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Speaker 1: This is Dana Perkins and you're listening to Switch It.

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Speaker 1: On the bn EF podcast today, Mark Taylor and I

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Speaker 1: interview Alan, Tom Abraham and Nick Albanais, who right for

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Speaker 1: Bloomberg any f about electric vehicles. They recently co wrote

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Speaker 1: a piece about two wheelers titled how Fast will two

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Speaker 1: Wheelers Electrify? I vividly remember my first time on a

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Speaker 1: two wheeler. It was actually my twenty one birthday, and

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Speaker 1: I was in Vietnam, and while the cute guy from

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Speaker 1: the university program I was on kept trying to get

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Speaker 1: me to ride with him, I instead decided to ride

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Speaker 1: with our translator. It was tempting to pretend that I

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Speaker 1: was living in a rom com, but the sheer number

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Speaker 1: of bikes, motorized and pedal, intimidated me to no end,

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Speaker 1: And it turns out I was right to be intimidated.

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Speaker 1: Vietnam has the highest number of two wheelers per capita

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Speaker 1: out of any country in the world, and that number

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Speaker 1: has only increased over the past decade. But perhaps the

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Speaker 1: buzzing sound that came from the engines of the seemingly

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Speaker 1: endless sea of motorbikes hasn't increased at the same rate

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Speaker 1: as we'll learn today that electric two and three wheeler

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Speaker 1: sales are increasing in some key markets. Before we get started,

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Speaker 1: a quick reminder that b an EF does not provide

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Speaker 1: investment or strategy advice, and we have a more complete

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Speaker 1: disclaimer at the end of the show. Additionally, if you

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Speaker 1: want to read the report, you can find this at

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Speaker 1: b an e F to go on the Bloomberg terminal

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Speaker 1: or at bienn f dot com. For our subscribers, Alan

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Speaker 1: is joining us from Singapore today and Nick from New

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Speaker 1: York with Mark and I in London. Today is a

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Speaker 1: truly global podcast. Let's welcome our guests to the show.

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Speaker 1: So Hi Neck, Hi Allen, thank you for joining us today.

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Speaker 1: So we're here to talk about two wheelers, or actually

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Speaker 1: two wheelers and three wheelers. While we're getting started, can

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Speaker 1: you actually define what these are? Certainly so when we're

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Speaker 1: talking about twoheelers, were primarily talking about mopeds, scooters and motorcycles.

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Speaker 1: So any type of small tubal device that you can

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Speaker 1: sit down on and take your right on. Similarly, three wheelers,

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Speaker 1: anything has three wheels. You come to many parts of Asia,

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Speaker 1: in many cities, what you will see is that are

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Speaker 1: these small three wheel vehicles which are used to carry

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Speaker 1: passengers or even goods. So in India it's populently called rickshaws.

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Speaker 1: In Thailand it's called the two, so that's what we

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Speaker 1: call us three wheelers. I've actually been in a tuktok

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Speaker 1: in Thailand and and they get around traffic pretty well.

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Speaker 1: So I want to know why these are so significant

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Speaker 1: in the transportation space right now? Why did you guys

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Speaker 1: even decide to do a research note on them? They're

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Speaker 1: actually the primary modes of transportation for a significant portion

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Speaker 1: of the world's population. So if you just look at

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Speaker 1: how large the market is in terms of unit sales

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Speaker 1: and fleet size, you'll find that it's actually comparable to

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Speaker 1: the passenger vehicle market. So about eighty three million moped

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Speaker 1: scooters and motorcycles sold last year that brought the fleet

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Speaker 1: over million across the globe. Compare that to the passenger vehicles.

