New Delhi, Mar 28 (IANS): Narrowing the price gap between internal combustion engine equipped two-wheelers and their electric variant, can accelerate electrification of urban focused scooters, said Motilal Oswal Financial Services Ltd. (MOFSL).

Accordingly, MOFSL in a report cited that cost of ownership due to regulatory factors, rising fuel prices, reduction in Lithium-ion battery prices, and Faster Adoption and Manufacturing of Electric vehicles (FAME)-2 or state government subsidies are factors resulting in narrowing of the price gap.

"Mainstream Original Equipment Manufacturers (OEMs) have finally entered the e-scooter segment, which was so far dominated by startups," the report said.

"We believe that e-Two-Wheelers (2Ws) are ready for disruption, particularly urban focused scooters are at risk of faster electrification."

According to the report, this trend has the potential to change the competitive landscape of the scooter segment.

"Similarly, e-three-wheelers (3Ws) are nearing an inflection point as it is almost at par with CNG 3Ws on a Total Cost of Ownership (TCO) basis."

"However, traction for e-3Ws would be a function of the charging ecosystem as vehicle uptime is of paramount importance in the B2B segment."

As per the report, the two-wheelers industry witnessed a considerable price inflation due to regulatory changes.

"The cost to the customer has risen by 25 per cent till January 2021 from April 2018 levels. At the same time, the cost of a lithium ion battery continues to fall sharply, with an estimated decline of 24 per cent during the same period."

"This coupled with an increase in subsidy under the FAME-2 scheme as well as some states offering subsidies on Li-ion battery operated vehicles, has helped to further narrow the gap between Interest, Commission, Extras (lending) 2Ws and e-2Ws."

Besides, the report said e-2Ws would be more relevant for urban markets due to shorter driving distance and better power availability along with lesser sensitivity to TCO.

"We believe electrification in 2Ws would first happen in scooters."

"Within scooters, we expect adoption to be faster in 125cc scooters due to premium positioning, similar product attributes as Electric Vehicles (EVs) and lesser pricing gap. However, 100cc scooters would not be immune to electrification for too long."

In addition, the report said changing technological landscape could "cause changes in the competitive landscape of the scooter segment, providing an opportunity for players with weak scooter presence".