Electric two-wheeler sales to fall as govt cuts subsidy

A reduction in subsidies by more than half can lead to price hikes of ₹1,000-5,000 per unit

Buyers swarmed showrooms in March to lap up deals on electric two-wheelers while higher subsidies on them lasted. This led to sales swelling to 136,000 units last month compared to over 83,000 units in February, according to the Vahan dashboard.

Starting 1 April, the government has decided to cut subsidies on these vehicles by more than half—from up to ₹22,000 per scooter to a maximum of ₹10,000 per scooter. This can lead to a price hike of ₹1,000-5,000 per scooter, where prices range from ₹80,000 to well over ₹1.5 lakh (ex-showroom).

However, FY24 saw the slowest sales growth in electric two-wheelers since FY21—a 29.9% growth rate for sales of 941,745 units. Sales were hampered by a substantial subsidy cut last June—from 40% of a vehicle’s ex-factory price to just 15%. (Sales had spiked 480% in FY21, thanks to the government doubling the cap on FAME-II incentives.)

This time, too, industry watchers say the sector will grapple with a lull before demand revives after March’s surge, prolonging a period of stagnation in electric vehicle (EV) penetration that kicked in in the second half of last year.

Monthly data from the Vahan dashboard reveals that electric twowheeler sales plummeted to 46,102 units in June 2023 from 105,390 in May, and recovered somewhat only in October to 75,069 units, when the festival season began.

Some EV makers have decided to absorb part of this subsidy cut. Bengaluru-based Ather Energy will absorb a ₹5,000 per unit reduction in incentives, and pass on only ₹5,000 to the consumer. Market leader Ola Electric, on the other hand, has tapered down discounts from 25% to close to 10% of the

ex-showroom price of its models, even as it continues to offer its cheapest model, the S1X, at ₹80,000.

Bajaj Auto and TVS Motor Co., the two big incumbents, haven’t announced new pricing under the Electric Mobility

AT 29.9%, FY24 clocked the slowest pace of electric two-wheeler sales growth since FY21

FY24 sales were hit by a subsidy cut last June—from 40% of a vehicle’s ex-factory price to just 15%

Promotion Scheme (EMPS) 2024, which is valid for four months after April, until the Union Budget under the new government gives way to a fully fleshed-out incentive scheme for EVs.

Industry executives, however, feel the recovery will be quicker this time than last year. “The reduction in the quantum of subsidy under the EMPS is much lower than the last time subsidies were lowered in May,” Ravneet Phokela, chief business officer, Ather Energy, said.

SOME electric vehicle makers have decided to absorb part of the latest subsidy cut

THE new Electric Mobility Promotion Scheme 2024 is valid only for four months after April

“The market pricing dynamic hasn’t changed dramatically, but because of a large volume of pre-buying in anticipation of the subsidy cut, demand could take some time to stabilize.”

Subsidies apart, EV market share is driven by another factor, distribution.

A JPMorgan report of 1 April on the Indian two-wheeler market said the market share of EV original equipment manufacturers (OEMs) was being driven by the strength of their presence—distribution or dealership network in those areas. The report highlighted that an OEM like Ola Electric’s market share rose in relatively low-income markets like Uttar Pradesh and Rajasthan where its distribution network far exceeds its competition. Conversely, in mature markets like Maharashtra and Karnataka, it is in much closer competition with rivals Bajaj Auto and TVS Motor, respectively (see chart).

This is a temporary advantage, the report inferred, and can change as other OEMs tap into new markets.