Looking beyond EV- Auto makers race ahead with Green fuel launches. Hybrids take over EV during last two months for the first time
After Indiaās New EV policy, Can Tata Motors , Maruti Suzuki Share price Crash?
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An intersting analysis from the authors of equity masters.
In March 2024, the Indian government approved the new EV policy, under which import duty concessions will be given to companies setting up manufacturing units in the country with a minimum investment of US$ 500 m.
The companies that would set up manufacturing facilities for EV passenger cars will be allowed to import a limited number of cars at lower import duty. Duty of 15% would be levied on vehicles costing US$ 35,000 and above for five years.
Which means that India now has no restrictions on the import of electric vehicles from any country, including China, under a new EV policy.
However , in India Tata Motors is the market leader in EV cars - It has developed an ecosystem in India which is doing well at Present- Tata UniEVerse, is an ecosystem that will leverage group synergies, from companies such as Tata Power, Tata Chemicals, Tata Autocomp, Tata Consultancy Services (TCS), Tata Digital, Tata Elxsi and Tata Motors Finance.
And Maritu Suzuki with all proven capability in car industry since 4 decades has just started its work on EV.
Will they (both Tata Motors & Maruti Suzuki) be able to withstand the EV competition with foreign players like Tesla & many well established Chinese EV players .?
Read on the full story. you may ignore the promoās in between.
The new policy allows import of just 40,000 EVs per manufacturer over a 5-year period i.e. at a rate of not more than 8,000 EVs per year. And that too on the condition of setting up a manufacturing base in India. Secondly this is for import of only high-end vehicles (USD 35,000 i.e. around Rs.30 lacs and above). Competition is bound to increase in the long run anyway (from the present), and this policy is just a small carrot to those who are anyway planning to enter the Indian market. I donāt think it is much of an issue for existing players.
Union Minister Nitin Gadkari has sent a proposal to the finance ministry to lower tax on hybrid vehicles. This is a step in the right direction. Maruti Suzuki Chairman has been saying this for a long time that government should promote hybrid vehicles which solves the issue of range anxiety in EVs and will also help lower oil import bill. I donāt know why the government took so long to realise this. They should have promoted hybrid vehicles until the EV charging infrastructure was in place.
Agree. Hybrids have its own merits at this point of time. Lowering of GST on hybrids deserves consideration.
Unfortunately it is yet to get clearance from cabinet & GST councilā¦i think we will have to wait until election .
Who is going to be the winners in 2 wheeler industry? Is it TVS, Bajaj Auto, Hero Motors , Eicher, or Ola ? Or is it going to be someone else -āWho moved my cheeseā
With urban consumption continuing to rise and Rural consumption picking up, It is the 2 wheeler industry seems to be leading the charge.
Before we decide to put our money in the 2 wheeler industry, let us try to identify the likely winners. To do that we need to get some flavours from the past which has led to the present status and then predict the future trends.
1955-56
350 CC Bullet was the first 2 wheeler Motor cycle to be made by Enfield india some times in 1955. (now owned by Eicher).Royal Enfield- an Iconic brand is a global leader in the mid-weight motorcycle segment
1970-80, for getting a Bajaj Chetak Scooter, one would have to wait for 5-7 years even more after booking.
Marriages used to get postponed if Chetak was not made available for Dowry- Dahej. 
In Moped 50 cc, Kinetics Luna had monopoly business during this period.
1980-90, a new revolution started in 2 wheeler industry.
TVS came with TVS 50 Moped to compete with Luna.
Sooner , TVS had a collaboration with Suzuki to produce TVS suzuki Motorcycles and to compete with TVS Suzuki , Escorts -Yamah was born.
During 1985-86, two more innovative products were born from two different companies.
Hero group in collaboration with Honda came out with a 4-S engine motorcycle CD100- first in India .with " fill it, shut it and forget it" . 80 kms per litreā¦It became a big hit in Indian market and was appealing to the middle class bridegrooms.
