The Ministry of Heavy Industries’ recent reduction of the FAME-II subsidy is severely impacting India’s electric two-wheeler growth. The number is likely to plummet back to the modest sales numbers of June 2022 – 40,000 to 45,000 units – according to industry analysts and experts.
The numbers, as analysed by our sister publication Autocar Professional from the VAHAN data, shows that electric two-wheeler sales have dropped by over 60 percent to 35,464 units as of June 26, 2023. It was at an all-time high in May, with 1.5 lakh units sold. This, however, was before subsidies were slashed.
Rohan Kanwar Gupta, vice president and sector head, Corporate Ratings, at the Investment Information and Credit Rating Agency (ICRA) told Autocar Professional that the steep fall in sales figures is a direct fallout of capping incentives, which has led to an increase in retail prices between Rs 15,000-35,000 across the EV two-wheeler industry.
Kanwar says that the industry had ramped up volumes to 1.50 lakh units in May 2023 as compared to 66,000 units in April 2023. "Retail sales are expected to recover gradually. Going forward, customers are expected to take time to absorb the price hikes undertaken in the segment”, he said.
The FAME-II subsidy curtailment has hit some of India's leading two-wheeler companies, including Hero Electric which clocked retail sales of only 970 units in June 2023, and, its market share, which was above 16 percent earlier, has reduced to a meagre 3 percent. Hero Electric had sold 6,486 units in the same period last year.
Sohinder Gill, CEO of Hero Electric stated, "FAME was expected to catalyse a large-scale conversion of gasoline two-wheelers to electric in a short time. The two-wheeler industry started picking up the tempo, however, the exponential growth was short-lived, as many players got their working capital choked due to blocking of over Rs 1,600 crore of their subsidy."
"It's time the government recalibrates its strategy and decides how important the targets are it set for itself on the role electric two-wheelers have to play in decarbonising India and accelerating the scale while pursuing economic growth."
Two million target seems improbable at the moment
India’s electric two-wheeler players ended FY23 with only 7.4 lakh units as against the target of 1 million and achieving the target of 2 million in FY24 set by Niti Aayog will be extremely difficult, analysts have indicated.
Hemal Thakkar, senior practice leader and director at CRISIL Market Intelligence and Analytics indicated that this trend is likely to continue for another 2-3 months, after which some recovery can be expected. On the industry touching the 2 million mark by the end of FY24, Thakkar said, “It is going to get difficult for electric two-wheelers to reach the 2 million mark by end of FY24, but the long-term favourable total cost of ownership will help consumers go back to EVs around the festive period.”
As per current data estimates, Ola Electric sales in June are estimated to be at 14,073 units, almost half of the 28,617 units sold in May. The EV maker, which was averaging sales of 20,000 units for the last few months, had clocked sales of 28,612 units for May 2023 and 22,024 units for April 2023.
The FAME-II subsidy curtailment has also hit TVS’ iQube e-scooter hard with sales down to just one-fourth of May's 20,396 units – 5,253 units – while maintaining a 15 percent market share next to Ola Electric. Ather Energy, on the other hand, which clocked sales of 15,404 units for May 2023 and 8,758 units for April 2023, has had its sales crash to just 20 percent of that figure to 3,422 units.
Ampere Electric has seen its market prospects shrink significantly to 1,137 units by 26 June 2023.
| Sales comparison post FAME-II subsidy cut | ||
|---|---|---|
| Manufacturer | May 2023 | June 2023 |
| Ola Electric | 28,617 | 14,073 |
| TVS | 20,396 | 5,253 |
| Ather | 15,404 | 3,422 |
| Okinawa | 2,907 | 2,167 |
| Bajaj | 10,063 | 2,100 |
| Ampere | 9,635 | 1,317 |
| Hero Electric | 2,109 | 970 |
All sales numbers are as of June 26, 2023.
Sanjay Behl, CEO and executive director, Greaves Electric Mobility, mentioned that the sharp drop in electric two-wheeler sales and the reduction in FAME-II subsidy by the government pose a momentary challenge to sustain the rate of accelerated adoption of electric scooters for the industry.
"While the increased EV prices might temporarily slow the adoption, we believe that the industry's overall growth trajectory remains intact. We are confident that as technology advances and economies of scale are achieved, EVs will become more affordable,” Behl indicated.
Dealers want manufacturers to step in to arrest the slide
Automotive dealers who form the last mile of customer engagement have also confirmed that it is going to be a choppy ride for electric two-wheelers for the next couple of months.
Vinkesh Gulati, former President of Federation of Automobile Dealers Associations of India (FADA) acknowledged that India's electric two-wheeler industry is going through turmoil due to the ever-changing regulations, the latest being the massive reduction in the FAME-II subsidy.
"We expect a decrease of 30 percent in the registration in June, which is expected to continue till the festive period," Gulati said.
He further suggested that to further halt the slide in the sale of two-wheeler EVs, "OEMs will have to take a hard decision in absorbing the major part of subsidy reduction to handle the de-growth."
On reaching the 1 lakh retail unit target again, Gulati said that this is not possible before the festive season.