Accelerating Change: How Climate Tech Investment is Transforming 2-Wheeler Mobility in India

India stands at a critical juncture in its quest to balance economic growth and environmental stewardship. As the country works towards reducing its carbon emissions and transitioning to a greener economy, the electric vehicle (EV) market has emerged as a key area of focus. The 2-wheeler sector, particularly, is significant due to its sheer scale and ubiquity in Indian transportation. 2-wheelers, including motorcycles, scooters, and bicycles, are the backbone of personal mobility in India. They are used by millions for daily commuting and transportation and account for more than 70% of all vehicles.

Climate tech investment is crucial for accelerating the transition of 2-wheelers to electric mobility, with companies like EMotorad at the forefront of this shift. This post delves into the current landscape of climate tech investment in India's EV market and the vast opportunities for sustainable finance in this space. It also highlights Green Frontier Capital’s investment in EMotorad, a prime example of a company that embodies the potential of venture capital funds to drive sustainable change in India’s 2-wheeler market.

Climate Tech Investment in the EV Market in India

According to PwC’s State of Climate Tech Report, in 2022 climate tech investment made up 25% of total venture capital funding, marking a 14% increase from 2021. The Confederation of Indian Industry (CII) expects the global sustainable finance market to grow from US$ 3.6 trillion in 2021 to US$ 23 trillion by 2031. Electric mobility, in particular, is seeing tremendous growth in the climate tech landscape.

In India, this growth is fuelled by a combination of regulatory push, technological advancements, and shifting consumer preferences. The India electric vehicle market size is projected to grow from US$ 3.21 billion in 2022 to US$ 113.99 billion in 2029, according to the CII. Based on data by Counterpoint Research, EV sales are expected to increase by 66% as early as 2024 and according to McKinsey and Company, by 2030, electric two-wheelers are expected to account for 60 to 70% of new 2-wheeler sales in India.

There are plenty of opportunities for sustainable finance in this sector. According to the IEA, over the 2018-2023 period, Indian EV start-ups raised US$ 2.7 billion, of which over 70% was for electric 2-3 wheelers. The IEA also noted in their Global EV Outlook 2024 Report that the current investment potential in India’s EV sector is estimated at around US$ 200 billion, suggesting there are still considerable climate tech investment opportunities ahead for Indian entrepreneurs and start-ups.

The Indian government's commitment to reducing carbon emissions and promoting green energy has catalysed significant interest in climate tech investments, particularly in the EV market. Investors in India and venture capital funds like Green Frontier Capitalare recognizing the potential of this burgeoning market, leading to a surge in climate tech investments aimed at accelerating the adoption of EVs across the country.

A Case for India’s 2-Wheeler Market Attracting Climate Tech Investments

1. India’s 2-Wheeler Landscape is HUGE

India's transportation sector is uniquely characterized by its extensive reliance on 2-wheelers. Motorcycles, scooters, and bicycles dominate the roads, serving as the primary mode of transportation for millions of people. According to the National Family Health Survey in 2022, 55% of Indian households have a bicycle, while 54% have scooters and motorcycles.

There are several reasons for this, the primary being that 2-wheelers are significantly more affordable than cars, making them accessible to a broader segment of the population. Traditional internal combustion engine (ICE) 2-wheelers are known for their fuel efficiency, offering a cheaper alternative to cars in terms of fuel consumption as well. This makes them a cost-effective solution for daily commuting, particularly for low- and middle-income households.

Another reason is that India's congested urban areas and narrow streets make 2-wheelers a practical choice for navigating traffic. They are more maneuverable and can easily navigate through crowded roads, reducing travel time and stress. Plus, 2-wheelers have become ingrained in Indian culture, often being the preferred mode of transport for short and medium distances. They are used for a wide range of purposes, from daily commuting to goods delivery.

The extensive use of 2-wheelers in India underscores the need for a transition to electric mobility within this segment. Given the high volume of 2-wheelers, their electrification can significantly reduce carbon emissions and contribute to cleaner air in urban areas.

2. The 2-Wheeler Landscape is Poised for EV Transition

The transition to electric 2-wheelers offers numerous benefits, both from an environmental and economic perspective. Electric 2-wheelers produce zero tailpipe emissions, reducing air pollution and improving air quality in cities. This shift is crucial for mitigating the adverse health effects of air pollution, which is a significant problem in many Indian cities. Electric motors are more efficient than internal combustion engines, converting a higher percentage of energy from the battery to power the vehicle. This efficiency translates to less energy consumption for the same distance travelled, further reducing the environmental footprint.

EVs also offer lower operating costs compared to their ICE counterparts. Electricity is cheaper than petrol or diesel, and EVs have fewer moving parts, resulting in lower maintenance costs. Over time, these savings can offset the initial higher purchase price of EVs.

The Indian government’s policies and incentives for EV adoption, including subsidies, tax benefits, and investments in charging infrastructure, make the transition financially attractive for consumers and manufacturers alike. Additionally, advances in battery technology are improving the range, performance, and affordability of electric 2-wheelers. With longer battery life and faster charging times, electric 2-wheelers are becoming more practical for everyday use.

3. Plenty of Ace Opportunities for Climate Tech Investment

The Indian 2-wheeler EV market presents a plethora of opportunities for venture capital funds. With over 200 million 2-wheelers on Indian roads (as of 2020), the potential market for electric 2-wheelers is immense. As consumers become more environmentally conscious and aware of the long-term cost benefits of EVs, demand is expected to surge.