Piaggio came in collaboration with LML to produce the 1st scooter with engine at rear Vespa XP which also became a hit ( Bajaj scooter had engine in front with imbalance issue)
So all these developments which took place during 1980-90, became a seed for the future- a massive transformation took place thereafter in 2 wheeler industry and the market gradually shifted from scooter dominated to motorcycle dominance.
Sales of Chetak Scooter once a monopoly started dwindling and Bajaj was forced to close down its Chetak Scooter ICE plant in early 2000.
2001, Suzuki after divorcing TVS went on its own to produce Suzuki Motor cycles. ( today Suzuki Motors 2 wheeler is unlisted ). TVS continues on its own as TVS motors as a listed company.
2014- Honda divorced Hero and formed HMSI (Honda motorcycles & Scooters india limited ). Hero is now known as Hero motors corporation - listed entity.
All these.players are still there , but with new Avatars with Motorcycles in entry level , mid weight level and premium level. Eicher bought over Enfield India and they seem to be happy with the premium segment Eicher has no entry level vehicle where the mass market lies. However to eat a Pie out of Premium bike Segment, Bajaj Auto has partnered with Triumph Motorcycles to create a range of premium motorcycles:
Bajaj Auto also has partnerships with KTM and Husqvarna to manufacture higher CC bikes, while Hero MotoCorp to manufacture the Harley Davidson X-440 ā¦so Bajaj and Hero may eat a Pie out of Eicherās premium segment.
2020-30 ā¦EV was born when emission, climate change, carbon foot print took center stage. Ola electric had the first mover advantage in EV 2 wheelers- started marketing in 2021ā¦ As a start up , Ola got all the benefit.
By the time TVS , Bajaj , Hero realised the potential of EV, Ola had already taken the advantage of Fame1/2 subsidy and soon became the market leader.
But it was not too late for the Trimurthy (Bajaj,TVS & Hero ) to snatch away 50% of the EV market share by sept 2024 from Ola.
These traditional ICE players have brand loyalty , strong after sales service set-ups built over last 45-60 years- which is difficult to replicate by any new players.
So whether Ola days are over.? only time could say that. But it would remain a big challenge for Ola to face the onslaught from Trimurthy !
On EV penetration, It is here to stayā¦But the game would be different now. The 2 wheeler market came from a scooter to motorcycle ( currently 65% motor cycle and 35% scooter) But with EV landscape, the ratios are most likely to change- EV scooters would sell more than EV motorcycles.
Motorcycle EV cost is 2X-3X than EV scooters. 2 wheeler industry is cost sensitiveā¦so all the 2 wheelers are now focussing on EV scooters.
Who will be the winners ?
Still traditional ICE enjoys monopoly, EV is penetrating fast ā¦but not very fast ā¦EV charging infra not there in rural India and customers would still prefer ICE due to simplicity , even cost.
So while Trimurthy focussed on EV, HMSI ( Honda) focussed on ICE . Like Maruti , Honda played safe (Japanese are conservative) . They are here to make money.
They knew , it would take time for EV infra.
So who moved my cheese ? While Trimurthy fought together to snatch away 50% EV market share from Ola , Honda HMSI seems to have snatched away the ICE market share from the Trimurthy if we see the latest data. 1st link.
But Trimurthy with 45-60 years experience in 2 wheeler business will not let it go so easily though HMSI is a Very strong company to fight with.
Bajaj is the 1st company to launch its CNG 2 wheeler in india with " Fill it, Shut it & Forget it". The chetak brand was relaunched with CNG version. It is selling like a hot cake in lakhs. It can also run on CBG- a renewable energy source. CGD is expanding in to newer areas. so here lies a lot of scope for CNG 2 wheelers. Till the time others come up, Bajaj Chetak CNG becomes a monopoly. please refer link 3.
Bajaj also has an export base, which TVS and Hero are trying to catch up.
Honda is Formidable. It is the same Honda which revolutionised the Motorcycle market in Indian market by bringing a 4S engine CD100 which gave 80 kms per litre in 1985 - Fill it Shut it Forget itā¦ Now launching its EV 2 wheelers in 2024 with a 3-E concept. Exclusive Factory , Exclusive one EV platform in which various models can be built , EXclusive After sales service workshop. It is aiming at 1/3 of its production of EV by 2030. It appears from link 4 & 5 that HMSI is here in India for the long haul- the biggest mass market in the world . it makes sense for Honda.
please donāt miss link no 4 & 5 if you want to know more about HMSI.
