Challenges for Automakers in India’s Electric Vehicle Market: Bernstein Report
A recent report by Bernstein highlights the difficulties automakers face in India’s electric vehicle (EV) market. Despite significant financial incentives, generating profits and scaling up in the EV sector remains challenging.
Struggles of Traditional Automakers
Many traditional automakers are facing losses in the EV space. Bajaj Auto and TVS Motors are on a similar footing, while Hero MotoCorp lags behind. Eicher Motors, expected to launch its EVs soon, is predicted to be less relevant in the market. Bernstein rates Bajaj Auto with an ‘Outperform’ rating due to its lower valuations, while TVS, Hero, and Eicher are rated as ‘Market Perform.’
Performance of Startups
Ola Electric, a startup in the EV two-wheeler space, has managed to generate positive operating earnings (EBITDA) from its premium models like the S1 Pro and S1 Air. However, it is incurring losses on its mass-market model, the S1X.
Financial Challenges
TVS is estimated to be losing approximately 7.5% in EBITDA (around Rs 11,000 per vehicle), despite generating a gross profit margin of around 7% without subsidies. Bajaj Auto is reportedly facing an even steeper EBITDA loss of 10.5% (approximately Rs 15,000 per vehicle) and is also losing money at the gross profit level without subsidies.
Industry Reliance on Incentives
The overall EV two-wheeler industry in India generates about USD 1.3 billion in annual revenues but incurs an estimated EBIT loss of USD 300-400 million without incentives. The industry remains heavily reliant on government incentives and subsidies. To stay competitive, the EV industry needs sustained focus, large-scale operations, and significant cost reductions to compete with traditional internal combustion engine (ICE) vehicles.
Future Outlook
According to the report, only dominant startups are likely to become mainstream, while traditional OEMs will continue to compete for market share in the EV space.
Doubts Revealed
Bernstein report -: Bernstein is a company that does research and gives advice about money and business. They wrote a report about electric cars in India.
automakers -: Automakers are companies that make cars and other vehicles. In this case, they are making electric vehicles.
electric vehicle (EV) -: An electric vehicle (EV) is a car or bike that runs on electricity instead of petrol or diesel.
financial incentives -: Financial incentives are rewards like money or discounts given by the government to encourage people to buy or make electric vehicles.
scaling up -: Scaling up means making more of something. Here, it means making more electric vehicles.
Bajaj Auto -: Bajaj Auto is a big company in India that makes motorcycles and other vehicles.
TVS Motors -: TVS Motors is another big company in India that makes motorcycles and scooters.
startups -: Startups are new companies that are just beginning to grow. They often try new ideas.
Ola Electric -: Ola Electric is a new company in India that makes electric scooters.
government subsidies -: Government subsidies are money or help given by the government to support businesses, like those making electric vehicles.
internal combustion engine vehicles -: Internal combustion engine vehicles are cars and bikes that run on petrol or diesel, not electricity.