Electric two-wheeler companies pencil in slow sales growth for FY24

Electric two-wheeler companies are projecting they would sell around 1.5 million vehicles in FY24, much lower than Niti Aayog’s ambitious target of 2.3 million. This could push back the government’s ambitious plan to reach 80 per cent penetration of electric
two-wheelers by 2030.

The Society of Manufacturers of Electric Vehicles (SMEV), the association of leading electric two-wheeler companies, said that it had been impelled to go for a much more moderate projection as the industry’s performance in FY23 was expected to be far below Niti Ayog’s target of 1.2 million.  

For FY23, SMEV’s projection was close to that of the government as it expected sales to be over 1 million. But the reality was different.

“By the end of the financial year, we will be somewhere at 750,000, which is lower than Niti Aayog’s projection. Even we had expected to hit 1 million plus, that now does not seem to be possible. So we expect sales to double at the most in FY24 based on inputs from our members, but not go up three-fold,” said Sohinder Gill, director-general of SMEV, and CEO, Hero Electric. This is why SMEV’s projection is far lower than that of the government.

SMEV members say that the slowdown in sales was due to multiple issues that hit the sector after an initial dream run between May and October 2022 when sales grew 88 per cent.

One was the controversy on the FAME subsidy. For instance, the government decided to audit companies after a whistle-blower alleged that the electric two-wheeler companies were violating subsidy norms by availing themselves of the scheme without fulfilling the pre-condition for FAME 2 subsidy disbursements, namely, localisation of 51 per cent.

As a result, the government decided to suspend further disbursals till the issue was resolved. But companies that were impacted, such as Hero Electric and Okinawa, were forced to taper their production, as well as sales, as about Rs 1,200 crore of subsidy remained stuck.    

The new battery safety rules also slowed things down.  SMEV had recently asked the government to extend the deadline for implementing the second phase of the battery safety norms by 30- 45 days from the current deadline of March 31. If it does not happen, companies will not be able to produce enough and this will impact production and sales once again, they say.  

Gill says that the problem is that there are only three certification bodies in the country for homologation of the electric scooters of which the bulk goes to the Automotive Research Association of India. This causes immense delays as it is a long queue. Homologation refers to certification that the parts are roadworthy.

Further, anyone who fails a test has to rectify the problem, but then goes back to the same queue once again. The revised safety norms are far more stringent — better insulation, thermal propogation tests to ensure a thermal runaway in one cell does not spread to the other cells and sets the scooter on fire, and audio-visual warnings. There is also uncertainty among e-scooter makers on whether the FAME 2 subsidy scheme will be extended beyond March 31, 2024. This makes it difficult for them to plan their increase in production and capacity.  

But some such as Ola Electric (which is the number one in sales) are setting more ambitious targets. Ola Electric hit sales of 150,000 in FY22 and is looking at a three- to four- fold increase in its sales. as it launches below Rs 1 lakh.

It is also increasing its capacity to one million. If it succeeds, Ola Electric could disrupt the size of the market.