Honda only has about a quarter of the market in India, while in Thailand, Indonesia, Vietnam and Brazil Hondaās number is a monopolistic three-quarters. Scale is an advantage, too: Its combined capital spending and R&D budget last year, for instance, was about 16 times that of TVS, Hero and Bajaj put together.
All the 2 wheeler listed stocks have run up TVS has become expensive, unless you have invested from lower level .The next expensive stock is Bajaj Auto and the last one is Hero motors in listed space at an affordable valuation. HMSI is not listed so also Suzuki motorcycles.
By now, if you have read the above article fully and the articles in the link below, you may be knowing where to make your investment decisions in 2 wheeler industry.
Risk Factors:
(1) Auto Industry is cyclical in nature. In a down turn , the sales may come down which may affect stock performance.
(2) Auto industry reports sales figures every month. Market may react to monthly sales figures leading to stock volatility.
(3) Consumer preference changes very fast and companies may lose market share.
(4) EV carries a lot of govt subsidy.If subsidy is withdrawn, it may affect EV sales
(5) New players may come in which would increase competition among existing players
Discl : i have invested in Bajaj Auto from lower level. no transaction during last 6 months. Have a small position in Hero.
I may be biased . it is not a buy sell recommendation.please do your own assessment before buy sell.
Indian Electric Scooter & Motorcycle Market 2024-2030
The EV two wheeler market is expected to grow from USD 681.3 Million in 2024 to USD 14487.5 million in 2030 with a CAGR of 66.4% .
Please scroll down to read the entire summary report free. It throws a lot of insights.
Ola sales decline by 50% and it continues to lose market share. Bajaj Auto surpasses TVS sales numbers in Sept,. Bajaj auto gains market share.
Ola had a monopoly in EV scooters due to its first mover advantage during 2020-2022. However , once Bajaj and TVS came up, Ola is bound to have competition from all the three - Bajaj , TVS , & Hero. Now Ather is also going to launch its IPO.
But these new comers will have a challenging times to face Bajaj ,TVS , Hero. It is not only the quality/ reliability of the product , it is the after sales service infrastructure which Bajaj , TVS, Hero have built over last 50 years and the brand loyalty of the customer base.
Some brokerages are predicting Ola market share to plummet to 25-27 % by end of the 2024-25. perhaps Ola has to remain happy with 25% market share.
The only silver lining with Ola is that they are coming out with Lithium ion battery.
However , Lithium ion battery is becoming a commodity. We assemble and the supply chain is in China. Li ion battery capacities are coming up with so many established players. So Ola has to compete.
Discl : I am a Automobile professional with 36 years exposure in Auto industry.
Not invested in Ola. Invested in Bajaj auto with a small exposure in Hero.
I may be biased. It is not a buy sell recommendation . please do your own assessment before buy sell
Is the impact on Ola also considering their servicing issues and quality complaints?
Suppose buyers see persistent news about such complaints across media and from friends/other owners of Ola Electric. In that case, it will warrant a rethink on the decision, especially when there is no major differentiating factor among all the top 5 E-scooter manufacturers.
Can they even hold on to 25%, considering how Chetak and TVS are growing? Also, Ather may have figured out marketing, which was their weak point. Also, Ather was earlier focussed on south/west and is now heading nationally. IPO will provide funds and also a certain amount of publicity/media.
Also main heavy weight is launching next year. Honda will have high levels of technology/super distribution and ofcourse branding prowess. Can Ola even hold on to 20% considering these factors???
@hardik_shah1
You are absolutely right.
The top most 3 important parameters for the customer is (1) Build quality & Reliability (2) whether there is extensive Service network with well trained technicians at every corner of towns/ cities (3) Spare parts availability in service centers.
