News
India’s electric two-wheeler market, which had been experiencing rapid growth, has encountered a sudden setback this month. Jeopardizing the government’s plans to electrify the largest scooter and motorcycle market in the world. Following a 15-18% price increase after the reduction of government subsidies. Moreover, the registrations for electric two-wheelers plummeted in June 2023. Data from the Vahan vehicle registration portal reveals that the volume dropped to its lowest point in 16 months. With only 35,461 units registered as of June 27.
If we adjust the data for the remaining four days of the month. Assuming the current daily volume remains at 1,363 units. Moreover, it is estimated that the total sales for June will be around 40,000-40,500 units. This represents a significant month-on-month decline of 61%. Comparing the numbers to the five-month average (January to May) of 77,728 units, the drop amounts to approximately 47%.
FAME Subsidy Impact
The decline in sales can be attributed to the reduction in subsidies under the FAME (Faster Adoption and Manufacturing of Electric Vehicles) scheme. Which aims to promote the adoption of electric vehicles. In May, sales surged to 3,391 units as buyers rushed to make purchases before the subsidy reduction took effect. Ravneet S Phokela, the Chief Business Officer at Ather Energy, an electric two-wheeler manufacturer, commented on the situation. They were anticipating a negative impact on volumes due to the price hikes following the subsidy reduction. But the drop in sales was slightly higher than expected.
Industry Take
Ather Energy experienced a contraction in volume of 35-40% compared to the previous month. However, the company remains optimistic, expecting sales to pick up in the coming months. They believe that gradually reducing subsidies over time will help the market adjust to more realistic pricing, which will be beneficial in the long run.
Sohinder Gill, the Director-General of the Society of Manufacturers of Electric Vehicles. Emphasized the need to reassess the strategic objectives related to electric mobility and evaluate the industry’s performance in achieving them. He expressed concerns about achieving only 60% of the 2.3-million-unit target set by the Niti Aayog, a government policy think tank. Due to the subsidy reductions causing a bottleneck.
Despite the overall sales collapse, Ola Electric, the market leader, managed to maintain its position and even gain market share. While its daily sales decreased by 41% to 541 units compared to the previous month. However, it managed to increase its market share to 39.69% in June 2023, a gain of 12.4 percentage points. In contrast, most of its main competitors experienced a decline in market share. The top five electric two-wheeler companies still hold around three-fourths of the market share.
Ashim Sharma, Senior Partner at Nomura Research Institute Consulting and Solutions, acknowledged that a drop in sales was expected but not to this extent. The substantial price hikes implemented by manufacturers have disrupted the cost economics for potential buyers. Sharma emphasized the importance of closely monitoring the sales trend leading up to the festive season.
Conclusion
Overall, the Indian electric two-wheeler market has hit a roadblock. With a significant decline in sales following the reduction of subsidies. However, industry players remain hopeful for the future, expecting sales to recover in the medium to long term. As the market adjusts to new pricing dynamics.