Electric two-wheelers need to overcome their Qwerty problem
PremiumThey need a way out of the market inertia loaded against them as much as a reputation for quality
In the last few months, a spate of electric scooters have caught fire all across the country. In a few cases, people have died. A report by the Defence Research and Development Organisation (DRDO) said that the fires were caused by low-quality battery cells and not enough testing of battery packs. Business Standard quoted a person who had seen the DRDO report as saying that defects may have crept in due to manufacturers using lower-grade input materials to cut costs.
Some insiders in India’s electric vehicles (EV) industry have blamed the fires on issues being encountered by nascent EV technology. Others have sought to assure us that every new technology has a learning curve and hence has its challenges.
While the point about nascent technology is well taken, it’s an argument that worked well up until the 20th century. The trouble is that we are in the 21st century and everyone who has the monetary capability to buy an electric scooter already owns a smart phone. Videos of such fires have gone viral on WhatsApp and other social media.
This creates a problem of information asymmetry. The videos create doubts over the quality of electric scooters available in the market. Typical buyers are really not in a position to figure out which companies are making reliable electric scooters and which aren’t. Hence, in their heads, they are likely to paint all electric scooter manufacturers with the same brush.
As Jonathan Haskel and Stian Westlake write in Restarting the Future: How to Fix the Intangible Economy, “If buyers thought that the only people in the market were poor-quality suppliers, then the market might drive out good suppliers who were unable to convey that information." Thus, companies producing poor quality electric scooters are likely to drive out those making quality products.
What makes this more than likely is that many companies in the electric scooters space are new, without established brands. As Haskel and Westlake write: “The value of a brand… does not lie only in the informational content of the name and the logo… It is relational in that it is a sort of promise and a reminder of the past, tacitly referencing countless past transactions that make up the brand’s reputation and purporting to offer customers a particular experience or quality." New brands in our market for electric scooters do not inspire this kind of confidence, given their lack of a past record.
Other than a problem of information asymmetry, there is also the ‘Qwerty problem’ that is faced whenever a technological leap needs to be made. As Markus K. Brunnermeier writes in The Resilient Society: Economics after Covid, “The Qwerty keyboard… was based on the need to reduce mechanical breakdowns on typewriters (!) by minimizing the rate at which typewriter hammers crashed into each other. It is actually an inefficient setup for a computer keyboard, but the cost of switching is far too large." People are so used to the Qwerty keyboard that a move to any other better layout hasn’t happened.
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A similar problem is holding back the move from fossil-fuel vehicles to EVs. Companies selling two-wheelers which run on petrol have been around for a while and have a certain confidence in the minds of prospective consumers. The entire ecosystem around two-wheelers that run on petrol is fairly well developed, from getting a loan to buy one and getting local mechanics for repair work to selling a used one in the second-hand market. The same isn’t true of electric scooters. Of course, any system takes time to develop and unless people buy electric two-wheelers, the system won’t develop. So, the Qwerty problem is basically a chicken-and-egg problem of what comes first.
This is reflected in the low sales of EVs. In an answer to a question raised in the Lok Sabha in March 2022, the government had said that the total number of EVs in the country was at around 1.05 million. This was only about 0.38% of all vehicles in India. The number of electric two-wheelers stood at 336,924. This, despite the Centre allowing a tax deduction of up to ₹150,000 per year on the interest paid on a loan taken to buy an EV. In addition, state governments are also offering subsidies.
So, what’s the way out of this? In the short-run, better communication is needed from manufacturers of electric scooters. Second, they could seek some inspiration from the success of manufacturing in countries like Japan, Taiwan and South Korea, which as Haskel and Westlake write, “would be impossible without heavy investment in intangibles such as R&D, process design, and training". Clearly, in their hurry to be first into the market, quite a few manufacturers have resorted to importing low-cost components. This is hurting the industry’s reputation as a whole.
Just building a better product will not solve the problem of inadequate brand confidence. This is where existing two-wheeler companies, which sell millions of petrol-guzzling two-wheelers, can come in. Brands can cash in on the confidence people have in them by offering a good electric scooter at a reasonable price. In the current scenario, this is the best bet for electric two-wheelers to become a mass-market product.
Vivek Kaul is the author of ‘Bad Money’