Initially, the customer may tend to buy whatever is cheaper , but then if there is any issues as mentioned above, word of mouth spreads and if the customer has a choice, then he would go for alternatives. This may be the reasons why Ola is losing market share.
Further , Bajaj is yet to ramp up its EV volumesā¦it has only shown a small trailer ā¦you can not under-estimate this 1971 Chetak maker.
Hero was passionate about its motorcycle premium brand, but initially neglected the EV Scooter. Hero has realised this and now focussing on EV scooter. EV motorcycle costs goes up by 2X- 3X than its ICE motorcycle. So EV motorcycle can not be for the mass market.
TVS had also taken the potential of EV scooters seriously.
The EV 2 wheeler penetration will only grow by the year and onwards, barring seasonal factors.
While Bajaj , TVS, Hero started focussing EV scooter to snatch away Ola EV market share, the sleeping giant HMSI (Honda motors and scooters) took away some market share in ICE 2 wheelers from this Trio.
Honda (HMSI) is also ready with 2 wheeler scooter. Would be launched in a massive scale.
With all these players , there would be tough competition among all , though the EV market opportunity is huge , expected to grow 65% CAGR as per estimates from 2024 -2030.
Bajaj had also launched a 2 wheeler CNG which is selling like hot cakeā¦By seeing roaring success of Bajaj CNG 2 wheeler , TVS is also launching a CNG.
Bajaj already has 3 wheeler CNG.
So the market is getting heated up and only the fittest can survive- who can deliver Quality , reliability with extensive service net work , soares availability.
In case of Ola , if we relate to Rabbit Tortoise story- Ola was rabbit , other Trio were Tortoise.It appears though Bajaj, Hero TVS were slow in EV 2 wheeler induction, finally the tortoise seem to have overtaken the rabbit
PM E-DRIVE scheme has been notified. Maximum allocation is towards electric two wheeler and electric buses. However, maximum subsidy on electric two wheelers has been reduced to just Rs.5,000 (from 2025-26). From around Rs.45,000 subsidy in FAME-I, the subsidy has been slashed by a whopping 90 per cent. Government feels electric two wheelers no longer require subsidy. This is the reason why subsidy has been slashed steeply. I feel till the charging infrastructure is not in place, EV adoption will continue to be slower.
Second point is that with reduced subsidy, the time to breakeven for an EV buyer will be longer. At present, it takes around 2 years to breakeven for an electric two wheeler buyer considering the higher cost he has paid for the vehicle. This will increase to 2.5 years. And with per unit electricity cost rising, this may even take longer time.
The subsidy was not meant to be there for ever. The EV 2 wheelers have to stand on their own. The Govt has done its job of supporting for last 5 years.
This is known to all.players. So every company has action plan of reducing cost. Economy of scale also plays a major role in cost reduction.
2 wheeler scooter by now is becoming a matured product which would grow on its own. Every player has a EV scooter and that would continue to drive the market.
When CNG buses were introduced , govt gave a subsidy for 5 years and thereafter CNG as a product well received by the market and it is growing in leaps and bounds along with CGD.
in a similar fashion EV 2 wheelers will grow along with charging infrastructure
Effective 1st October,2024, India shifts to a new EV subsidy Scheme PM E-Drive
https://www.financialexpress.com/auto/news/india-shifts-to-pm-e-drive-all-you-need-to-know/3627849/
How many companies make E- Scooters in India ?
I find there are total of 68 manufacturers of E- Scooters as of date. List is given in the link below along with its listed price.
Though the E-scooters can grow steadily, but E-Scooter can not be a commodity. It is a product that is based upon innovation & Technology.
It is just not assembling an e-scooter out of components. For ensuring reliability of the product, It requires Good manufacturing practises , Quality control systems, Sales and After Sales Service Network of dealers and distributors, Spare parts etc which requires a lot of capex, trained man power and finally building the brand.
Bajaj, TVS, Hero have taken 45-50 years to build the infrastructure and its Brand.
