E2W Sales: Traditional ICE OEMs Gaining Ground

Mukul Yudhveer Singh
19 Jul 2022
11:00 AM
3 Min Read

June EV sales point out that OEMs have gained a lot of ground while some EV start-ups have lost in terms of numbers month-on-month on account of EV fires.

Representational Image

Remember the “OATS For Breakfast” statement that Rajiv Bajaj, MD, Bajaj Auto, made last year? Well, his company might not be doing that great in comparison to 2W electric vehicle start-ups, but it looks like Hero and TVS Motor have found their mojo when it comes to 2W electric vehicle sales.

June sales figures, sourced from Vaahan Dashboard, point towards a big leap that the two OEMs have taken in comparison to the EVs they had sold in May 2022. Hero, which sold only 2,851 EVs in May 2022, was able to retail 6,503 EV units in June 2022, posting month-on-month growth of over 128%. TVS Motor, on the other hand, sold 1,944 EVs in June 2022, representing 338% MoM Growth as it had sold just 443 units of EVs in May 2022.

Electric two-wheeler start-ups, apart from Ather Energy, saw a major dump in their month-on-month numbers. For instance, Ola Electric could retail only 5,883 EV units in June 2022 (-36%) against the 9,255 it had retailed in May 2022. There have been nearly 30 reported fire incidents involving two-wheeler EVs in the country, and some recent cases of four-wheelers have come in the news, noted Saurav Kumar, MD, Protiviti Member Firm For India.

He said, “The fires are witnessed more in the EVs owned by start-ups as compared to those owned by legacy OEMs as the start-ups have rushed to join the bandwagon and launch EVs in the market without proper R&D and quality control testing.” Atul Chandel, Director, Autobei Consultants, is also of the view that no negative experience (fire incident) associated with established OEMs is helping them grow in numbers.

Start-ups whose EVs have caught fire in the recent past have all posted a decline in their MoM sales figures. Okinawa, which was retailing over 8,500 EVs on an average every month since March 2022, was able to retail only 6,981 EVs in June 2022. These numbers, compared to the May 2022 figure of 9,305 EV unit sales, represent a decline of over 24% MoM.

EV sales data Jan to June 2022
Source - Vaahan Dashboard

Will The Trend Continue?

The EV ecosystem in India is likely to see investments of INR 94,000 crore ($12.6 billion) across the automotive value chain over the next five years. The larger goal of decreasing reliance on fossil fuels is too important to be put off by sporadic safety issues. Overall optimistic view of the investor community about the EV segment notwithstanding, the recent fire incidents can create doubts among investors in the short-term, explained Kumar.

He said, “Investors believe that the issues are short-term in nature and expect the overall EV market to grow in the long-term. In May, the Indian startups in the EV space reportedly raised over $170 million of funding. Recent fire incidents involving two-wheeler EVs and supply chain disruptions are transitory in nature, but the overall EV market will continue to grow.”

Even though the EV industry in India is in its infancy, it is one of the world’s largest untapped markets, making it a hotbed for investment opportunities in the sector. It is also worth mentioning that amid the ongoing Russia-Ukraine war, rising inflation, and tightening monetary policies, there are whispers of a ‘funding winter’ in the country’s startup ecosystem. The funding raised by Indian startups declined 53% month-on-month to $1.6 billion across 117 deals in May.

Anurag Singh, Managing Director, Primus Partners, noted that while large conglomerates or OEMs would be better equipped to scale up their operations and production capacity rapidly if the need arises, the spotlight will continue to be on the start-ups, given their openness and fluidity in the adoption of newer technologies and digitisation.

He said, “With rapid changes in customer preferences, business dynamics, and shorter product life cycles, companies could benefit from a more agile, startup mindset that takes uncertainty in its stride and responds nimbly, is more open to risks, and can innovate at a rapid pace.”

The proof of the pudding lies in the fact that despite many EVs from start-ups catching fire, not all electric EV start-ups have reported weak figures. For example, Ather Energy, backed by Hero Motocorp, has posted month-on-month growth of over 14%. The start-up had sold 3,338 units in May 2022 compared to the 3,816 units it sold in June 2022. Revolt, another start-up to have not reported any fire incidents, also grew by over 52%.

OATS, as pointed out by Kumar, will go through the initial teething troubles, but once proper processes, quality controls, and supply chain constraints are resolved, they will be a tougher nut to chew.

“Several factors like new model launches will keep affecting the trend in the short- and long-term. Some start-ups might even shut operations if the Government applies strict manufacturing norms,” said Chandel.

Can The Government Come To The Rescue?

While the Government of India has announced various probes into EV fires, it will need to do a lot more to ensure that two-wheeler EV sales continue to flourish in the country. Ola, Okinawa, and Pure EV had recalled at least 6,656 units for checks and measures. The Government is also looking at introducing a battery safety standard through the Bureau of Indian Standards (BIS).

The robust policies by the Central Government and subsidies by respective State Governments, as Singh noted, have helped in a 463% surge of E2Ws from April 2021 to April 2022. The Government, as per him, would need to work more on the charging infrastructure. He said, “A challenge the Government would need to overcome while trying to achieve its targets would be to set up a process for the safe disposal of batteries.”

India has one of the largest user bases for two-wheelers in the country, comprising almost 80% of the sales in the category between 2015-2021. Given the country’s aim to achieve the goal of consuming only 50% of its energy needs from renewable resources by 2030, it is imperative for the market to shift from ICE to electric mobility. Similarly, the Government must work with EV OEMs and start-ups to help instil confidence in EVs among consumers.

“Strong measures and swift action by the Government will bring the confidence levels of the customers back. The market is bullish with growth, and 2-wheelers are leading from the front,” concluded Kumar.

Also Read

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