The electric three-wheeler (E3W) vehicle landscape in India: Drivers and barriers

e3w in india

The electrical vehicle (EV) industry in India has witnessed a rapid transformation over the last few years. There is a strong business case for high-quality EV which is why we are witnessing a switch to this category. The market size for electric three-wheeler (E3W) vehicles, in particular, was valued at USD 472.56 Mn in 2020 and is projected to reach USD 756.52 Mn by 2028. India is projected to be the largest driver of the Asia-Pacific E3W landscape during the forecast period. Many E3W manufacturers in India are already strategizing aggressive expansion plans in capacities and new products.

Given the significant disruption happening in this space, Netscribes is bullish about the segment growth and we have been actively tracking the E3W market trends in India and worldwide. Our automotive practice lead Siddharth Jaiswal sat down with Dr. Deb Mukherji, Managing Director of Omega Seiki Mobility, for an interesting conversation surrounding the business case for E3W in India, emerging OEM players in the segment, and the many challenges in electrification.

Siddharth: The passenger electric three-wheeler (E3W) market in India is largely unorganized and fragmented. Do you think that E3W makes a good business case and mobility choice in India even as it is still relatively new in the cargo segment?

Dr. Mukherji: India produces around a million three-wheeler vehicles, half of which are exported. Even during the pandemic, the exports have been pretty consistent, largely led by Bajaj. Almost 5,25,000 make up the passenger segment and 1,10,000 represent the cargo segment in India. The introduction of EV started in the low-end passenger segment and today, the market is quite fragmented and nascent. Over three to five years, an EV with robust quality and durability will result in a minimum of 20% savings for the operators.

That said, the problem lies in the cargo vehicle segment, wherein the low quality of the currently available EVs barely last for more than a year. Even though the running cost is less, there is no viability and one will not be able to accrue the benefits over a while given its low quality. But there’s a strong business case for high-quality EV which is why we are witnessing a switch to this category. This technology-driven transition to electric three-wheelers will also help ensure that the logistics market in India becomes more organized.

Siddharth: The pandemic-induced upsurge in e-commerce has led to rapid growth in the first/last-mile delivery market. What do you think are the top use-cases for E3W in India, especially in the cargo segment?

Dr. Mukherji: Understandably, the e-commerce industry has shown a spike of growth amid the pandemic. While e-commerce has been a major driver of growth for the E3W cargo category, it is yet to penetrate several segments. There’s a huge untapped market available in segments such as the food and grocery segment, intracity and intercity industrial goods movement, etc. Another important category is the auto component movement/delivery market. For instance, a huge amount of automotive components move from Gurgaon to Maruti Suzuki or Honda plants in the outskirts. The supply of these components must happen in a particular time frame, in a just-in-time manner, and on a fixed route. There can be great use cases for E3W vehicles in these categories wherein a lot of these materials can be moved in a sub-1 tonne category.

Tata Ace dominates the commercial 1-tonne/1.5-tonne segment, with almost 70% of the market share. This is where major vehicle electrification will occur, and the entire logistics will get disrupted. In tier-1 cities like Delhi-NCR, there may be a no-entry restriction for IC engine vehicles in some areas. Here, electric vehicles can enter with permission, making a huge business case for them in terms of capacity utilization.

Siddharth: New-age companies such as Big Basket, Ikea, and Amazon are adopting E3W for last-mile deliveries. Why do you think the conventional fleet operators or logistics companies are hesitant to electrify their fleets? How can they overcome such challenges?

Dr. Mukherji: If you look at the market mix, over 80% of the logistics market consists of unorganized operators. This is a very important segment at the bottom of the pyramid. It must adopt EV to ensure scalability. The key challenge in the pursuit of EV adaptation is the charging infrastructure while vehicle quality, robustness, and durability matter as well. The reduction in battery performance over time is another challenge that the industry needs to overcome. More importantly, financing is an important link to driving this business. Over 95% of vehicles in India are sold through financing. Today, NBFCs, banks, and private lenders are concerned about asset quality and are largely hesitant to finance E3Ws. Various industry stakeholders must prioritize and address these concerns. Banks and governments need to come forward with solutions such as priority lending to make electric vehicles affordable and easily available.

