Bajaj Auto Sees A First-Mover Disadvantage In Electric Scooters — BQ Insight

Bajaj Auto Ltd. has taken a calibrated approach towards electric two-wheelers, Executive Director Rakesh Sharma said, at a time when startups have stolen a march over incumbents in India's EV space, riding a wave of easy money.

"To some extent, this might be a first mover's disadvantage," Sharma told BQ Prime’s Niraj Shah. "This is exactly what happened in Africa, where the Chinese opened the market with cheap motorcycles. The customers got a taste of motorcycling, and then the good-quality companies moved in."

Today, India’s Bajaj Auto and TVS Motor Co. dominate the African market, pushing out—by some estimates—nearly 160 Chinese automakers. The sturdy Bajaj Boxer 150, which was a flop in India, is among the best-selling motorcycles on that continent.

Similarly, a clutch of EV startups, led by Ola Electric and Ather Energy, have grabbed market share with multiple offerings in the nascent but fast-evolving electric two-wheeler space in India. In comparison, incumbents such as Bajaj Auto, TVS, and Hero MotoCorp Ltd.—which ironically is an early investor in Ather Energy—have been slow in rolling out their products. In fact, the biggest scooter maker—Honda Motorcycles and Scooters India Pvt. Ltd.—has yet to enter the market, though plans to launch an electric Activa are afoot.

On the surface, that appears to be due to the access EV startups have to private equity funds. In May, Ola Electric raised $300 million at a valuation of $6 billion, despite the company’s trial by fire in the year gone by. The Bhavish Aggarwal-led company, which is planning an initial public offering, has raised nearly $1 billion so far. Ather Energy reportedly has a $250-million fundraising campaign at a valuation of nearly $1.3 billion.

Bajaj Auto’s Sharma, however, disagrees.

"The issue is not easy money. Let me tell you that there is enough easy money for even the incumbents," he said. "The issue is the cost and at what rate the customer will accept it. We’re calibrating for that. It is not that if we had access to easy money, the industry would change. That you switch off the tap and the industry will recede." 

"We don’t have private equity dollars to throw, and even if we did, we would be very circumspect about the ecosystem—our vendors and dealers have to be successful too. We are only as strong as them."

Subsidising isn’t a solution either, Sharma said. A subsidy may accelerate adoption but make decision-making highly skewed. Once subsidy goes away, demand falls, he said. The withdrawal symptoms, in fact, are starting to show.

Retail sales of electric two-wheelers crossed the one lakh mark for the first time in May, largely in anticipation of a reduction in FAME-II subsidies that came into effect on June 1. Dispatches rose 57% over the previous month to 104,755 units, according to the government’s VAHAN website.

"The removal of the subsidy will separate the wheat from the chaff. Companies with strong fundamentals—be it new or old—will see their rise," Sharma said.