Though the market opportunities could be huge for low end 2 wheeler scooters, (considering the EV penetration is low at 10% now ) , with so many players in the game , only the fittest would survive
In the end, only few established players will survive in the EV two wheeler space. The rest of the players will either be acquired or will shut down. Tork Motors is already on the verge of shutdown. Okinawa, whose sales volumes once were higher than Ola hardly sells anything now. I see only top 5 players surviving because they have strong backing.
Till today, EV two wheelers are incurring losses on every EV scooter they sell.
All the players in EV Scooter market are more knowledgeable than you and me. Before putting their money in a EV 2 wheeler project , they must have done their homework.
No project/ investment gives you return overnight, though break even point may be different for different projects depending upon several factors such as project size , scale , capex , Technology capability/ R&D and human talents, Govt policy etc.
The point is Energy transition is taking place world over to reduce carbon foot print , climate change/ Global warming, sustainability and India is no exception. In fact India has another big challenge of importing 85% of energy requirement as crude petroleum through forex spends and the price is highly volatile.
(it is No brainer that petrol diesel are highly carbon intensive 8-16 times than natural Gas for reference)
To counter the issues as mentioned above, EV transition is taking place all across the Globe and the is irreversible. EV is here to stay and is going to increase gradually and steadily for at least next 10-15 years until Green hydrogen takes over gradually to fuel Automobiles which is considered ultimate Green fuel of the future.
So , the entrepreneurs have understood this and foresee a huge opportunity in EV 2 wheelers where the penetration is too lowā¦at 9%.
However , too many players for sure may not survive. Only the fittest would survive with strong R&D capability, technology innovation to reduce cost, Can ramp up production very fast to take advantage of economy of scale , strong service network for after sales support.
For next 5 years , it is those 2 wheeler companies who have an energy mix of Petrol, CNG , EV scooter /motorcycle would make more volumes and win market share and would make good profit than the pure play EV 2 wheelers.
PM E-DRIVE Scheme Overhauled.The new revised scheme announced,to subsidise charging stations for 2 and 3-wheelers- and reduce charging rates drastically to be effective Dec ,2024
Crude price volatility ,Geo-political situation, Carbon foot print keep us on our Toes- thanks to our 85% import dependent.The Centre has overhauled its plan to deploy electric vehicle (EV) charging stations by including subsidies for setting up two- and three-wheeler chargers. This is a significant development since earlier iterations of the EV subsidy scheme, called Faster Adoption and Manufacturing of Electric Vehicles (FAME), did not support deployment of two- or three-wheeler charging stations.
The government introduces subsidies for two- and three-wheeler EV chargers in a ā¹10,900 crore plan under the PM E-DRIVE scheme. The initiative supports 72,300 public charging stations, prioritizes daytime solar charging, and mandates 50% domestic value addition in chargers from December 2024.
Up to 80% of back-end infrastructure development costs will be subsidised under the newly launched ā¹10,900 crore PM E-DRIVE scheme. Besides, NHAI -National Highways Authority of India, Indian railway , Oil marketing companies and state governments will also be engaged in this scheme.
The guidelines propose that government or public entities offer land at subsidized rates to private operators in exchange for a share of the revenue over a 10-year period,
Increasing EV adoption is going to drive the electric Power requirement. In order to encourage usage of Solar energy for EV charging and with an aim to lower the EV charging rates, the charging rates have been slashed.
The new rates for fast charging have been lowered from the previous range of Rs18 to Rs 24 per unit to Rs11.00 per unit during solar hours and Rs 13.00 per unit during non-solar hours.
For slow chargingāthe rates are set at Rs 3.00 per unit for solar-based charging and Rs 4.00 per unit for non-solar charging
Distribution Licensees will charge 0.7 times the Average Cost of Supply (ACoS) during solar hours (9:00 AM to 4:00 PM) and 1.3 times ACoS during non-solar hours.
Aim is to quickly establish at least one public charging station must be established within a 1 km x 1 km grid in urban areas. Along highways, charging stations are to be located every 20 km for regular EVs and every 100 km for long-range and heavy-duty vehicles, such as buses and trucks. All OMCās have been asked to implement this within set timelines and put up a notice that āEV charging availableā in every refueling station.
Please read the two press notes to get more insightsā¦