Electric showdown: Who will dominate the thrilling battle of e-bikes from entry-level to premium?

From the stables of Bajaj Auto, India’s third-largest two-wheeler manufacturer.

What was inaugurated that day at Bajaj’s plant at Chakan was the newest theatre of battle in the highly competitive, extremely price-sensitive Indian motorbike market. Here every segment has its own logic and, most often, its own set of competitors. It is a market that is subject to constant churn as newer technologies upend the status quo.

In the ICE (internal combustion engine) segment, a fight rages on as the legacy bike makers slug it out across the entry-level, mass market, and premium segments. In this epic, some of the dramatis personae are household names—like Hero MotoCorp, Honda Motorcycle & Scooter India, Bajaj Auto, TVS Motor Company, and Royal Enfield—while others—such as electric vehicle start-ups like Ola Electric and Revolt Motors, and Mahindra & Mahindra with Classic Legends—strive to steal the spotlight.

All this effort has but one aim: to come out on top in the bike market, which industry insiders peg at 900,000 units every month and believe is the biggest in the world. The victors will not just gain fame and glory, but, ultimately, profits, and lots at that.

The CNG Spark

The reason Bajaj Auto—that has weathered nearly 80 winters—launched the world’s first CNG motorcycle was to steal a march over its rivals in the entry-level segment. This segment has suffered in recent years as rural demand has dipped, especially in the immediate aftermath of Covid-19. Fuel prices have risen quite a bit, pinching the pockets of the segment’s extremely wallet-conscious customers.

In the CNG powertrain, Bajaj spies an opportunity to reclaim ground it lost to Hero and Honda over the past 30 years. That is because CNG is a much cheaper fuel option than petrol. “We want to return the favour to Hero and Honda after 30 years,” an emotional Rajiv Bajaj, Managing Director of Bajaj Auto, said at the launch of the Freedom 125.

Those 30 years have witnessed an immense change, as the composition of two-wheeler sales swung from 70% scooters to 70% motorcycles. Since 1998, Bajaj Auto has fallen behind leaders Hero and Honda in the commuter and mass market motorcycle segments, though its market share has increased incrementally in recent years.

Hero MotoCorp, a survivor of 40 winters, leads the commuter segment with a commanding 77% market share, led by models like the HF Deluxe, Passion, and Splendor. It is followed at a very distant second by Bajaj Auto (10.07%), Honda Motorcycle & Scooter India (6.12%), and TVS Motor Company (6.08%).

The picture is slightly different in the mass-market segment, where Honda leads with a 40.92% market share, followed by Bajaj Auto (27.12%), Hero MotoCorp (16.98%), and TVS (14.98%).

These two segments combined account for 70% of bike sales, Bajaj said at the Freedom 125 launch in July. “Almost 650,000 [units are sold] in the 100-125 cc segment. And our share in that segment today is 150,000 units… We are targeting 700,000 units. That is the kind of opportunity that lies ahead,” said Bajaj.

Analysts feel the Freedom 125 might have an incremental impact on Hero and Honda’s sales, but don’t expect heavy cannibalisation of existing ICE models. There’s reason for that caution. The existing CNG fuelling infrastructure is rather weak and concentrated in select areas. As a result, it may cannibalise the market for Bajaj’s ICE models only in areas with readily available CNG infrastructure. Other factors too will define the CNG bike’s impact on the market, like the price premium of the bike and consumer acceptance.

“Bajaj has the first-mover advantage in the Indian CNG motorcycle market, which could give it a significant lead in market share initially,” says Atin Jain, Senior Research Analyst at market research firm Markets & Markets.

It’s not just traditional fuels that will face the heat from CNG. The EV space, too, may feel the burn if CNG takes off in a big way. During an analyst call after the June quarter results, Bajaj Auto’s Executive Director Rakesh Sharma said the firm anticipated some impact on EV sales. “Our analysis was that CNG would appeal to the longer-distance riders, people who will ride 30 km-plus per day. If you see, there has been a little bit of stagnation in the growth of the electric two-wheelers because it is largely addressing the short-distance commuter.”

Should Bajaj succeed in this foray, its rivals Hero and Honda may be forced to explore alternative fuels in response. But “their core offerings should remain largely unaffected, maintaining their market dominance”, says Jain.

Beyond the market leaders, Bajaj’s new path has reportedly prompted TVS Motor Company, which has a very rich legacy, to explore the CNG powertrain in the two-wheeler segment.

The Electric Charge

Even in the nascent landscape of electric two-wheelers, electric bikes are a rarity. Only start-ups have entered this space. And the numbers show that it has a long way to go. According to the VAHAN database, electric motorcycles account for just 1% of total motorbike sales. There are just 10 manufacturers at present.

That’s set to change. On August 15, India’s 78th Independence Day, Bhavish Aggarwal-led Ola Electric launched the Ola Roadster series at a competitive pricing of `75,000. The series will compete in the commuter segment. “In ICE motorbikes, the mileage and power remained the same, but prices go up,” says Aggarwal.

