EV sales – 2Ws scaling up; PV stays low

2W EV penetration is led by South and West India, while other regions are lagging. In 2Ws, there has been a marked shift in market share away from low-priced low-spec EVs to high-spec models. This has led to significant market-share gain for Ola, TVS and Ather. Players such as Hero Electric and Okinawa have lost substantial market-share. This has coincided with loss of FAME eligibility for these players. The EV space has become very crowded with over 300 three-wheeler (3W) EV makers and 80+ 2W EV makers. Lastly, the industry continues to be fueled by subsidies and a favorable GST regime. If FAME subsidies are withdrawn, manufacturers’ business economics and customers’ affordability will get hit. This is evident in the way, volumes of Hero Electric, Okinawa and Revolt have started declining YoY in recent months.

EV penetration up at 5% in 2Ws; PVs lag at about 1%

The penetration of EVs in 2Ws has jumped sharply to more than 5% in recent months, versus about 2% in FY22. The penetration is high in states in South and West India. In PVs, EV penetration is still low at about 1%. With new launches from Tata Motors and M&M, analysts at IIFL Securities expect it to inch up further, albeit at a slow pace. In 3Ws, EV penetration stands at more than 50%, but that’s due to proliferation of low-priced e-rickshaws. In trucks and LCVs, penetration is negligible. However, in Buses (a relatively small volume category), penetration has increased to about 6% driven primarily by EV adoption by State transport undertakings.

Big shift in 2W EV market-share

The 2W EV industry has seen a marked shift in market-share from low-priced low-spec models to high spec models. The likes of Ola, TVS and Ather have clocked significant market-share gains. Players such as Hero Electric, Okinawa, Pure EV and Revolt have lost market-share.

Volume uptick for Ola post pricing action; FAME subsidy expiry hurt Hero Electric and Okinawa

After a soft start for Ola post launch in late 2021, the company undertook price actions in the form of lower priced variants and discounts. This seems to have sparked a pickup in volumes in recent months. Ola is consistently clocking close to 20k units per month from October 2022. TVS has also hit the sweet spot with a good product offering and prudent pricing. Ather has scaled up volumes, despite premium positioning and pricing. On the other hand, erstwhile leaders Hero Electric and Okinawa, which together accounted for almost 50% of the market in FY22 are now clocking YoY decline in volumes. This has coincided with withdrawal of FAME subsidies for their models.

Sustainability of growth dependent on subsidies, favorable tax regime

As highlighted by analysts at IIFL Securities in the past, the price and ownership cost parity of EVs versus ICE is driven by subsidies and a favorable GST regime. Had it not been for FAME subsidies and lower GST rate (5% versus 28% for ICE), prices of 2W EVs would have been 60-80% higher versus current levels. 

Analysts at IIFL Securities believe that sustainable business model and rise in electrification would be achieved only when cost of production of EVs come closer to ICE. This argument is supported by several 2W EV makers having to scale down production rates and growth plans after FAME subsidies stopped flowing.