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Speaker 1: That's a market that solve sales of eighty four million

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Speaker 1: last year and the fleet size of about one point

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Speaker 1: two billions. So we talked about cars a lot, but

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Speaker 1: actually the tub of the market is just as vague

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Speaker 1: in terms of absolute numbers, so it's not too far off,

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Speaker 1: and it's set to grow your report outlines of forecast

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Speaker 1: out to where this two or three will the market

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Speaker 1: is set to grow pretty significantly. Before we get into

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Speaker 1: the results of the forecast, can you walk us through

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Speaker 1: just kind of how you did it. Our process was

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Speaker 1: first to look at historical sales and fleet growth in

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Speaker 1: the primary markets around the world, and we identified thirty

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Speaker 1: countries that account for plus percent of the global markets.

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Speaker 1: So what we did is we looked at historical mopeed,

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Speaker 1: scuter and motorcycle sales and each of those markets, analyze

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Speaker 1: the correlation between sales and everything from GDP per capita

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Speaker 1: to urbanization and population growth in these markets, and then

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Speaker 1: came up with a forecast based on from well understood

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Speaker 1: try and is related to economic growth and rising organization

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Speaker 1: and for markets to forecast sales complete size through twenty

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Speaker 1: So we looked at each of those key vehicle segments

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Speaker 1: and all the world's major markets. So then that makes

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Speaker 1: a question where in the world are they most popular.

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Speaker 1: So when we look at those numbers, you know, like

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Speaker 1: Nick mentioned, the n twenty million vehicles on the road,

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Speaker 1: about eighty seven percent of them are in Asia. That's

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Speaker 1: a big number that you're talking about, So it's an

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Speaker 1: Asia centric story for two wheelers today, and as we

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Speaker 1: go in and look into the future, we see that

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Speaker 1: the ratio holds somewhere about eighty six percent even in

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Speaker 1: twenty forty. So what we're seeing is that even going

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Speaker 1: from twenty twenty to twenty fourty, about eighty five of

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Speaker 1: all two wheelers and three whalers on the road are

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Speaker 1: going to be in Asia. Why are they so much

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Speaker 1: more popular in Asia than other parts of the world.

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Speaker 1: It's a combination of reasons. So two wheelers especially, what

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Speaker 1: we have to understand is over the last twenty years

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Speaker 1: of economic progress that we witnessed in many countries in Asia,

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Speaker 1: like China or Southeast Asia or India, even with that

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Speaker 1: sort of development, a passenger away or a private car

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Speaker 1: is still not accessible to many people. So in that

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Speaker 1: sort of a situation, to wheelers are affordable. They also

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Speaker 1: offer an opportunity for people to access transportation, especially in

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Speaker 1: you know, really highly congested cities as well as you

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Speaker 1: know in cities like New Deli or Mumbai or Jakarta

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Speaker 1: where you don't have the same level of public transport

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Speaker 1: infrastructure available as it is in say US or Europe.

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Speaker 1: So this is actually giving access to people to modes

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Speaker 1: of transportation in these sort of developing markets. Then I

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Speaker 1: want to know a little bit about the use case.

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Speaker 1: So you're saying they're being used predominantly to move people

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Speaker 1: around in what circumstances are they then used actually as

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Speaker 1: a means for transport for goods. You know, if you

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Speaker 1: if you go into the streets of Vietnam or India,

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Speaker 1: what you can see is that two wheelers are used

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Speaker 1: for a cold Boston purposes. You know, you can see

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Speaker 1: college students writing it all the way on their way

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Speaker 1: to college. You can see people taking agricultural produces from

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Speaker 1: rural markets into city centers. You can also see people, uh,

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Speaker 1: you know, professionals and executives traveling and two wheelers because

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Speaker 1: it's the most convenient way of transport within cities in

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Speaker 1: congested roles, and it's you know, you don't have to

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Speaker 1: get stuck in traffic jams or in or in you know,

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Speaker 1: heavily cramped busses. So that's that's particularly recent and the

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Speaker 1: same reasons also applied to goods, so you can easily

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Speaker 1: transport goods, especially in your smaller packages as well as

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Speaker 1: you know, your deliveries and coreer services and stuff which

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Speaker 1: can be easily done through two wheelers and three views,

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Speaker 1: and it's it's affordable and it's easy to put dure

