I. Overview

The Automotive Market

The Indian automotive market is the 5th largest automotive market in the world. The industry produced a total 22,652,108 vehicles in April-March 2021 (SIAM, 2021). The automotive industry is highly competitive, with both international and local players. Out of the total automobile industry, the two-wheeler (2W) segment makes up 81% of the total quantity produced (SIAM, 2021).

Now, there is disruption in the industry - The Indian electric 2W segment had a market size of USD 893 million in 2022. This is forecasted to grow at a CAGR of 27.30% from 2022 to 2030, with many drivers providing tailwind.

Nisiki Technologies Private Limited

Based in Bangalore, India, Nisiki serves Original Equipment Manufacturers (OEM) such as Bajaj Electric, Toyota, Hyundai, Maruti, etc through Tier-1 suppliers like Mitsuba, Kinetic Taigene, Varroc, etc. Through relationship building and manufacturing excellence, the team at Nisiki has established long standing relationships with its customers and suppliers which has given them a strong reputation as a reliable and efficient supplier.

After years of B2B operations, the managing director of Nisiki wants to make a strategic move into manufacturing of electric 2W scooters under their own brand “Poise”. Through its current operations, Nisiki has achieved slow and steady market growth through a duopoly with Sahney Industries, its next biggest competitor. With annual revenues plateuing at USD 12.5 Million, there is risk of revenue loss as the electrification of 2W automobiles will lead to loss of sales as one of the key components used in Internal Combustion Engines (ICE) 2W will become redundant. Essentially, this move enables both a diversification objective and a vertical integration further downstream into one of the industry that Nisiki already serves. This decision is validated against Ansoff’s Strategy Matrix (Ansoff, H.I., 1957).

II. Market Analysis

Target Market

The market that Nisiki is targeting is the submarket of 2W automobiles in the Indian sub-continent. This includes both domestic sales and exports from India. This segment is in a phase of transition where various drivers are pushing the adoption of electric variants of 2W automobiles. Electric 2W are seen as direct substitutes for ICE 2W and, as such, any firm producing and selling electric 2W are direct competitors to the current firms in the 2W automobile industry.

Further defining the target market, we can break it down along the following dimensions:

Product characteristics - Broadly speaking, the closest substitutes include EVs. Other substitutes are indirect substitutes such as taxi rentals, car pooling services, and even further out, public transport. 2W automobiles are defined based on their seating arrangement, powertrain capacity(in Brake Horse Power,or BHP)and fuel type (diesel or petrol). Electric 2W are essentially the same to a consumer except for the fact that they have a different powertrain (measured in kW) and power source (kWh) that brings in many beneficial features compared to an ICE 2W. These include reduced emissions, lower operating costs, negligible maintenance costs.
Geography - The Indian subcontinent and certain export markets whose characteristics are similar to India’s.
Customer Groups - Includes consumers and business (who buy vehicles for commercial purposes)

Elasticity of Demand

The market is an oligopoly, with many big incumbents with large market shares across segments. The largest segment is the price sensitive mid-segment, who are very price elastic and have multiple options to choose from. Firms operating in this segment are constrained by availability and delivery times and so companies try to ensure presence to beat competition. It is worthwhile to evaluate the elasticity of demand between the current market and the projected future market that is disrupted by EVs.