The evolving retail landscape for electric two wheelers in India

The electric vehicle (EV) market in India is expected to hit over 63 lakh unit mark per annum by 2027, according to a report by the Indian Energy Storage Alliance (IESA). Between 2020 and 2027, the EV market is expected to grow at a CAGR of 44%. Electric two-wheelers (E2Ws) accounted for the highest sales in this entire segment in last fiscal’s retail landscape. Although EVs can be experienced in multiple ways, there are few channels through which customers can compare different attributes between ICE-2Ws and E2Ws.

In this light, here’s an interesting tete-a-tete between Amit Das, founder, and CEO of Electric One and Siddharth Jaiswal, Automotive Practice Head at Netscribes, as they take a quick look at the burgeoning EV market in India with a focus on the electric two-wheeler segment. They identify the drivers attributing to this growth, key players, and the best ways to market their products – and how Electric One could bridge the gaps from OEMs to manufacturers to dealers.

Siddharth: I believe the demand you are seeing for Electric One, in multi-brand retail for electric vehicles is something new. I say this given the volatility in ICE vehicles, the semiconductor shortage, and supply chain issues. Despite this, India is witnessing a constant increase in demand for electric two-wheelers and three-wheelers. Do you think it’s safe to say there’s now more acceptance and trust in electric two-wheelers in India?

Amit: Yes, I think we are definitely seeing a new phenomenon where people are open to adopting an electric mode of transport. There are a few factors contributing to this – first, the surging petrol prices. Second, those considering a two-wheeler purchase for the first time, say like a motorbike, are exploring EVs as an option. This was not the case last year and, hence, is a noteworthy change.

Last year, most of the sales came from customers who switched from conventional petrol bikes to electric two-wheelers. But this year, with electric being considered in the very first instance while buying a bike or a scooter, it’s a very strong indicator of the trend shifting towards this mode, primarily for two-wheelers.

Another major reason for this shift is the increase in charging stations, especially across tier-1 cities. In fact, in a survey we conducted on class twelve and first-year engineering students, we found that they are very happy to try EVs. They don’t want bulky petrol engines. They prefer cleaner, better, and lighter vehicles. So, this again is a great indicator of consumers, especially youngsters, moving towards a cleaner mode of transport.

Siddharth: Interesting! Now, this is a transition where, typically in India, the aspiration for youngsters would have been a heavy, 350 CC+ vehicles. What according to you has triggered this shift in the vehicle buyer’s mindset?

Amit: I think it’s mostly just a change. For example, if we take Royal Enfield as an ICE engine example, it’s doing quite well in its space. This in my opinion is because Royal Enfield did exactly what Harley Davidson did across the globe. They have increased their market base and affordability, the two main reasons behind their popularity.

However, their recent models are not as heavy as they used to be about a decade or two years ago. Now, they are leaner and sharper and come in a range of colors. Royal Enfield is also entering the E2W market. So, I think, people are not as fond of bulkier, heavy vehicles anymore – especially younger consumers. They are looking for trendy, smart-looking, and efficient vehicles that meet their daily needs. Across the retail landscape in India this mindset for electric two-wheelers has caught on as a trend in the last three to four years.

Only when there’s a pre-defined mindset, of a specific service class, that’s when buyers are considering bigger and heavier motorcycles like an Enfield or Apache. These are some fundamental behavioral shifts we are observing in the community of two-wheeler buyers.

Siddharth: Great! So one thing we’ve established, is that consumer behavior is changing. In this light, how do you think is the retail space evolving? What are the available touchpoints that form the customer journey within the electric mobility space?

Amit: That’s an interesting topic. Retailers across the globe are driving multi-brand sales. It’s only in India where there’s a conventional mode of single-brand dealerships. Today, if you go to buy anything at all, right from smartphones to apparel, electronics, and more, people always prefer a store that gives them options to explore. This allows them to compare products before making a purchase rather than make a hasty, uninformed, impulse decision.

I think it is the same within the EV space. Given its nascency and the limited awareness and understanding among customers, I think a platform like ours gives a more comprehensive knowledge experience. And that’s probably why our sales representatives at showrooms have a tough time explaining all the 5, 7, or 8 portals in EVs, compared to single brand dealerships.

I have noticed that customers are curious to know and understand the workings of various models, their necessities, and requirements, all to figure out which model best aligns with their needs. Savvy buyers browse multiple online platforms, read reviews about vehicle quality, and their performance under various loads, and compare budgets and pricing.

With so much to know and learn about EVs, I think the route for the future of EV auto retail will be a hybrid model of multi-brand dealerships and online interactions, given how buyers like to compare products and do so without wasting much time.

Siddharth: So, in your experience, how different is the customer journey for E2Ws versus an ICE vehicle? What role does digitization play in this, given that the consumer is young and already digital?

Amit: With ICE, consumers usually have a pretty clear picture of what they want before they even enter a showroom. These are all predefined, predetermined decisions that helps them buy an ICE vehicle. Accordingly, they will visit a particular showroom and buy based on the availability, or they will switch to the second option in case of a specific model’s unavailability. Decisions in this case are predetermined and based on references.