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Speaker 1: for most of these small companies and smaller markets. So

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Speaker 1: let's get into the growth. Can you tell us about

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Speaker 1: how much this market is set to grow out? Yeah,

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Speaker 1: so we're predicting pretty significant growth, accounting for the fact

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Speaker 1: that COVID nineteen is going to have a dramatic impact

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Speaker 1: on sales in the near term, primarily in as we

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Speaker 1: expect a rebound to take place. We're thinking that sales

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Speaker 1: of two wheelers globally could approach around a hundred million

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Speaker 1: units by the mid twenty thirties, so increasing by about

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Speaker 1: twenty million units annually. So that's pretty significant growth, and

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Speaker 1: we think it's slightly faster than the growth that will

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Speaker 1: see in passenger vehicle sales goal away. And is this

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Speaker 1: in primarily the same markets in Asia or is it

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Speaker 1: somewhere else? So this is primarily Asian story, as Alan

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Speaker 1: was alluding to. So the one exception here is China.

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Speaker 1: We've we've looked at this market in in pretty close

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Speaker 1: detail and we actually expect the China tol Their sales

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Speaker 1: have already heaked and will slowly start to decline through. India,

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Speaker 1: on the other hand, represents the significant growth market, as

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Speaker 1: do other rising economies and what we call the rest

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Speaker 1: of Asia. So countries like Thailand, Vietnam, Taiwan, a number

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Speaker 1: of other significant markets could see strong growth through thet

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Speaker 1: What points to a decline or a peak in China?

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Speaker 1: So China investing very heavily still in public transit services,

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Speaker 1: so they're building out metro services as well as bus

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Speaker 1: lines in major urban city centers, and congestion has been

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Speaker 1: quite bad in most of these major cities, so governments

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Speaker 1: are trying to incentivize people to move into other modes

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Speaker 1: of more high efficiency transportation. Do two wheelers and three

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Speaker 1: wheelers do they end up adding to or really kind

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Speaker 1: of finding a way to circumvent congestion because they are

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Speaker 1: a little bit smaller, they're a little bit more nimble.

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Speaker 1: But when you've got enough of them, it does it

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Speaker 1: almost feels like a see of them when you're crossing

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Speaker 1: the road in like places like Vietnam. Can I double

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Speaker 1: up on that question. I used to go to Jakarta

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Speaker 1: a lot, and I can't imagine more two wheelers there.

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Speaker 1: So how is Indonesia going to grow under that scenario

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Speaker 1: definitely one area where there's certainly policy risk to the

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Speaker 1: extent which tooler market can grow. A number of markets

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Speaker 1: have you know, already announced that they want to ban

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Speaker 1: the sale of internal combustion engine two wheelers. That's already

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Speaker 1: been put into effect in some places, but now major

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Speaker 1: cities and infect national governments are looking at banning two

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Speaker 1: of their sales outright in some instances. So this has

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Speaker 1: already happened in Lagos, Nigeria, the government has banned used

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Speaker 1: two wheelers for taxi agencies there and we're starting to

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Speaker 1: see similar announcements in other markets across Asia. So this

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Speaker 1: is something that could definitely pick up as governments try

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Speaker 1: to reduce traffic congestion and sort of the associated fatalities

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Speaker 1: that occur off the back of that dense congestion. So actually,

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Speaker 1: let's talk about the internal combustion engine ones and then

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Speaker 1: the electric two wheelers. One of the things that I

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Speaker 1: think your research found and correct me if I'm wrong,

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Speaker 1: is that the electric ones have a higher uptake than

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Speaker 1: maybe in the car market right now. So why are

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Speaker 1: electric two wheelers more popular and why are they growing

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Speaker 1: more quickly? Yeah, so there are few factors that are

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Speaker 1: driving the rapid electrification of the tooler space. Really boils

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Speaker 1: down to policy support and the largest markets in Asia Pacific,

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Speaker 1: as well as rising private sector investment and increasingly favorable economics.

