A research report by investment firm Morgan Stanley, published in June, expects a wide transformation in India’s two-wheeler business with the advent of electric bikes. For two simple reasons: India is the largest gasoline-powered two-wheeler market and more than half the miles traveled in India are on two-wheelers.

The report estimates that by 2025, electric two-wheeler penetration will be at 10%, rising to 40% by 2030. The increased penetration is expected even as new two wheeler sales are expected to rise from 21 million in 2018 to 47 million by 2030, at a 6.8% CAGR.

Three key factors will play a role in the shift towards electric two-wheelers in India. Firstly, cost economics and value proposition are turning favourable. Though electric bikes cost more than conventional ones, which are expected to see a price increase post implementation of the BS VI emission norms. This coupled with lower running costs for electric bikes is expected to even out the cost of ownership over a 10-year ownership period. This is only expected to improve in favour of electric bikes as battery prices head south in the coming years.

Secondly, electric two wheelers don’t require special charging infrastructure and their batteries can be charged once-a-day at home. Fast home chargers cost ₹10,000, while normal ones cost ₹5,000-6,000, making them affordable. Further, two-wheeler batteries are detachable and discharged batteries can be swapped for charged ones at kiosks. According to the report, Taiwan-based Kymco and 22 Motors India are planning to offer battery swapping stations key metros by 2020.

And finally, the segment is expected to have a supportive government policy to kickstart growth. Already, under FAME II (Faster Adoption and Manufacturing of Electric Vehicles), the government has set aside $285 million and is offering ₹10,000 incentive per kWh. In addition, few states are also waiving the road tax enabling the customer to get almost 25% off the retail selling price. The government is targeting sales of 1 million electric two wheelers by April 2022.

The firm admits that currently it gets no questions on the future of electric two-wheelers in India but it believes that this debate will start soon and 2020 will be year of electric two-wheelers. To start off, it anticipates that biennial auto show in 2020 to unveil several electric two wheeler models with at least 10 lithium battery-based models on sale by the end of 2020. It also expects the battery-powered vehicles to hit a market share of 1% in any single major metro of India by the end of 2020. It also says that the BS VI rollout (April 2020) will lead to 10-12% price hike for gasoline vehicles, bring forward the debate on electric vehicles for customers.

The report, in the work for several months, built three scenarios to estimate the size of the market. In an extreme bull case, where all the costs for the electric two-wheelers fall into place, it predicts a 65% penetration by 2030, but in a bear case if battery prices don’t come down or there are regulatory glitches, then that number is only 20%. It’s standard, base case assumption of 40% penetration hinges on higher prices of gasoline engine vehicles and favourable government policy.

Follow us on Facebook, Twitter, YouTube & Instagram to never miss an update from Fortune India. To buy a copy, visit Amazon.