners and Stellaris Venture Partners||11.5|
|Mar-19||Bounce||Bike & scooter rental||Debt||Sachin Bansal||3|
|Mar-19||Vogo||Bike rental||Debt||Sachin Bansal||3|
|Mar-20||Bounce||Bike & scooter rental||Equity||InnoVen Capital||7|
|Apr-19||Bounce||Bike & scooter rental||Debt||InnoVen Capital||3|
|Apr-20||BLive||EV tourism startup||Equity||Mumbai Angels Network||Undisclosed|
|May-19||Ather Energy||Manufacturer||Equity||Sachin Bansal||32|
|May-19||Ather Energy||Manufacturer||Debt||InnoVen Capital||8|
|Jun-19||Bounce||Bike & scooter rental||Equity||B Capital, Falcon Edge, Accel Growth Fund, Maverick, Qualcomm||72|
|Jun-19||Tork Motors||Manufacturer||Equity||Bharat Forge||4.3|
|Jun-19||Vogo||Bike rental||Debt||Alteria Capital||3.6|
|Jun-19||Vogo||Bike rental||Equity||Ananth Narayanan, K Ganesh, Srini Anumolu, Manish Vij||1.1|
|Jun-20||Yulu Bikes||e-bike rental startup||Equity||Rocketship.vc||3.96|
|Jul-18||Ather Energy||Manufacturer||Equity||Hero MotoCorp||19|
|Jul-19||Ampere Vehicles||Manufacturer||Equity||Greaves Cotton||5.6|
|Jul-19||Pure EV||Manufacturer||Equity||V.C. Nannapaneni, Chairman and Managing Director, Natco Pharma||35|
|Date||Company name||Company type||Deal type||Acquirer/ Investor(s)||Deal value (in $ Mn)|
|Jul-20||Earth Energy EV||OEM||Equity||LR Joshi, MD, Pranada Bio-Pharma and others||Undisclosed|
|Jul-20||Ather Energy||OEM||Equity||Hero MotoCorp Ltd.||11|
|Aug-18||Bounce||Bike & scooter rental||Equity||Sequoia Capital India and Accel Partners||12.2|
|Aug-18||Ultraviolette Automotive||Manufacturer||Equity||TVS Motors||0.9|
|Aug-19||Rapido||Bike taxi aggregator||Equity||Westbridge Capital, BAce Fund, Astrend India Investment and Nexus Venture Partners||54.9|
|Sep-18||Bounce||Bike & scooter rental||Debt||InnoVen Capital||3|
|Sep-20||Ultraviolette Automotive||OEM||Equity||TVS Motor||4|
|Oct-18||Ampere Vehicles||Manufacturer||Equity||Greaves Cotton||10.5|
|Oct-19||Tork Motors||Manufacturer||Equity||Ratan Tata|
|Oct-20||Ultraviolette Automotive||OEM||Equity||GoFrugal Technologies||Undisclosed|
|Nov-19||Ampere Vehicles||Manufacturer||Equity||Greaves Cotton||8.4|
|Nov-19||Vogo||Bike rental||Equity||Matrix Partners, Stellaris Venture Partners, Kalaari Capital.||4|
|Nov-19||Yulu||Bicycle & e-scooter rental||Equity||Bajaj Auto||8|
|Nov-19||Zypp||E-scooter sharing||Equity||Indian Angel Network||2.1|
|Nov-20||Ather Energy||OEM||Equity||Sachin Bansal, Hero MotoCorp||35|
|Dec-17||Ultraviolette Automotive||Manufacturer||Equity||TVS Motors||0.8|
|Dec-18||Hero Electric||Manufacturer||Equity||Alpha Capital Advisors||22|
|Dec-18||Vogo||Bike rental||Debt||Alteria Capital||1.1|
|2014||Ather Energy||Manufacturer||Equity||Sachin Bansal, Binny Bansal, Raju Venkataraman||1|
|2015||Ather Energy||Manufacturer||Equity||Tiger Global||12|
|2016||Ather Energy||Manufacturer||Equity||Hero MotoCorp||31|
Source: JMK Research
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