The number of startups in India’s electric two-wheeler market has grown to over 150 from 54 in 2021, driven by government incentives to promote clean vehicles and reduce oil imports, according to a new analysis.
The influx has intensified competition in a segment expected to grow 15-20 times to annual sales of 15-20 million units over the next decade, Bernstein said in a report late Tuesday.
“Most compete in the mainstream, and 85% of the 65 models launched last year were such products: high-speed versus speed and limited-range products, which were typical of startups,” Bernstein analysts wrote. “Average battery capacity for new launches increased from 2.3 kWhr in 2022 to 3 kWhr.”
India aims to achieve 30% electric vehicle penetration by 2030 and net zero carbon emissions by 2070. The government has offered incentives under the FAME II scheme, which provides subsidies to buyers and was recently extended to 2024.
Despite the reduction in FAME II subsidies in mid-2023, the number of electric two-wheeler companies increased from 124 in June 2023 to 152 by January 2024, with much of the increase coming from “importers” sourcing parts or whole vehicles from abroad. Bernstein noted.
“Most of them are just assembled kits from China,” said Kunal Khattar, founder of mobility-focused venture capital firm AdvantEdge. “Getting an EV product out the door is not expensive. It’s brand building and distribution that people underestimate.”
Image Credits: Bernstein
Startups currently hold seven of the top 10 positions, including the market leader (Ola Electric, which also plans to go public soon) with a 39% share as of January 2024. Around 85% of sales volumes he ranks among the top five players, however.
Bernstein’s analysis found low barriers to entry, with electric two-wheelers built using outsourced models and readily available components. Only about half of the 35 founders they analyzed had technical backgrounds.
Image Credits: Bernstein
The government is now moving towards Production Linked Incentives (PLI) favoring domestic manufacturing. Most established auto companies have received PLI, while only a handful of startups have qualified, potentially providing a cost advantage for large incumbents, Bernstein said.
The report sees room for at least five startups to emerge as relevant players alongside established companies, but warns that intense competition could keep industry margins and returns subdued in the medium term.
Image Credits: Bernstein
