Battery price crash will boost African 2-wheelers

From the newsletter

Africa's love affair with two-wheelers is undeniable. About 1.8 million are sold annually, with electric ones accounting for less than 5%. According to a Goldman Sachs report battery prices, the most expensive component of EVs, are expected to fall by 50% by 2027, which could reshape the market.

• Affordability is a major factor for motorcycle buyers in Africa. The lower cost of traditional petrol motorcycles has made them the preferred choice for many.

• About 80-90% of these motorcycles are used for commercial purposes–taxi services, deliveries, and small-scale transportation.

More details

• Adoption of electric motorcycles in Africa holds significant potential for transforming urban transportation, but affordability slows progress.

• Business models have evolved to address this affordability gap. Asset financing and pay-as-you-go options have become popular, with companies like M-Kopa financing over 1,000 electric motorcycles in Kenya.

• Almost all electric 2-wheeler buyers are opting for battery leasing—only paying for the charge rather than buying the batteries.

• But this approach creates a dependence on leasing companies. For true market penetration, end-users need the freedom to own their batteries and charge them anywhere, including at home.

• On the technology side, electric motorcycles compare favourably to fossil ones, except when battery components are included.

• Reducing battery prices will position electric motorcycles to compete with fossil ones and this could alter the market dynamics.

• With African cities being amongst the fastest growing, congestion in cities is expected and electric motorcycles will fill the demand for fast commutes between traffic.

Our take

• Closing the affordability gap will require more than just flexible business models; battery pricing is crucial, and any price reductions will boost sales. 

• As urbanisation accelerates and traffic congestion worsens in major African cities, the question surrounding the demand for electric motorcycles is not if it will surge, but rather when—just like it happened with fossil-powered motorcycles.