According to Jain of Markets & Markets, EV two-wheelers cost 25–30% more than ICE bikes, but that differential may reduce in the future to 10–15% as battery technology advances, production increases, and new government policies come in.

Jain feels electric bikes will make the biggest impact in the commuter segment if they can successfully lower cost. “As electric models offer lower operating costs and reduced maintenance requirements, they will become increasingly attractive to consumers,” observes Jain. Eventually, this could lead to a decline in sales of ICE models, but only if electric infrastructure improves.

It may turn out to be difficult for legacy brands to make inroads into the electric space since the companies in this space are working hard on building indigenous batteries. The Ola Roadster bikes, for instance, will be equipped with indigenously built 4680 Bharat battery cells by FY26. “The cell is the costliest component of an EV. It’s the heart of an EV,” Aggarwal of Ola explained recently at the Business Today India@100 summit. It is akin to the engine of ICE vehicles because it defines the weight of the vehicle, range, and charging speed. “All these things in your vehicle depend on the cell, and if we make our own, we will be able to make it about 25–30% cheaper,” Aggarwal had said.

These relatively new firms could enjoy another advantage over the legacy firms: the lack of baggage and thus the ability to be more agile in terms of innovations. “Their pace to the market can be very quick in terms of development, offering the product, strategy, and reorienting themselves. Since they are new, they have relatively younger organisations. And they don’t have any liabilities in terms of any typical supplier base or any commitments that they may have given,” says Puneet Gupta, Director of rating firm S&P Global.

Meanwhile, some automakers like Bajaj Auto argue that EV adoption remains low even though the government has provided subsidies to boost sales. “In spite of the government pouring so much money into EVs and subsidies, at the end of the day, the EV penetration in the two-wheeler segment is about 4-5% and somewhere between 1-2% in four-wheelers. So it doesn’t really seem that it has taken off like a rocket,” Bajaj had said in July.

However, other firms, like TVS Motor Company, remain confident about EV adoption. “The heightened customer interest in EVs is driven by the alluring total cost of ownership, digital-first technology propositions, and the support from the national or regional governments. And, not to be underestimated, we recognise that the mindset of sustainable smart mobility is increasingly coming to the fore,” Sudarshan Venu, MD of TVS Motor Company, said at the company’s 32nd annual general meeting.

Defending Legacy

The competition may be snapping at their heels, but India’s top two bike makers, Hero MotoCorp and Honda Motorcycle & Scooter, aren’t sitting idle. They retained their market share, even though both did not make any big-ticket launches this year, thanks to a steady revival in rural demand.

Hero MotoCorp is looking to spread its bets across all segments to maintain its market share. “[Growth] drivers are at the entry segment, where we have a very strong, formidable market share,” Niranjan Gupta, CEO of Hero MotoCorp, said during the Q1 analyst call.

The company will also focus on increasing the market share in the 125 cc segment. Over the years, its share has declined in this segment as competitors raced ahead. But its share jumped from 13% in Q4 to 20% in Q1. “In 125 cc, we had a steep recovery… which is why we’re expanding the category,” Gupta said.

Hero has also set its sights on the electric segment, though it’s a latecomer in this space. It has partnered with Zero Motorcycles, via an investment of $60 million, to add electric motorcycles to the Vida range by 2025-26. As the world’s largest two-wheeler manufacturer, Hero MotoCorp’s entry here will undoubtedly accelerate electric adoption. “Hero MotoCorp’s entry could shift the market dynamics, potentially favouring larger, more established companies with the resources to invest,” says Jain of Markets & Markets.

Meanwhile, Honda Motorcycle & Scooter remains undeterred by the competition. “India’s market is versatile [enough] to accommodate all types of powertrains, so there is room for EVs. There is room for flex fuel. There is room for such alternate products coming in,” says Yogesh Mathur, Director of Sales and Marketing at Honda Motorcycle & Scooter India.

Battle of Classics

And, finally, in the premium category, Mahindra & Mahindra is hoping it will be third-time lucky via its two-wheeler foray through Classic Legends. With brands like Jawa, Yezdi, and BSA, it is eyeing the neo-classic segment that has been a turf of Royal Enfield. “This is the segment that will grow the fastest,” says Anupam Thareja, Co-founder of Classic Legends. The company plans to add 100 touch points as part of its expansion plans.

As the competition in the 350 cc segment increases, Royal Enfield, which holds a whopping 90% market share, will be focussing on the 350-650 cc segment. “The Indian market is very important for us,” Siddharth Lal, MD of Eicher Motors, said at the company’s 42nd annual general meeting.

The increase in competition, analysts observe, could dent Royal Enfield’s market share slightly. “But Royal Enfield will also try to balance it out by offering more features and trying to retain segments,” says Gupta.

The battle gong has been sounded and it will be a fight to the finish. There is no comfort here for the incumbents as they confront an ever shifting battlefield. Only the brave will remain standing when the dust settles.

@OrielAstha11