The EV industry in India has witnessed rapid transformation which is at par with the developments in the telecom industry. For instance, in 2000, the teledensity in India was almost non-existent: 7 out of 100 people in India owned phones. Today more than 85% of people own phones. In the EV space, we are trying to achieve something similar: jumping from ICE vehicles to EVs directly instead of hybrids. The only way to ensure we reach this goal in time depends on how the industry solves the aforementioned problems.

Siddharth: One way to enable EV adoption is to bring large OEM players onboard. Will EV adoption increase if renowned OEM brands are involved? What will this mean for the existing vibrant startup ecosystem in this space?

Dr. Mukherji: Mainstream players who are currently not in the EV space are showing interest. EV is no longer a choice; it’s already happening. 76% of the automotive industry will shift from ICE to EV by 2040 and major OEM players have announced their plans to achieve so. India will, needless to say, follow suit. The Indian automotive industry, particularly the car segment, is largely dependent on ICE technologies from Japan, Korea, etc. Once these countries curb the tech developments in the ICE category, India will be left with an option to build the competencies on a standalone basis which is difficult to do. Not only is it very time and resource consuming, but the emission norms are also becoming more stringent. Mainstream OEMs will enter the EV segment.

Moreover, EV is a leveler technology: making it a level playing field, there’s an equal opportunity for anyone to come into this space and become a successful player. But, taking the technology from incubation into business is a big challenge. This is when any startup’s scaling capabilities are put to the test. Many non-legacy companies will eventually become a part of the mainstream EV race through alliances and acquisitions. Some of these will carve out a niche of their own based on their technology or product innovation. There will be both mass market and niche market players in this ecosystem.

With mainstream players coming in, mass adoption will increase. They possess the bandwidth to scale up and come up with multiple models and factories. Additionally, their existing network of dealerships will provide very large sales channels. Many big OEMs in India operate their financing subsidiaries which will help increase the penetration of electric vehicles.

Siddharth: A lot of disruption is evident in how companies are pushing their EVs to their end consumers. Some are following in Tesla’s footsteps, removing the dealership network and going direct to the consumer. Do you think the EV industry will embrace this strategy?

Dr. Mukherji: Certain technology innovations such as connected cars are, nevertheless, going to happen. Such innovations are fuel agnostic. Similarly, the adoption of IT services by the automotive industry will happen across all vehicle segments, whether ICE or EV. Marketing and sales are good channels to display these technology capabilities. Furthermore, direct-to-customer will emerge as a powerful opportunity. In India, a good strategy will be to have a mix and match of dealerships and D2C. Dealerships can provide physical touch and feel touchpoints and human experiences. With D2C, technology can help gather insights into customer preferences and plot marketing strategies accordingly. It won’t be a complete transition to D2C, but rather a hybrid play.

Siddharth: India is mainly dependent on South Asia and China for the battery cells that make up the major portion of the cost of E3W vehicles. Is this a key bottleneck for India in achieving competitiveness in the E3W market?

Dr. Mukherji: Battery costs in India are somewhere between USD 210 per kWh. In the US, the same amounts to USD 100-150 per kWh. This is a huge gap since we don’t manufacture battery cells and are largely dependent on South Asian countries like China, Japan, and South Korea for the same. This offsets India’s energy balance. To pursue 50% conversion from ICE to EV, the country will need 50-70 GWh of battery capacity given that the two-wheeler and three-wheelers population is huge. This will require time as the supply chains are very complex. It remains to be seen how companies are going to plan their supply chains. Over 70% of lithium refining happens in China. Metals like cobalt, manganese, and lithium are not available in India. So dependency on China will remain (unless companies like Reliance decide to get into material refining in India). The next decade will be crucial in answering the same.

Siddharth: Apart from the batteries, components such as BMS, motors, and inverters are key nodes of an electric powertrain. Do you think India can achieve a competitive edge in such components?

