Manufacturers of electric two-wheelers (E2Ws) are relying on discounts and exchange schemes to spruce up demand as sharp increases in vehicle prices are biting into growth, compromising sales projections for this year and the next.
Sales of electric two-wheelers remained unchanged in January 2023 and December 2022 at 64,300. However, they were down by over 10% from October and November’s run rate of 72,200 and 75,900, respectively, data shared by the Federation of Automobile Dealers Association (Fada) showed. Volumes in February are expected to be line with the previous two months.
The industry is facing headwinds from many sides. Not only has the pace of new launches slowed down, thereby reducing consumer interest, those models which hit the market a few days ago are being offered at cash discounts. At the same time, there is an ongoing scrutiny on manufacturers by the government following complaints of misappropriation of funds.
Ola Electric slashed its prices by up to Rs 12,000, while Ather Energy brought down its prices by Rs 8,000 through schemes. Ampere is selling the recently launched Primus scooter at Rs 3,000 less, even as deliveries are set to commence from next month.
Manish Raj Singhania, president, Fada, said: “Electric two-wheeler penetration in December was 6% and now it has come down to 5% in January. Manufacturer-wise data show that there has been a big drop in volumes from the smaller startups.”
According to data supplied by the Vahan portal, by the end of February, the E2W segment clocked 630,000 units in sales and is likely to close the current financial year at 700,000, which will be 30% less than the projection made by NITI Aayog of 1 million units.
In addition to the targets set by the Centre, the sales targets of states which are aiming to accelerate adoption of electric mobility, are also running behind schedule. Andhra Pradesh, Delhi, Kerala and Uttar Pradesh, which had announced policies, are unlikely to meet their stated targets, while Gujarat and Maharashtra are most likely to meet theirs, according to the Vahan portal and an analysis by Climate Trends.
“When the planning was going on in 2019 to push electric vehicles nationally, the general thought was that battery prices will come down. But it went in totally the opposite direction. Not only did battery prices go up, there was a negative forex movement too,” said Sanjeev Vasdev, founder and MD, Flash Group, an EV parts supplier.
The replacement cost of batteries, which is typically 40% of the cost of the vehicle, remains the other prime factor in influencing E2W demand. “Without the (replacement) cost of the battery, the resale value of an E2W is heavily depreciated. Therefore, it is natural consumers will be apprehensive,” said a supplier of starter motors to EVs.
The government stopped its subsidy programme for more than a dozen E2W makers last year after receiving complaints about misappropriation of subsidies. Former market leader Hero Electric, whose subsidy reimbursements were stopped by the government since April last year, said it is continuing to provide subsidies from its own pocket.
Sohinder Gill, CEO, Hero Electric, said: “We are still passing on the subsidies to the customers. We are actively engaging with the newly appointed senior officials at the ministry of heavy industries and hope for a quick resolution, unlike earlier when the senior officials neither acknowledged, nor accepted any of our repeated requests for a meeting for more than six months between April 2022 and September 2022.”