Are Indian EV startups ’uninvestable’? Bernstein weighs in

Investing.com -- Indian electric vehicle startups, once at the forefront of the two-wheeler market, are now facing an uphill battle as traditional automakers assert dominance. 

Analysts at Bernstein warn that while many startups are still pushing for public listings, their long-term viability remains uncertain.

Established manufacturers like Bajaj Auto (NSE:BAJA) and TVS are leveraging scale, distribution, and policy incentives, leaving little room for smaller players to survive.

The early expansion of India’s EV market was driven by startups that capitalized on subsidies and first-mover advantage. 

However, this landscape has shifted. Established manufacturers, once lagging in the EV transition, have now caught up. Their extensive distribution networks, brand credibility, and ability to scale production have given them a decisive edge. 

As Bernstein analysts put it, “While we have to say that the incumbents have been launching what we call boring and uninspiring products, it is largely reach, better servicing, and perception of safety that is driving their resurgence.”

Market consolidation has accelerated. Over 150 startups had initially entered the space, leading to fragmentation, but now just four companies command over 80% of the market—Bajaj and TVS alone account for nearly 50%. 

With traditional manufacturers launching competitively priced models and expanding their dealership networks, smaller startups are struggling to retain relevance.

The financial outlook for most EV startups remains bleak. Many continue to operate at a loss, burdened by capital constraints and rising competition. 

“Most startups are grappling with losses, capital constraints, scale, and limited market reach,” Bernstein analysts observe. 

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Unlike established automakers that benefit from the Production-Linked Incentive scheme, most startups lack this critical support, making it difficult to sustain operations.

Moreover, time is not on their side. As Bernstein warns, “By the time they manage to scale and establish a solid offline presence, much of the market may have already been claimed.” 

The reduced government subsidies further weaken their position, making it difficult to compete on price with incumbents.

Despite some startups looking to enter public markets with aggressive valuations, Bernstein urges caution. 

“Investors should tread carefully while assessing these models. Don’t be swayed by lower valuation ask or the allure of trading momentum based on the belief that these startups will transition from losses to profitability.”

While a handful of companies, such as Ultraviolette, have demonstrated niche potential, the broader startup ecosystem lacks competitive differentiation. “We do not consider any unlisted startup a safe investment,” Bernstein says.

As the industry consolidates, Bernstein expects most EV startups to struggle with scaling and may ultimately exit the market. 

The likelihood of acquisitions remains low, as few startups offer unique technological or cost advantages that would attract buyers.

For investors, the opportunity in India’s EV space appears to be shifting toward traditional manufacturers rather than new entrants.

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