To attract buyers and gain a foothold in the electric two-wheeler market, start-ups are trying new and aggressive strategies, allowing consumers more flexibility in ownership
For the second year in a row, electric vehicle sales in India topped the 1 million mark. According to data from the Ministry of Road Transport and Highways’ Vahan Dashboard, the two-wheeler segment accounted for more than half of the EVs sold in 2023, followed by three-wheelers and passenger vehicles. This data clearly points to consumer preference for electric two-wheelers. But there’s another significant transition underway that could have a bearing on electric two-wheeler manufacturers – both legacy players as well as startups.
According to a Mckinsey report, based on a survey of 1,200 participants with varying mobility patterns, the preferred ownership model is shifting from outright purchasing to financing, leasing, or even pay-per-use. The report says while 78% of consumers' interest would currently be for outright purchase of electric two-wheelers, that number is likely to drop to 63% in the next 10 years. However, it adds, this trend is relatively slower for electric two-wheelers as their purchase cost is lower than standard EVs like cars and three-wheelers.
Fig 1. Image via McKinsey Center for Future Mobility India Mobility Consumer Survey
Banks, NBFCs, and fintech startups have pitched in to offer low-interest financing options for electric two-wheeler buyers, reducing the high upfront cost burden. In a bid to promote the use of green technologies, the focus is now also shifting towards EV leasing, which provides an affordable solution for consumers to transition to electric vehicles without actually owning one.
They can either lease an electric two-wheeler either on a monthly basis or even hire the vehicle on a pay-per-use basis. In the latter business model, consumers pay the vehicle providers a sum of money agreed in advance for every ride they take. Both these models offer a cheaper alternative to owning an EV, yet they help boost the popularity of the emerging technology.
There is also a key shift happening in consumer behaviour in terms of functional features provided in two-wheeler EVs. Most buyers who do think of buying these vehicles outright prefer a product that offers them premium features, such as higher speed and larger battery pack for endurance.
Most consumers already purchase electric two-wheelers with a top speed of 80 kmph (39%). Half of of them would be willing to pay up to Rs 10,000 ($120) to upgrade their electric two-wheeler to a higher speed (from 80 kmph to 100 kmph). For range, 90% buyers want vehicles that can sustain over 80 km per charge. In fact, nearly half (45%) would be willing to pay up to Rs 10,000 to upgrade from a range of 100 km to a range of 120 km, says the report.
Indian Mobility Ecosystem
Two-wheelers have long been an integral part of the Indian mobility ecosystem, accounting for more than 70% of all vehicles on roads. By 2030, electric two-wheelers are expected to account for 60-70% of new sales in India. The liking for two-wheeler EVs could be due to availability of multiple product choices, evolving but reliable technology features, and flexible ownership models. But mainly affordability plays a major role in nudging an average buyer towards them.
There is another significant reason why an average Indian consumer buys a two-wheeler. It offers accessibility. Most people know how to drive a motorbike or a scooter. While in cities, two-wheelers help commuters navigate the notorious traffic jams, they help people in rural India reach areas where it is difficult to take cars or bigger vehicles.
The report said 31% of respondents expect to increase their use of private motorcycles and scooters, while 18% expect to use their micro-mobility vehicles (such as bicycles and e-scooters) more in the future. Not only do consumers expect to rely even more on two-wheelers, but for most, the next two-wheeler is electric: 86% of them would consider buying an electric two-wheeler, while only 69% would consider a combustion engine vehicle.
New Players in the Electric Two-Wheeler Market
The electric two-wheeler market is heating up only now. With a significant increase in the number of potential buyers, manufacturers are racing up to meet the consumer expectations and tap the emerging segment. While people think most about vehicle brand, safety, and sustainability, they also appear to be trusting the new players in the EV segment. Legacy players like Hero, Bajaj Auto and TVS Motor Co. are facing a stiff challenge from start-ups like Ola, Ather Energy, and Okinawa Autotech.
Fig 1. Image via McKinsey Center for Future Mobility India Mobility Consumer Survey
To attract buyers and gain a foothold in the rapidly evolving electric two-wheeler market, start-ups are trying new and aggressive strategies, allowing consumers more flexibility in ownership. “This is evident from the fact that today, approximately more than 50% of the electric–two-wheeler market is dominated by new attackers,” says the report.
“Consumers continue to trust incumbents; however, they’re also willing to embrace newcomer EV companies. This is evident from the fact that today, approximately more than 50% of the electric–two-wheeler market is dominated by new attackers,” it said.
This is in significant contrast to the ICE two-wheeler market, where incumbents continue to dominate more than 90% of the market. This change in consumer approach for start-ups is supported by a rapid transformation in the digital sector, which allows them to buy a vehicle online.
In fact, Ola Electric CEO Bhavish Aggarwal recently posted on social media platform X that two-wheeler sales for his company “have gone through the roof”. “Our sales have gone through the roof this Dussehra and Navratri! Selling a scooter every 10 seconds right now, and almost 2.5x of last year! India’s EV moment is here this festive season! #endICEage,” he said.
Given the emphasis the government has on transitioning towards clean energy-based transportation, it can be safely said that the future of Indian mobility is electric and two-wheelers would largely drive that shift initially.
The increased use of electric two-wheelers will support India’s efforts at decarbonising the transportation sector. Already, city administrations are making regulations that are aimed at reducing air pollution and improving traffic conditions. However, concerns about vehicle safety, battery life, and lack of charging infrastructure could present challenges in achieving full market penetration sooner.
