As electric vehicle technology gains ground in the realm of passenger cars and trucks, it’s also reshaping the landscape of two-wheeled transportation.
The future of automotive technology will embrace a diverse range of power sources, with electric power set to be a pivotal player. Currently, this shift is most evident in the four-wheeled segment, marked by a surge in sales of battery electric vehicles and fuel cell electric vehicles.
The electrification wave is poised to revolutionize the world of two-wheelers, encompassing mopeds, scooters, motorbikes, and motorcycles—a category that accounts for approximately 30% of global transportation.
This transformation is particularly significant in regions like China, South Asia, and Southeast Asia, where they sold approximately 45 million units in fiscal year 2021, highlighting their essential role in the transportation network.
Currently, the electric conversion of two-wheelers represents a minor share, but the market has seen a surge in new entrants. Just like their four-wheeled counterparts, the electric transformation of these vehicles holds the potential to gain significant momentum, contributing to emissions reduction.
In our comprehensive analysis, we delve deep into the electric two-wheeler market, examining its growth trends, total cost of ownership (TCO), recent technological advancements, and consumer perceptions. Armed with these valuable insights, we identify key success factors for original equipment manufacturers (OEMs) and other stakeholders in the two-wheeler industry.
Global Two-Wheeler Market
This transformation is particularly significant in regions like China, South Asia, and Southeast Asia, where they sold approximately 45 million units in fiscal year 2021, highlighting their essential role in the transportation network. For instance, in India, electric two-wheelers accounted for just 4 percent of total sales in 2021. Nevertheless, on a global scale, our projections suggest that by 2030, electric two-wheelers will make up approximately 30 percent of the market.
In China and the developing world, the focus remains on smaller, utility-oriented machines for work and transportation purposes. Meanwhile, in North America (excluding Mexico) and Europe, the landscape is more diverse. Here, premium brands dominate the market, offering products with engine capacities exceeding 500 cubic centimeters. High-end, high-performance motorcycles extend into heavyweight and superheavyweight categories, attracting consumers for recreation and sports.
Newcomers, eyeing potential market opportunities in these lucrative segments, have been driving innovation in electric motorcycles. Nevertheless, challenges such as cost premiums, battery chemistry-related range limitations, and a lack of economies of scale remain significant obstacles in convincing dedicated high-performance and long-distance riders.
The limited adoption of electric two-wheelers holds significant implications for addressing climate change. In regions where these vehicles are the primary mode of transportation, they consume over 50 percent of gasoline and contribute to 5 to 10 percent of CO2 emissions. As more countries aim for net-zero emissions and fight urban pollution, the need to shift to electric two-wheelers grows more urgent.
Drawing insights from the evolution of the four-wheeled vehicle market, government regulations advocating for electric two-wheelers could trigger substantial change and potentially boost sales. For instance, China leads the world in electric vehicle (EV) adoption rates, largely due to robust government support for electrification initiatives.
Surging Consumer Demand for Electric Two-Wheelers
Historically, electrification in the major two-wheeler markets has languished below the 5 percent mark, primarily due to a host of barriers. These obstacles encompass elevated upfront expenses, performance disparities when compared to internal-combustion-engine (ICE) counterparts, a dearth of diverse product offerings from established players, and the absence of comprehensive financing and charging infrastructures.
However, it’s important to note that the landscape is on the brink of transformation, as substantial efforts are underway to tackle these challenges head-on.
Notable advancements in battery technology have eliminated the constraints of limited range concerns for electric two-wheelers. Presently, lithium iron phosphate (LFP) and nickel manganese cobalt (NMC) batteries boast energy densities of approximately 180 to 250 Wh/kg, offering an impressive range of 80 to 120 kilometers per charge.
Furthermore, the total cost of ownership (TCO) for electric two-wheelers already rivals that of internal combustion engine (ICE) vehicles in many regions, and they are poised to become even more cost-effective than ICE alternatives.
Traditionally, battery costs have represented around 35 percent of the total bill of materials (BOM) for two-wheelers. However, these costs are experiencing significant declines as manufacturers achieve economies of scale, streamline production processes, and shift towards more cost-efficient LFP batteries.
Electric two-wheelers are enjoying a favorable regulatory environment, including consumer subsidies of up to 25 percent of their purchase price. Rising oil prices and the gradual reduction of traditional fossil fuel subsidies in various countries further contribute to their appeal. In countries like Indonesia, the TCO for locally assembled electric two-wheelers has already reached breakeven and will become even more budget-friendly as the electric vehicle industry continues to mature.
Electric Two-Wheelers: A Growing Focus for the Investment Community
Between 2018 and 2022, investments in the micro mobility sector have surged to over $8 billion. While the number of transactions has decreased due to COVID-19-induced market volatility, the median deal size has quadrupled, growing from $1 million in 2018 to $4.23 million in 2022.
Historically, investors predominantly channeled these funds into low-speed electric two-wheelers like kick scooters, mopeds, and bicycles. However, high-speed scooters are now also drawing substantial investments from private equity, venture capital funds, and smart-mobility service providers. As an illustration, a company primarily focused on two-wheelers in India raised over $1.5 billion in 2022.
Lead the Way
OEMs operating in the electric two-wheeler market can tap into the valuable insights of early adopter customers. With consent-backed access to rider and bike data, manufacturers can unlock a plethora of opportunities for product and service enhancements.
For instance, integrated electronic systems can effortlessly transmit vehicle and rider data, refining product features, enhancing efficiency, and optimizing maintenance.
Furthermore, OEMs can implement automated software updates and upgrades to provide riders with enhanced performance and convenient new features. In an innovative approach, a premium electric two-wheeler company has ventured into a peer-to-peer blockchain-enabled bike-sharing customer experience.
This initiative enables bike owners to securely share their vehicles with other riders, for free or in exchange for cryptocurrency payments, ensuring an integrated customer experience.
Conclusion
The electric two-wheeler market is at a pivotal juncture, poised for significant growth and transformation. Electric two-wheelers provide an attractive, sustainable option, reducing emissions and enhancing urban mobility amid the search for eco-friendly transportation.
With advancements in battery technology, these vehicles are overcoming range limitations, making them increasingly practical and cost-effective.