Ola needs more than just hype for its electric scooter to succeed in the long run

Indian ride-hailing unicorn Ola has managed to create euphoria around its electric scooter plans, but the long-term success of the vehicle will depend on many factors, including some that are out of the company’s control.

Softbank-backed Ola will launch its electric scooter—its first foray with manufacturing—on Aug. 15, founder and CEO Bhavish Aggarwal said earlier this month. Aggarwal and his team have spent the past several months trying to build momentum around the two-wheeler.

On July 30, Aggarwal launched a poll on Twitter $TWTR asking how potential customers would like their deliveries.

On July 2, Ola had also released a promotional video that showed Aggarwal taking a test run on the scooter in Bengaluru.

“Ola has already created a buzz in the Indian market with its ‘Future Factory’ and its production plans,” said Bakar Sadik Agwan, senior automotive analyst at London-based data analytics firm GlobalData. “With regards to technical specifications of its upcoming products, Ola is likely to offer best-in-segment features and is well-positioned to create a niche in the Indian market.”

Once ready, Ola’s Future Factory, being built in the southern state of Tamil Nadu, is set to start operations in 2022. The company has claimed this will be the largest scooter factory in the world and will have 10 production lines, while will roll out one scooter every two seconds, taking the total annual output to 10 million. This will be 15% of the current total two-wheelers capacity globally.

On July 15, when the scooter was opened for pre-registration with a nominal charge of Rs499 ($7), the company received over 100,000 bookings.

However, beyond the initial excitement, Agwan said it might be too soon to say if Ola’s EV bet will sustain the positive momentum in the long run. “The company is fairly new, and its products are priced at a premium. Cost of acquisition is set to have a high weightage in factors that would decide sales volumes,” he said.

What we know about Ola’s electric scooter so far

Ola has shared several details about the scooter to entice buyers.

For instance, the company has said the scooter can be charged at home using any 5A socket and through Ola Electric Charging Network, which is currently spread in over 100 cities across India. This is an important aspect given that EV adoption in India has been slow so far because of the lack of charging infrastructure.

In addition, Ola has said the scooter will have two variants: S1 and S1 Pro, which will be available in 10 colours. The details about the variants are not yet known.

While the company will likely share these details on Aug. 15, it’s expected that the scooter will have a driving range of 150 km and will also come with connected technology and a touchscreen.

But the promotion by the company and its CEO has so far have skipped the most important detail: the price.

The company has assured customers that the scooter will be “competitively priced.” For a price-sensitive market like India, that could be a major factor in deciding the success of the vehicle.

Industry experts believe that to be a market leader and to maintain the pre-booking momentum, affordable pricing is crucial.

“Affordability is one of several major criteria that can enable or discourage e-scooter use/adoption. It is also important to consider appropriate business models (individual ownership, rental, subscription, pool, etc.), as well as regulatory constraints that may be imposed by various governmental jurisdictions: local, community, city, county, state, etc,” explained Richard Simmons, director of the energy, policy, and innovation centre at Georgia Institute of Technology.

There are expectations that Ola will price the scooter below Rs1.5 lakh ($2,014.6) to take advantage of the Narendra Modi government’s scheme for EVs, which could provide the company with a subsidy of around Rs50,000.

Ola’s future success hinges on many factors, but there are reasons why Indians must adopt electric two-wheelers.

The future of electric scooters in India

India is the third-largest carbon-emitting nation globally, with 22 of the world’s 30 most polluted cities.

The country is also the world’s largest two-wheeler market, and these vehicles—the largest vehicle class in India—are responsible for 20% of the total carbon dioxide emissions, as per Anindya Ghose, the Heinz Riehl professor of business at New York University. “Therefore, the market for two-wheelers ripe for disruption by electric scooters,” Ghose said.

At present, EVs merely constitute 1% of the total two-wheeler sales in India. In 2020, there were just 150,000 electric scooters and bikes sold in India. But experts estimate the segment will grow to over one million by the end of 2025.

There are various factors—some clear roads and others uphill climbs—that will affect the course of India’s EV adoption:

• High petrol prices: In July, petrol prices touched all-time highs in India, which makes electric alternatives relatively more appealing. “With high fuel prices, the electric scooters have already achieved total cost of ownership parity,” said Jaspal Singh, co-founder of research and advisory firm Valoriser Consultants.
• Increase in the number of manufacturers: Indian consumers will soon be spoilt for choice. Bengaluru-based Ather, which launched its first electric scooter three years ago, is racing ahead of the competition. Another startup from India’s IT hub,  Simple Energy, is launching its first e-scooter on the same day as Ola. Then, New Delhi-based Hero MotoCorp is set to launch two electric two-wheelers in the first quarter of 2022. International big names like Honda $HMC, Yamaha and Suzuki Bergman are also set to debut their electric models. With healthy competition, there will likely be better products and prices.

  
  

  Moreover, domestic production is important in the wake of border tensions with China. “The assembly of spare parts of EV often come from China and given the post-Galwan world, Indo-Sino ties may be a hindrance to imports of batteries, motors, and other electrical and electronic components,” said NYU’s Ghose.
• Battery manufacturing: Lithium-ion batteries used in EVs mostly come from China. However, several players are now manufacturing them locally. India’s first EV battery plant is coming up in Karnataka courtesy Vikram Handa, the son-in-law of India’s biggest steel tycoon, Sajjan Jindal. Meanwhile, the price of lithium-ion batteries have fallen sharply——and the .