There’s a strong reference in the market for petrol engines, and potential customers will accept lots of advice and recommendations from their inner circle, extended family members, and friends. Within the electric two-wheeler realm, this benchmarking circle is not so clearly defined yet.

Moreover, no pre-determined notion across segments, except for a niche market. Like we have Ather and Ola and many other players emerging in the more than 1.5 lakh bracket. That is a predetermined notion created by very serious vehicle buyers seeking to buy a specific model or brand.

But the mass market lacking confident referencing or benchmarking, is making more spontaneous decisions based on what they can compare at face. This, according to me, is the biggest difference in the product buying lifecycle of ICE versus EVs.

Siddharth: Great! So you mentioned there are two buckets – one with niche players like Ather and Ola and the other a mixed bag of big players like Hero, Okinawa, and many other startups. Now, how does this equation play out? What will be the product differentiator? What will be the success model, or will there be a lot of consolidation and like, in ICE, just 5-6 dominant players?

Amit: If you ask me, the market for electric two-wheelers will be mostly fragmented. This means there’s equal opportunity for everyone who has a basic threshold of capital and technology and a production line. It will be a medium-scale industry wherein we’ll have pockets of manufacturers investing into EVs. Speaking of winners, Okinawa and Hero Electric have emerged to the top over the last couple of years.

But at the same time, there have been some emerging players like electrics from SAR Group and more. The reason behind their success is lower market entry barriers, as there’s no engine involved in EVs. For instance: Two decades ago, HERO depended on Honda and Bajaj depended on the Kawasakis of the world for their engine requirements.

But now there’s no such barrier. Instead, there’s a huge regional market dominance that will make way for winners in this fragmented format. These will gain a maximum of 10% of the EV market share. Also, production is steadily rising with the current consumption, and there’s a lot of technological advancement in terms of facilities, testing, and validations in the mass market.

All of this will reach a certain stage of consumption. And beyond that, a niche market will evolve into the next leap in production, capabilities, and specifications. So I think the mass market, will comprise mainly two parts – 10-15% will belong to major companies while the rest, almost 80% – 85% will belong to younger companies emerging in the business.

This will fuel progress for the local ecosystem of motors, controllers, batteries, and other vendors. Together, they will form the backbone of the EV industry, and the greatest beneficiaries as they will be supporting an entire system that cannot be built indigenously.

That’s impossible to create – motors, controllers, batteries, scooters, and everything in between, all in one go. Therefore, the ecosystem will support everybody in the market. A great case in point is China. Since 2012, its market has evolved to a point where almost 80% of the companies are industry newcomers.

And it’s not the bigwigs that rose to the occasion when exports from the country surged. Instead, winners have emerged from the more fragmented segment. The first-mover companies will acquire almost 10 to 15% of the market share. But a majority of the pie will belong to the new and emerging businesses.

Coming back home, India is witnessing a gamut of startups emerge particularly from Bangalore and Hyderabad. These young companies are approaching vehicles with more hardware plus software integration. They are incredibly fast, flexible and adaptable to hybrid – software and hardware integrations. That’s where the current conventional frontrunners are bound to lose success to these new entrants in the near future. So, I see a good opportunity for startups, who are thinking of electric as hybrid.

Siddharth: Insightful! So given the importance of product differentiation in a crowded, fragmented market, what role does branding play and where do retailers come in this branding strategy?

Amit: Indian EV companies are growing and extending competition to global EV companies. This means that success will not just belong to the traditional bigwigs across the retail landscape.

The market is now evolving at a pace that will give equal opportunities to all. But a point worth noting is that it is very important for young startups to raise funds as it bolsters reliability. One of the reasons why Tesla has been selling is because its reliability index has seen an upward curve over the past decade. The company saw initial failures, they worked on it to instill reliability and raised significant funds along the way.

Therefore, to succeed, companies in this space need to develop a strong sense of reliability among their audience. This reflects most in their aftersales service and availability of spare parts.

Gaining reliability from your investors also enables firms to steer close to 90% of funds toward product capabilities. Moreover, I feel the younger generation of startups can effectively come up with a plug-and-play model wherein they can build the product and get branding and servicing done at the local level in specialized retail formats.

It can be a bigger format like ours or other varieties of emerging formats. It all boils down to whether you want investments in product capabilities, or in branding capabilities. Both involve raising a tremendous amount of funds since everybody can’t be lucky like Ola. I say this more since there have been lots of losses among unicorn companies lately. Therefore, investors are shying away from heavily investing in such formats.”

Siddharth: Interesting. So what kind of business model do you see evolving for retailers? Do you see more companies like Electric One coming in? How profitable or how attractive will this space become?

Amit: More companies like Electric One will definitely emerge in small pockets considering auto retail is really tough. Lots of retail chains, like Cromas, Big Eastern, and more have sizeable real estate and will join hands with Electric One in shop-in-shop format. Why not leverage this real estate for E2Ws? This can increase the per capita output of that space and if we can engage prospects using VR or AR to help them understand an EV model, I think that’s the future.