Investment in battery technology is crucial for the growth of the EV market. Improved battery performance, longevity, and reduced charging times are key areas for innovation. Climate tech investments in companies developing advanced battery technology can have a competitive edge and contribute to the overall viability of electric 2-wheelers. The development of widespread and accessible charging infrastructure is also essential for the adoption of electric 2-wheelers. Climate tech investment in setting up charging stations in urban and rural areas, as well as exploring innovative solutions like battery swapping, can address range anxiety and convenience issues.

Encouraging local manufacturing of electric 2-wheelers and their components can reduce costs and dependence on imports. Sustainable finance in setting up manufacturing facilities and supply chains can create jobs and stimulate economic growth.

EMotorad: A Great Climate Tech Investment for Green Frontier Capital

EMotorad, an Indian manufacturer of electric cycles, bikes, and scooters, exemplifies the potential and promise of climate tech investment in the 2-wheeler EV market. It was founded by Rajib Gangopadhyay, Kunal Gupta, Aditya Oza, and Sumedh Battewar in 2020 and has experienced significant growth in India since, with its customer base exceeding 100,000 globally. The company is currently building a manufacturing facility in Pune, which will be the world's largest electric bicycle gigafactory. 

EMotorad is committed to sustainability, with products designed to reduce carbon footprints and promote green transportation. Their emphasis on eco-friendly manufacturing processes and materials aligns with global sustainability goals, making it a great investment for sustainable finance investors in India.

Its competitively priced electric two-wheelers make green mobility accessible to a broad audience in India’s price-sensitive market. For venture capital funds like GFC who have put their climate tech investment in EMotorad, this means high market potential and scalability, offering a strong opportunity for long-term growth. With investments in advanced technology like long-lasting batteries and smart connectivity, EMotorad ensures superior product performance. For sustainable finance investors, this commitment to innovation positions the company at the forefront of the EV market, promising sustained competitive advantage. Its focus on continuous innovation ensures it remains ahead of industry trends. This approach signals a forward-looking company capable of adapting to market changes and sustaining long-term growth for its investors in India.

Its successful entry into international markets demonstrates its global scalability and offers exposure to the growing global demand for electric mobility for venture capital funds like GFC. EMotorad also benefits from strategic partnerships with tech providers, government bodies, and environmental organizations. This supportive ecosystem reduces operational risks and broadens market reach, enhancing the company's attractiveness as a climate tech investment.

EMotorad’s experienced leadership team drives strategic growth and innovation. For investors, strong leadership is crucial, providing confidence in the company’s ability to navigate challenges and capitalize on opportunities in the climate tech sector.

EMotorad and Green Frontier Capital: The Way Forward

The transition to electric 2-wheelers in India is a crucial step towards achieving sustainable mobility and addressing the pressing issue of climate change. With a vast and growing market, supportive government policies, and increasing consumer awareness, the 2-wheeler EV market in India presents a compelling opportunity for climate tech investment. Companies like EMotorad are leading the charge, offering innovative and affordable solutions that align with the global push for green transportation.

According to Managing Partner of Green Frontier Capital, Sandiip Bhammer, “What struck us the most is the pace at which they were able to expand the business across geographies in just 2 years of existence, not only this the technology they are building on the top of their bikes a game changer, it will change the way people cycle.”

As of July 2024, EMotorad has saved 21,602+ tons of CO2 (equivalent to what 820,864+ fully-grown trees absorb in a year), avoided 9,758,287+ litres of conventional fuel (petrol/diesel) by opting for e-bikes and created 250+ green jobs. 30% of their manufacturing process utilizes solar energy and 99% of their waste management happens in an environmentally safe manner. EMotorad is undoubtedly a smart green investment for sustainable finance investors in India. It not only promises substantial financial returns but also contributes to a cleaner, greener future for India and the world.

FAQs

• What is climate tech investment?

  Climate Tech investment refers to funding directed towards technologies and companies that aim to combat climate change and its impacts. This includes innovations that reduce greenhouse gas emissions, promote renewable energy, improve energy efficiency, and support sustainable practices across various sectors like transportation, agriculture, and manufacturing. Climate Tech Investments seek both financial returns and positive environmental outcomes, supporting the development of solutions that address the urgent challenges of climate change.

• What returns to climate tech investments deliver?

  Climate Tech investments offer the potential for significant growth as demand for sustainable solutions increases globally. Companies in sectors like renewable energy, electric vehicles, and energy efficiency are positioned to capitalize on the shift towards a low-carbon economy, potentially yielding high returns for investors.

• How can climate tech investment augment India’s EV market?

  Climate Tech investment can significantly boost India's EV market by funding innovation, expanding manufacturing capabilities, and enhancing infrastructure. Investment in advanced battery technology and charging networks will address key challenges like range anxiety and charging convenience. It can also support the development of affordable EVs, making them accessible to a broader population. By supporting startups and established companies, Climate Tech investment can drive the growth of a sustainable EV ecosystem, positioning India as a leader in electric mobility.

• How can climate tech investment support India’s 2-wheeler EV market?

  Climate Tech investment can support India’s 2-wheeler EV market by investing in companies that want to improve the performance and affordability of electric 2-wheelers, making them more attractive to consumers. Funding can also help scale up local manufacturing, reducing dependency on imports and lowering prices. By supporting startups and established manufacturers, Climate Tech investment can accelerate the adoption of electric 2-wheelers and promote sustainable urban mobility in India.