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India’s electric two-wheeler takeover

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India’s electric two-wheeler takeover­
India’s electric two-wheeler takeover

December 29, 2011 3:00 pm by Kanupriya Kapoor

Electric vehicles might have yet to catch on in India but that hasn’t stopped one Indian company from seeing the money-spinning potential of electric motorcycles and scooters.

Hero Eco – owned by the same parent company as India’s largest two-wheeler maker, Hero Motocorp – is hoping to boost its presence in the electric two-wheeler industry with the acquisition of Ultra Motors – a UK-based manufacturer.

Analysts said the deal – for which the financial details were undisclosed – would do little to promote EVs in countries like India. Instead, the push is aimed at the global market, which is projected to grow to over 400m units by 2016, according to Pike Research.

“Such a deal is to cater to global demand rather than here in India,” said Surjit Arora, auto industry analyst at local brokerage Prabhudas Lilladher. “EVs will take some time to be favored by consumers in India as infrastructure, like battery charging stations, is not in place yet. Electric two-wheelers are not expensive and do have better mileage, but…the sector has not seen growth in the past two years, and also going forward, the growth will be incremental.”

The view was echoed by Hero Eco who said the acquisition of Ultra would help the company extend its reach into 22 new countries including Germany, Switzerland and Australia. Overseas sales are expected to bring in up to $100m over the next five years.

“It would have taken us at least four years to expand to so many markets,” Naveen Munjal, managing director at Hero Eco, told reporters. “We have been leaders in India’s electric-vehicle market. With Ultra Motor’s global brands, the acquisition will help Hero Eco to have a strong international presence.”

“We plan to soon start exporting electric two-wheelers to Europe,” Munjal added.

While cars are the status symbol of choice among India’s growing middle class, two-wheelers prove more economical and convenient – often with entire families piling on for the commute. With over 11m units sold last year, two-wheelers dominate up to 76 per cent of vehicle sales in the country.

Yet manufacturers of electric two-wheelers have struggled to ramp up sales, which, at 70,000 last year, account for only 0.63 per cent of total motorcycle and scooter sales. In spite of government subsidies for EV makers, the relatively high prices for green technology deter cost-conscious Indian consumers who are loath to cough up for only marginally better mileage.

Hero Eco revealed plans to invest $90m (Rs. 450 crore) in expanding its overseas manufacturing capacity from the current 65,000 electric two-wheelers, with plants in North America in the pipeline to almost triple its turnover to $282m. The deal will bring under its control Ultra Motors’ existing manufacturing facilities in the UK, China and Taiwan.

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