For instance, in South America, there’s a brand called Italica. They have huge retail chains and sell E2Ws. Anyone with a credit or debit card can simply visit the store and ride home a scooter in a jiffy by simply signing up for a loan or EMIs.

Aspects like ease of finance, accessibility of scooters anywhere, and more aggressive moves will get companies that are not into cumulative retail considering it in the future. For example, in Southeast Asia, bigger formats of retail or cumulative retail exist – wherein everything from apparel to electronics to cosmetics, almost everything under the sun is sold under a single roof. This format has yet to gain traction in India. These formats promote a shop-in-shop model. Lots of players like Electric One will make become available in tier three and tier four formats where accessibility reaches villages and cities.

These kinds of retail formats will help EV companies focus on their core strengths like technology and aftersales support while leaving showrooms and ways to delight the customer across the purchase journey to retail stores.

Handling all of this is overwhelming for startups, believe me. For instance, if someone asks me to build IoT applications since I don’t possess those competencies. I’d rather, tie up with a requisite startup. The same holds true if you tell me to deal with extended warranties. What’s important is giving the same experience and accessibility to users in tier one to tier four cities.

Siddharth: Interesting. So just getting a little deeper into the concept of multi-brand retail, of which Electric One is pioneering in India. How are the dynamics here, with the OEM? How do you build a relationship with say a HERO or HONDA or a TVS to get them onboard? What are the apprehensions?

Amit: Since it’s a new format, there were brands that were initially very apprehensive to partner with Electric One. Eager to follow in the footsteps of traditional players they too were looking for a way to formalize their own channel. The only reason for this mindset is that no one had dared to try something innovative like this before and benchmark it against conventional approaches. And that’s precisely how I approach OEMs – If you are a traditional company and eager to catalyze the process of making your bikes and scooters known and available to every Indian citizen, Electric One, helps you get there faster since there’s a better ROI for a dealer.

We are present in almost 82 stores, 65 cities, and 16 states, with pan-India accessibility.

This pitch makes sense for OEMs since it’s not a dealer-driven business, it’s a product-driven business. We have an ethic of being in harmony that has to do with immunizing our location. This simply means that if your dealership is present, then I will not open within three kilometers and vice versa.

Quite a few OEMs have partnered with us, particularly newer, younger brands who have stepped into the market from abroad. Given that these brands have taken the lead in approaching us, they do have their own apprehensions like managing a big network all by themselves. To put it in a nutshell, I think sole management of a large network is highly unviable.

Why? Because most products are in their nascency and there’s a huge churn of dealers shuffling between various brands. So while from an Indian perspective the numbers may seem to be good from an Indian perspective, the ground-level retail experience is going for a toss.

Very often single-brand vehicle customers visit the Electric One showroom as their vehicle’s spare parts are unavailable, or because they have been hunting for batteries for over two months. Given such experiences we now have a direct connection to original equipment suppliers, providing us with spare parts, and batteries to support any brand altogether. This is how we are building an ambient ecosystem for customers eager to purchase an electric scooter and receive services at Electric One.

We are eager to do this for various EV companies going forward, for those whose OEMs are not supportive or there if there is no local availability of parts. In the case of petrol engines, people hardly visit a showroom for repairs after their bike is out of warranty unless it’s a serious issue. They rather take it to a local mechanic since their spare parts are easily available. In EVs however, there are no spare parts as such. So being a service provider, knowing the dynamics of your market is critical if you want to effectively serve both EV companies and customers.

Siddharth: Great! And now my final question. Since all OEMs aim for brand loyalty – in that if one customer buys their brand, they aim to get that customer’s entire family to buy from them. Similarly given Electric One is the touch point here; what is your aim? Is your thought process that – if this person has bought from Electric One their entire family and the next generation should only be associated with Electric One?

Amit: Absolutely! Our brand loyalty aim is similar to Vijay Sales. If you’ve seen their ads they showcase how three generations are buying from them. They don’t mention the brands of electronics their customers buy. All they say is that they are a stable retail chain that has lasted three decades, offering a good consumer experience and at a good price.

That’s the objective of Electric One as well. Since we are a consolidated format, we have a strong focus on quality consumer experience. So much so that when due to financial incapabilities one of our Ahmedabad or Surat showrooms was shut, we supported a customer who reached out to us, from a different location and borne the losses ourselves.

At the end of it all, we believe that the customer is the customer. And if the entire family has purchased from Electric One we are here to ensure they get a good experience and need not go elsewhere. So we definitely aim to be in the space of building our own retail brand, supported by good OEMs and quality products.

Siddharth Jaiswal leads the automotive research team at Netscribes and has been a part of the industry for close to a decade. He harbors a keen interest in the future of mobility, autonomous technology, and vehicle E/E architecture. In his free time, Siddharth loves tuning engines, riding his vintage bike, and spending time with his family. You can reach out to him at siddharth.jaiswal@netscribes.com.