Electric two-wheeler sales likely to miss NITI Aayog target for FY24

Electric two-wheeler (E2W) sales in financial year 2023-24 (FY24) are likely to miss the NITI Aayog target of 2.3 million by a significant margin, as the industry has so far clocked around 800,000 units.

Industry insiders point out that there are several reasons behind this relatively slower growth rate — like smaller start-ups grappling with making a mark in the market. Major players have struggled with FAME subsidy funds and heavy discounts led to temporary boosts, but at the same time eroded the value of products and brands.

Till February, the number of electric vehicle (EV) two wheelers sold in the Indian market was seen at over 806,000 units, compared to 641,000 units during the same time last year.

On a year-on-year (Y-o-Y) basis, however, it was a growth of 26 per cent. However, the E2W industry will not only fall short of the 2.3 million target of NITI Aayog but also fail to meet the FY23 target of 1 million units.

Speaking to Business Standard, Sohinder Gill, chief executive officer (CEO), Hero Electric, said, “In the current financial year, E2W sales figures are projected to fall below 1 million units, a significant deviation from NITI Aayog's ambitious forecast of over 2 million units. Traditionally, smaller startups have grappled with establishing their presence in the market, while major players like Hero Electric, Ampere, Okinawa, and Revolt have been the dominant players.”

Gill further said that recent years have seen the emergence of formidable competitors such as Ola, Ather, TVS, and Bajaj, pushing pioneering brands like Hero Electric and Okinawa to the sidelines.

“These pioneers faced subsidy issues with the ministry of heavy industries, leading them to withdraw from the market,” he added.

Data from BNP Paribas showed that Ola gained market share from 24.3 per cent in April 2022 to 42.3 per cent in February 2024. Meanwhile, Hero Electric saw its share erode from 13 per cent to 0.4 per cent during the same period.

TVS and Bajaj Auto have steadily gained market shares — with 17.5 per cent and 15.2 per cent, respectively, of the E2W market as of February 2024.

Gill agreed: “To fill the gap left by the pioneers, larger players have turned to heavy discounting. Yet, they have struggled to fully meet the needs and demands of this segment. The root cause may lie in the pervasive heavy discounting by almost all large players, which could result in temporary boosts but can ultimately erode the value of products and brands in customers’ minds.”

He compared the heavy discounting to a winter season sale persisting through the summer.

Dealers feel a major reason for the dip is the reduction of FAME subsidy by the government.

“This year, it has been up and down in the EV market because of the reduction of EV subsidies. The market got a shock in terms of price increase after that. The new price level took another two-three months to settle in the minds of customers.

The penetration had gone down to 3.75 per cent from 4 per cent. Again, it is back to 5.5-6 per cent now,” said Manish Raj Singhania, president of the Federation of Automobile Dealers Associations (FADA).  

He added that the price gap between internal combustion engine (ICE) and EVs and lack of choices are also playing a crucial role in the market not picking up.

“ICE vehicles start at Rs 65,000. Price gap is a huge concern. A lower price band will push EV two wheelers in the market. All legacy players have only one or two models in the EV segment. On the other hand, in ICE, you have huge choices in the entry level,” Singhania said.

Analysts, however, see this as a temporary blip, remaining optimistic about India’s E2W story.

“Currently, we are going through a transition phase — from the FAME demand-led scheme to the PLI benefits-led production model. That is why we can see that the industry growth is relatively slow or missing the NITI Aayog stated targets,” said Puneet Gupta, director-Mobility, S&P Global

“But this is also a phase of consolidation — where the government strategically wants to incentivise quality products (after the fire incidents in E2Ws earlier). It wants to ensure that people who are investing in tech and production facilities are the ones that scale up.

The overall electric two-wheeler growth story for India remains intact and I feel that there would be significant traction from the commercial sector like fleet operators and food delivery services,” he added.

Gill also feels that a resurgence of manufacturers renowned for producing affordable, value-for-money electric bikes could potentially contribute to expanding the entire EV ecosystem.

“Personally, I view this slowdown as temporary. As customers recognise the cost-saving benefits of electric two-wheelers over 3 to 4 years, coupled with a broadening customer base, we anticipate traction to improve and lost ground to be regained,” he said.