EV in Asia: Easy riders

Never mind the muscle cars, no brand epitomizes the noisy, gas-guzzling excesses of the internal combustion engine quite like US motorcycle maker Harley-Davidson. The mobility industry may therefore take it as an omen that the company has ramped up its unlikely electric vehicle (EV) program by acquiring domestic electric sport-bike player Alta Motors.

This is one segment, however, where the US is a relative backwater. The consumer appeal of two-wheeled transportation is more about economics than joyriding - a fact that puts the most promising company development playgrounds squarely in the developing world.

According to Statista, Asia Pacific is set to sell 109 million motorcycles this year, compared to only 1.9 million in North America. The economic factors that underpin this imbalance are also creating openings for private equity investors, especially as EV and smart mobility technologies come to the fore.

The main challenge for private equity players in EV is that the industrial timeframes do not mesh with typical fund horizons. It can take 7-8 years to build an electric car company from scratch and launch a product. This process can cost in excess of $300-400 million.

By contrast, an electric motorcycle company can go from the blackboard to the blacktop in less than four years on a budget closer to $50-100 million. Also, two-wheelers as finished products are 10 times more affordable than cars. This makes it easier for customers to break even when they pay a premium for an EV that promises long-term economic advantages related to fuel. 

As a result of these factors, the two-wheeler industry will probably go fully electric years ahead of the car industry. Some of the latest PE activity reflecting this outlook includes a $300 million investment from Singapore’s Temasek Holdings in Gogoro, a Taiwanese electric scooter company hoping to expand its unique battery-swapping model into Southeast Asia.

Meanwhile, Ather Energy, an Indian electric scooter maker backed by Tiger Global Management, received a $31 million round from domestic motorcycle giant Hero MotoCorp. The deal coincided with India overtaking China as the largest two-wheeler market in the world with almost 18 million motorcycles and mopeds on the road, compared to only three million cars. 

“The next 3-4 years are going to be very interesting because many of the companies in Asia will not just launch but actually start scaling,” Tarun Mehta, CEO and co-founder of Ather, told AVCJ. “That’s when it will start flipping from a dominant petrol vehicle market to, in some cases, a dominant EV market.” 

The scaling advantage of the two-wheeler industry will also position it as an R&D leader in many of the technology-related categories that PE investors are targeting. In vehicle production, engineering starts to require a much more sophisticated approach when prototypes graduate to mass production. Therefore, if the two-wheelers realize that maturity milestone first, they’ll have an innovation edge on cars.

For obvious reasons, autonomous driving will remain a car-focused affair. But two-wheelers will participate thoroughly in every other technology and business model development area. Related services will leverage two-wheelers’ inherently reduced urban footprint as smart city programs roll out, with shared scooter tracking and remote diagnostic checks among the likeliest evolutions.

Despite the forays of Harley-Davidson, Hero MotoCrop, and the likes of Honda, smart connectivity and EV have so far remained blind spots to most traditional motorcycle makers. As investment dollars continue to pour into cars instead of two-wheelers, Asia’s private equity industry might be guilty of making a similar mistake.

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• Topics
• Cleantech
• Industrials
• South Asia
• Greater China
• Asia
• automobiles
• manufacturing
• Tiger Global Management
• Temasek Holdings
• Transportation
• India
• Taiwan (China)