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In March, Bhavish Aggarwal, founder of Ola Electric, announced plans to build the world’s largest electric two-wheeler factory in Krishnagiri, Tamil Nadu.

Nothing less than global in scale would have piqued interest as India’s electric two-wheeler sector is full of start-ups and traditional two-wheeler manufacturers launching new products and investing in new capacity. Amid an investment drought in the country, the electric two-wheeler sector was an island of hope.

In the first three months of the 2021 calendar, eleven new products in the electric two-wheeler segment were launched in India. Others are in preparation.

While Ola’s mega-factory is also into exports, interest in this sector is driven by domestic demand. Electric two-wheeler sales have increased more than seven-fold in the past six years, but this is only on a small basis.

Looking ahead, the share of electric vehicles in the total two-wheeler market is estimated from 0.8% in the period 2020-21 to 12.8% in the period 2024-25, according to JMK Research & Analytics.

Demand is expected to come from both individuals and from the delivery and hail shipping companies. McKinsey estimates that ecommerce / delivery company demand is expected to grow 15-30% per year through 2025.

While early adopters of electric vehicles tend to be more environmentally conscious, the demand for electric two-wheelers is mainly driven by the economy.

In terms of total cost of ownership, electric two-wheelers are 10-20% cheaper than gasoline-powered vehicles, research by analysts at Motilal Oswal Financial Services shows. The cost momentum has deteriorated in their favor, mainly due to the falling prices for lithium-ion batteries thanks to the mega-factories, which are mainly located in China.

Volume control

A decrease in battery costs can significantly reduce the cost of an electric vehicle (EV). McKinsey estimates that this typically accounts for around 40% of material costs.

The prices for batteries have fallen. According to BloombergNEF, lithium-ion battery prices fell 89% from over $ 1,100 per kilowatt hour in 2010 to $ 137 / kWh in 2020.

BloombergNEF expects this figure to drop further to USD 101 / kWh by 2023. This could mean that electric vehicles in their markets can be compared in terms of their costs to vehicles with internal combustion even without subsidies.

In India, electric vehicles are currently subsidized through the government’s FAME-2 program. Battery prices could fall further to USD 58 / kWh by 2030, for example through the introduction of solid-state batteries. Last year, battery prices fell 13% from 2019, driven by increasing order sizes, increasing sales of electric vehicles and the introduction of new packaging designs, BloombergNEF said.

Chinese dominance

China is unmatched in investing in battery production. According to a study by the Oxford Institute for Energy Studies, 136 of the 181 battery mega-factories are in various planning and construction phases in China.

According to the Mineral Intelligence benchmark, the country accounts for 72.5% of the world’s battery capacity. Even if total battery capacity increases six-fold over the next 10 years, China will keep a 67% stake, adds Benchmark.

At a time when many global companies are trying to cut supplies by reducing reliance on a single source, it will be vital for Indian electric two-wheeler manufacturers to look beyond China, especially if they are not making any investments.

Electric two-wheeler manufacturers could work with battery cell manufacturers. Volkswagen and General Motors did just that in Europe and the US, respectively.

Charge charge

For Indian manufacturers of electric two-wheelers, however, strengthening the network of charging stations is an immediate problem. While individual customers are likely to use it for short trips, companies are expected to keep their vehicles working longer hours each day. Research from McKinsey suggests that one vehicle in an e-commerce fleet would travel 90 to 100 km per day while one in a grocery delivery fleet would travel 120 to 130 km per day.

While some electric two-wheelers promise such a range on a single charge, the availability of charging points will be a major driver of demand. In 2019 the Indian government had allotted £1,000 crore for setting up a charging infrastructure as part of the FAME program. Recently, Ola followed up on his announcement of building the world’s largest electric two-wheeler factory with another big plan. Over the next five years, 100,000 charging stations are to be set up in 400 cities. Given the current Indian network of 4,300 stations, this is a long distance.

www.howindialives.com is a database and search engine for public data

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