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Speaker 1: So as a result of those three drivers, you know,

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Speaker 1: we've already seen rapid electrification of toolers. In twenty nineteen,

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Speaker 1: we estimate that upwards of tooler sales globally were already electric.

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Speaker 1: Compare that to the passenger vehicle market, or just about

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Speaker 1: three percent of sales were electric. So this is a

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Speaker 1: market that is electrifying rapidly for history reasons. Yeah. So,

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Speaker 1: like Nick mentioned, city policies also play a d school

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Speaker 1: in how electrification progresses because if you take the two

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Speaker 1: wheeler market and the electrified to the two wheeler market

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Speaker 1: in particular, we see that most of it is happening

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Speaker 1: in China. And what actually drove China's huge story into

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Speaker 1: electrification was in the late nineties nineties, many of the

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Speaker 1: cities started imposed interstrictions on internal composting two wheelers and

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Speaker 1: they get some relaxation to electric motorcycles or as they

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Speaker 1: call it, electric bicycles, which could travel at certain speeds

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Speaker 1: and you know, and also had a lot of smaller

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Speaker 1: batteries and stuff. And this sort of relaxation actually kick

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Speaker 1: started the adoption of electric two wheelers in China and

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Speaker 1: it became a prominent mode of transport for a lot

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Speaker 1: of people. And these vehicles also had access to bicycle lanes,

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Speaker 1: which made it even more popular. You didn't have to

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Speaker 1: register then with your provincial legislate legislatives, and also you

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Speaker 1: didn't require drivers license to operate. So all of these

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Speaker 1: factors eventually led to the growth of electric two whalers

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Speaker 1: in China. Lives almost all of the two groups over

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Speaker 1: the last couple of tickets in the world. So even

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Speaker 1: without policy support, are these lucrative businesses for the manufacturers

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Speaker 1: to be in. And actually who were making all of

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Speaker 1: these two and three wheelers that are being well, who

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Speaker 1: are the biggest manufacturers? I guess since I'm sure that

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Speaker 1: there's quite a few, This is definitely interesting question. And

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Speaker 1: it's been actually startups that have sort of jump started

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Speaker 1: the electrification of Jumila market. Primarily as these startups have

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Speaker 1: sort of scaled up in a number of become publicly traded.

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Speaker 1: You've seen sort of the major two LAER incumbents terms

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Speaker 1: of annual sales hit it into electrification. So we looked

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Speaker 1: at corporate strategy announcements of the top major two LAER incumbents.

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Speaker 1: All of these companies, to vary in extent, have announced

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Speaker 1: commitments to either invest further in their electric units or

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Speaker 1: if they don't have electric units stable today, are planning

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Speaker 1: to launch them in the next few years. But currently

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Speaker 1: it looks like startups are sort of beating this electrification charge.

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Speaker 1: Some of the most notable ones are Go Go Row

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Speaker 1: in Taiwan, as well as companies like New and The Idea,

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Speaker 1: which are based on Chining. So we've talked about Harley

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Speaker 1: Davidson in the past in benf and it seems like

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Speaker 1: they're kind of pivoting to electric motorcycles, and it seems

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Speaker 1: they're facing a bit of criticism for that, but also

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Speaker 1: seems that they're kind of sticking to their strategy on

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Speaker 1: this one. From everything I've read. Are they seeing the

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Speaker 1: same things you're seeing? And are they betting on the

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Speaker 1: US is picking up as a major market for this stuff.

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Speaker 1: Where are they betting on going over to these markets

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Speaker 1: where these two wheelers are are growing. Yeah, my guess

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Speaker 1: is that they're betting on Asian markets. So the United

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Speaker 1: States is actually seen a slow decline in motorcycle sales

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Speaker 1: for the past few years. Sort Of the target demographic

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Speaker 1: for motorcycle ownership in the United States is not a

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Speaker 1: market that it's primed to want to purchase an electrified unit.

