Electric 2 Wheelers in Asia: A Snapshot of Business Models and Approaches
By Anna Mowat and Peter du Pont
Electric two-wheelers are a growing industry in Asia. With countries like Vietnam, India and China seeing the percentage of households owning two-wheelers at levels of 87%, 47% and 60% respectively. Given this growth, the potential impact of reducing emissions by switching from internal combustion to electric two-wheelers (E2Ws) can be huge. As the market for E2W’s grows, many start-ups are moving into the space. Through our work with the Private Financing Advisory Network (PFAN), [1] we have recently been seeing business models and financing proposals for E2Ws in Southeast Asia and wanted to share some thoughts on the different approaches and business models we have seen.
E2W companies can provide a range of services such as: mobile apps, charging stations, two-wheeler taxi systems, and mile-based or time dependent rental systems. While each company provides a slightly different combination of products, they often have a common thread of promoting the further democratization of the public transport market. Companies providing these app-based, rental systems can provide lower cost by kilometre and greater convenience for consumers than owning one’s own vehicle. They also are in tune with the mindset of the younger generation.
In early 2019, PFAN received applications from two E2W start-up companies in Vietnam: QIQ and Selex. QIQ has a license from the Vietnam Government to operate in smaller cities such as Hoi An and they claim to currently be the only city-level, electric shared mobility solution in the country. They are operating an active electric bicycle sharing business in Hanoi and are currently building 50 charging locations in the city. QIQ offers a mobility platform that uses an ultra-battery solution and e-bike. Customers can rent electric bicycles and scooters through their mobile app. All vehicles are equipped with GPS and battery monitoring software. After their pilot system in Hoi An, they plan to expand to Ho Chi Minh City, Hanoi, and other cities across Vietnam.
Selex offers a smart electric motorbike (as opposed to a bicycle), and they take a different approach to battery charging. Both Selex and QIQ use an Internet-of-Things (IoT) style system where a mobile app talks to the GPS installed on a vehicle, which also talks to software monitoring battery life. However, Selex uses a battery-swapping solution instead of a charging location model. Rather than plugging a vehicle into a charging station, customers swap out the dead battery of their electric motorbike with a new one at “swap points” across the city. In emergency cases, they can also order a battery delivery. This model is slightly more like the experience of filling gasoline at gasoline stations than QIQ’s approach.
Additionally, Selex and QIQ also differ on the vehicles they offer. The product offered by QIQ is a smart electric bike, while Selex offers smart electric scooters. This may put them in a different market category from the consumers perspective as QIQ demonstrates a transition from bicycles to electric bicycles, while Selex is replacing internal combustion scooters with electric counterparts. Bicycle owners and scooter owners may not be the same consumers.
To learn more about E2W business models, we also looked at the electric mobility market in India. Practically all (99%) of electric vehicles in India are E-scooters and E-rickshaws. There are plenty of E2W companies in India, and they include (but aren’t limited to) companies like Yulu, eBike Go, Rapido, Zypp, and Hero Electric. Yulu, currently based in Bangalore, has recently announced a pilot-program with Uber. This is the first time Uber has ventured into the e-bike market in India, and they plan to show Yulu’s services as an option in their app. Yulu, Zypp, and Rapido all follow a similar business model as QIQ, in which customer service is provided through an app that locates the bikes, and once finished, customers leave the bikes at charging stations. Yulu and Rapido design their own bikes, while other firms such as eBike Go and Zypp work more like a car rental service that specialises in E2W. Zypp goes a step further and offers service for E2W owners to join as a ride-sharing driver. In addition to these new start-ups, there are more established firms, such as Hero Electric, which has seen growing sales in the Indian E2W market over the past ten years. Hero Electric expects its total annual E2W sales to rise from 100,000 in 2018 to 120,000 in 2019. On top of ride sharing, some companies are also branching out to offer additional services such as delivery vehicles to move packages and food.
The market is also seeing successful fundraising for E2W start-ups. In March 2019, Hyundai and its subsidiary Kia invested $300 million in Ola Electric to manufacture cars and mobility services. Shortly afterwards, in May 2019, Hero MotoCorp invested $8 million in Ather, an intelligent electric scooter and electric vehicle charging network. [2] In December 2018, cab giant Ola invested $100 million in Vogo, a dockless electric scooter sharing platform. The government stance on electric vehicles in India is also becoming more favourable. According to the Financial Times, the central government has reduced customs duties on EV components by 5% and unveiled a three-year $1.5bn EV subsidy program in March 2019. [3]
Even with the favourable market and tech space, there are still a few more difficulties to be overcome by E2W companies and charging networks. While electric vehicles are typically referred to as clean modes of transport because they do not run off internal combustion engines, the production and disposal of batteries needs to be considered. Methods of manufacturing and recycling batteries in a “clean” manner (i.e. without negative environmental impacts) are new, and the potential environmental implications are still unknown. Additionally, since the vehicles are plugged into their local grid, they may still be running on fossil fuels given the make-up of electricity generation in their respective country. E2W’s face other challenges besides how green they are. Singapore recently banned E2W’s citing several incidents of fires blamed on charging devices and collisions due to the quietness of the vehicles.
The companies we reviewed use either an app-based pay-as-you-ride model or replicate the daily rental model from conventional vehicle rental services. Those that use app-based models tend to provide charging services themselves and typically mention the charging infrastructure they have built and are building. They also usually have GPS units on all their vehicles. The biggest difference within the app-forward services is how charging is provided. Many provide plug-in charging stations; however, a few offer a battery changing system.
What does the future hold? It is hard to tell at this early stage, but in the end, it will come down to the dynamics of each market and customer behavioural preferences. Factors such as the ease of traveling to a charging station, time of charging versus swap-out batteries, user experience of software and consumer preference of vehicles will determine which E2W company customers choose to use. There is a lot of potential for further growth in the E2W market in Vietnam, India, and other parts of Asia. It is an area that people should be watching.
Images: Yulu e-scooter, QIQ app page
Anna Mowat is a Research Assistant and Peter du Pont is a Managing Partner of Asia Clean Energy Partners. Important information on recent deals and market trends from India was provided by Nagaraja Rao, Head of Investment Facilitation for PFAN.
[1] PFAN is a global network of financing, climate, and energy experts who work to identify and coach small and medium-sized climate and energy business and help introduce them to investors and secure financing. PFAN has facilitated more than $1.6 billion of financing for small and medium size climate and clean energy companies since its establishment in 2006. PFAN is operated globally by UNIDO and the Renewable Energy and Energy Efficiency Partnership (REEEP). Asia Clean Energy Partners coordinates the network across 12 countries in South and Southeast Asia.
[2] Entrepreneur INDIA. 2018. Why Are Traditional Automobile Companies Investing in EVs? Article by Shreya Ganguly. 17 September 2019.
[3] Financial Times. 2019. Reforms drain India’s electric car industry. Article by Benjamin Parkin. 13 August 2019.
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