Dr. Mukherji: The rise of electric vehicles is a great opportunity for India to become a global hub for components in motors, electricals, and electronics, BMS categories. Modern vehicles have almost 55% of software-based components which is humongous. The key is to design EV-specific motors. The motor must be able to drive the powertrain of a vehicle in an energy-efficient manner. This is where IT innovation comes into play. While we already have the motor and mechanical component manufacturing, and electronics and IT talent in place, it boils down to how these components work in harmony with respect to the EV architecture.

Read more: Future vehicle E/E architecture to reduce complexity and improve functionality

Siddharth: Purpose-built platforms are crucial to sustainably scale EVs. Do these platforms make sense for E2W and E3W in India?

Dr. Mukherji: An EV should be designed with a clean-sheet approach and not with a retrofit approach. IC engines have gone over 100 years of improvements and innovations. EV, however, is new. Looking at it from a completely grounds-up engineering perspective is a challenge. EV must be designed around the battery. We can’t just take out the engine and gear-box and fit back the battery. The next step should be to come up with innovative designs such as the skateboard platform. For instance, the body panel of the vehicle can represent the battery, embedding the cells into the panel. A swap battery is a good option for E2W. A zero-base design will be the way forward for both E2W and E3W in India.

Siddharth: In the mobility-as-a-service landscape, companies like Ola and Uber have thrived. Companies like Porter and Link have connected the first and last mile segments of the once unorganized cargo industry. How can mobility-as-a-service operators succeed in the E3W space?

Dr. Mukherji: Mobility-as-a-service is not an EV-specific solution. The reason why it’s being discussed more and more is because of how disruptive the idea is in the EV space. Moreover, e-commerce is a major driver of the EV sector and new-age companies run on an asset-lite model. This is where the concept of providing mobility as a service emerged. Since it’s highly scalable and easily accessible to users, Maruti Suzuki came up with a pay-for-use, subscription-based model. Mobility-as-a-service can take up many forms: last-mile mobility of your own, outsourced mobility, ride-sharing, subscription model, etc.

Everything needs to be centered around service; OEMs need to position themselves as service providers. OEMs can no longer afford to merely be vehicle manufacturers because customers will demand more and more services. EV is just another medium for making mobility-as-a-service successful.

Siddharth: In the coming years, how do OEMs intend to revolutionize the E3W market in India? What do you think will be the best business model for their success?

Dr. Mukherji: Automotive is a serious business with a diverse set of stakeholders and technology playing a crucial role. Most of the E3W start-ups are getting knockdown kits from China, hashing it up and selling in the market will not work in the long run. OEMs must be technology-oriented and develop their internal capabilities to design and manufacture a robust and high-quality electric vehicle. A modern vehicle must be fail-proof and long-lasting. Omega Seiki offers an E3W for INR 3.5L. An entry-level ICE-powered car sells for around the same price. The quality of an E3W in India has to be at par with a comparable ICE vehicle to build consumer trust. Furthermore, access to relevant human and financial capital can ensure a technology-oriented infrastructure which is necessary for OEMs to create a scalable EV ecosystem.


Over the last two decades, Netscribes automotive industry solutions have helped leading automakers and OEMs, aftermarket companies, and dealers identify new opportunities for growth, understand the impact of new and emerging technologies, and drive innovation through a deeper understanding of consumers and emerging technologies. To know more about how you can keep pace in the face of evolving social, regulatory, technology, and consumer demands, get in touch with us.

Siddharth Jaiswal leads the automotive research team at Netscribes and has been part of the industry for close to a decade. He harbors a keen interest in the future of mobility, autonomous technology, and vehicle E/E architecture. In his free time, Siddharth loves tuning engines, riding his vintage bike and spending time with family.


Dr. Deb Mukherji

Dr. Deb Mukherji

Managing Director, Omega Seiki Mobility

Dr. Deb Mukherji is Managing Director at Omega Seiki Mobility. He has completed his MTech from IIT-Delhi and Ph.D. in Economics from Jamia Millia Islamia University. He is currently driving the electric vehicle vertical of the Anglian Omega Group. With over 35 years of expertise in the automotive industry, Dr. Mukherji has worked with global auto giants such as Suzuki and Honda and has been instrumental in setting up greenfield plants across India, Mexico, and Thailand. He believes that by having a data-driven approach, any industrial challenge can be resolved.

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