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Speaker 1: These are customers that are used to having extremely long

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Speaker 1: range capable vehicles and are not necessarily interested in your

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Speaker 1: drive train. So you have a shrinking market and sort

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Speaker 1: of a difficult demographic to target, Whereas in Asia Pacific

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Speaker 1: region you have governments that are offering upburning sentives for

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Speaker 1: electric units as well as top line sales growth. So

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Speaker 1: my guess is that they're primarily focused on selling electrified

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Speaker 1: units into that market. To change to subject a little bit,

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Speaker 1: it seems that COVID kind of really through your assumptions

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Speaker 1: and expectations for the research for a loop. Did anything

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Speaker 1: else really surprise you or was unexpected from when you

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Speaker 1: began this research. Well, I think, as you say, Mark

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Speaker 1: COVID and then impactsed that on the near term market

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Speaker 1: are definitely surprising. You know, as I mentioned before, we

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Speaker 1: looked quite closely at the correlation between GDP per Capita

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Speaker 1: and its sales ulers. These are very closely linked because

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Speaker 1: dular customers are incredibly price senitive. So we're actually expecting

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Speaker 1: the total market to decrease by about will be one

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Speaker 1: of the largest drops that we've seen in the market's history.

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Speaker 1: But that decline in top line sales actually gives electrified

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Speaker 1: units a bit more time to catch up in terms

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Speaker 1: of price parity. And I think probably one of the

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Speaker 1: most surprising findings of this analysis is that after we

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Speaker 1: looked at battery pack cost trends as well as the

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Speaker 1: major investments that both incumbents and startups are putting into

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Speaker 1: electrified units, you know, we found that the upfront cost

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Speaker 1: of an electrified to wheler that has comparable performance to

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Speaker 1: a internal combustion engine scooter, for example, that up from

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Speaker 1: price could call by roughly thirty six to forty six

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Speaker 1: percent just by alone. So you already have competitive total

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Speaker 1: cost of ownership for these vehicles today, but upfront price

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Speaker 1: parity is actually not that far off, and that's going

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Speaker 1: to accelerate adoption even even for them. Is the price

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Speaker 1: right for you? Do you own one? I don't own one,

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Speaker 1: now would love to. I think probably the challenge for

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Speaker 1: urban city drawlers like me is finding access to parking.

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Speaker 1: That also sort of tied to challenges related to charge

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Speaker 1: un infrastructure. If you do not own a two wheeler

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Speaker 1: that has a removable battery pack, you need to find

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Speaker 1: on street city parking that has access street chargers. So

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Speaker 1: there are a few innovative companies that are working on

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Speaker 1: scaling up charging infrastructure After Energy in India is one

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Speaker 1: that comes to mind. They're partnering with corporate campuses to

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Speaker 1: deploy public chargers at workplaces as well as a prominent city,

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Speaker 1: well known businesses and interbed city centers, and and they're

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Speaker 1: trying to offer charging as a service, so that could

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Speaker 1: really sort of scale up electrification potential for two ulers

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Speaker 1: in India. How long does it take the average two

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Speaker 1: wheeler to charge up? So, of course it depends. The

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Speaker 1: first major variable is what type of electric tooler you own.

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Speaker 1: You know, in fact, most two wheelers that are sold

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Speaker 1: today still use lead acid batteries, so these have very

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Speaker 1: slow charging times. So it probably takes eight hours to

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Speaker 1: fully charge that battery. If you have a lithium ion unit,

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Speaker 1: probably just gonna take four to six hours. In fact,

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Speaker 1: most of those lithium mine units have lightweight renoval batteries,

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Speaker 1: so you can pull it out of the vehicle at

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Speaker 1: night to get into your apartment in your office and

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Speaker 1: fully charge it into a matter a few hours. So

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Speaker 1: actually charging is something that you can do quite quickly

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Speaker 1: with some of these newer units. But it's not dissimilar

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Speaker 1: to a car in terms of charging times, because I'm

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Speaker 1: picturing like going on a road trip driving a motorcycle

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Speaker 1: down Highway one. Is anybody who's listened to this show

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Speaker 1: before it's probably heard I'm originally from California, so that's

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Speaker 1: that's where my head's at. But yeah, if you're trying

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Speaker 1: to go along your distance, you're gonna have to charge intimately.

