Electric Two-Wheelers Face An Uphill Task With Reduced Subsidies

The Indian electric two-wheeler market has been witnessing steady growth over the past few years. However, according to a recent report shared by Bernstein states that most of the brands haven’t been able to achieve profitability. This is down to scalability of the products and the thin margin of profitability given that EVs are more expensive to produce than traditional ICE vehicles.

The highest cost component of an electric scooter is the battery, which needs to be imported and manufacturers can’t control the cost for the same. The EV segment received a boost with government subsidies such as FAME, however state subsidies have all but diminished, while the subsidies from the centre have reduced significantly in the recent past. With costs rising, EV adoption has slowed down too, however EVs still enjoy a significant GST tax cut.  

The report also added that legacy Indian manufacturers are facing financial losses whereas a few EV startups are faring better. However, it also mentions that in the long run, traditional OEMs might have a larger market share, if they manage to increase scale and reduce manufacturing costs. According to the report, the electric two-wheeler industry in India generates around $1.3 billion (₹10,878 crore). However Bernstein also added that brands incur $300-400 million (around ₹2,500 to 3,300 crore) in losses. An interesting data is that Ola Electric has managed to generate positive earnings via its premium offerings the S1 Pro and S1 Air, but the affordable and mass market product, the S1X is making losses. Bernstein adds that TVS Motor loses ₹11,000 per vehicle, whereas Bajaj Auto is even higher at ₹15,000 per Chetak.

No wonder then manufacturers are developing new platforms which will not only make their products more affordable to buyers but will also help in improving their margins. But with limited subsidies, the electric two-wheeler segment will keep on expanding, however at a much slower pace than predicted earlier, unless there is some drastic breakout in technology or cost.