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Speaker 1: Is there any view around they're rolling out fast charging

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Speaker 1: for these sorts of things, so people can you know,

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Speaker 1: really maybe even share have shared use, or really maximize

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Speaker 1: the return on their investment in the vehicle to be

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Speaker 1: used by more than one person or more than one route.

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Speaker 1: You could carry multiple battery packs. Also, that's one of

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Speaker 1: the models that many companies audit's going to be having

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Speaker 1: must the battery backs. Uh. So that's let's get to that.

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Speaker 1: But fast charging is uh is technically possible for lithimine batteries,

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Speaker 1: but not for the lead acid batteries because that will

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Speaker 1: quickly disintegree in those batteries. For lithimine batteries, there are

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Speaker 1: still limitations up to how fast you can trust these batteries.

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Speaker 1: And some companies like go Grow are trying different models.

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Speaker 1: They're trying swappable batteries where you going thro a swap

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Speaker 1: station and you swap your depleted batteries for a fresh

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Speaker 1: battery which is charged to the food. So you would

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Speaker 1: only take probably less than a minute to go back

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Speaker 1: on the road without spending even uh, you know, the

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Speaker 1: same even the same amount as you would have even

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Speaker 1: under the fast charging station. So those sort of models

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Speaker 1: are picking up in some countries, and probably it's scalable.

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Speaker 1: It's only that you need more and more manufacturers to

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Speaker 1: accept this as a technology that they want to scale.

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Speaker 1: So there's a lot of startups in the space. You

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Speaker 1: guys have brought that up a couple of times, and

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Speaker 1: I'm curious who of the big players are watching the startups,

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Speaker 1: because my assumption would be that they are going to

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Speaker 1: be primes for acquisition at some point, or maybe already.

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Speaker 1: There is some sort of silent venture funding in the

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Speaker 1: background from some of the players that we may already

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Speaker 1: know his household names. Yeah, absolutely, that's right. We looked

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Speaker 1: at this market closely. We found over seventy Electric two

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Speaker 1: and threeglar startups outside of China alone. If you include China,

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Speaker 1: they're probably another hundred companies that are working on the

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Speaker 1: electrification of these vehicles. So there's a number of companies

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Speaker 1: working on this and they have attracted sizeable fundraising to date,

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Speaker 1: over seven hundred thirty five million as of last month.

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Speaker 1: And in fact, today we just heard that Ola, which

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Speaker 1: is one of the largest shared mobility service providers in

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Speaker 1: India and in fact across Southeast Asia, will be purchasing

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Speaker 1: a company called Ergo, which is a manufacturer of electric

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Speaker 1: two wheelers. So we're starting to see sort of share

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Speaker 1: mobility service providers as well as incumbent to learn manufacturers

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Speaker 1: invest more heavily in this space. And that's because they

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Speaker 1: see sort of that the clear policy signals that are

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Speaker 1: going to require them to invest more heavily an application

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Speaker 1: in the future. Alan, I just want to know from you,

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Speaker 1: do you have one. We've heard from Neck already. What's

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Speaker 1: your take, So I live in Singapore. It's really hard

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Speaker 1: to buy your week in Singapore. I should do that.

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Speaker 1: So you need to go to a number of loops

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Speaker 1: and pay uh and get a certificate live entitlement in

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Speaker 1: order to buy vehicles, which means it's close to impossibly.

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Speaker 1: So I don't think I buy one here, but I

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Speaker 1: do have one in India? Who makes it? The one

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Speaker 1: I have is from Honda, so the number one manufacturer

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Speaker 1: in the world. You've got it. You're part of the

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Speaker 1: part of the movement. This has been really fascinating and

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Speaker 1: I look forward to seeing this market grow. So thanks

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Speaker 1: for joining Member Any a service provided by Blomber Finance

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