Electric two-wheeler sales in June lowest in 12 months

Electric two-wheeler (E2Ws) sales in June 2023 fell 57% from last month to hit their lowest level in the last 12 months, according to e-governance app Vahan's dashboard. The dampening customer sentiment follows subsidy cuts for E2Ws.

In May, the Ministry of Heavy Industries (MHI) made a significant announcement regarding subsidy cuts for E2Ws. The maximum subsidy cap, previously set at 40% of a vehicle's ex-factory price, was reduced to just 15%.

On the battery front, the subsidy for electric two-wheelers was reduced from Rs 15,000/kilowatt-hour to Rs 10,000/kilowatt-hour.

In June 2023, only 45,798 units were sold compared to 1,05,340 units in May. It's worth noting that May's surge was largely driven by last-minute bookings and sales, as consumers rushed to avail of subsidy discounts before they expired.

In June 2022, nearly 44,381 units were sold, but adoption was still rising last year.

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June 2023's numbers were the lowest recorded sales in the last 12 months, according to Vahan's data.

Ola Electric, TVS Motor Company, Ather Energy, Ampere Vehicles, Hero Electric, Bajaj Auto Limited, Okinawa, etc all saw declines in their June sales versus the last couple of months, on average.

Ather, which sold 6,479 units in June 2023, said the drop in numbers was "slightly more than we'd anticipated", but should normalise over the next two-three months after the industry bounces back from the subsidy cuts.

"While it impacts short-term financials, this (cutting of subsidies) is certainly a step in the right direction from a long-term perspective," Ather's Chief Business Officer Ravneet Singh Phokela added.

The FAME II scheme, which had a total capital outlay of Rs 10,000 crore, was launched in 2019. Of the Rs 10,000 crore capital allocated to boosting EV adoption in India, Rs 2,000 crore was earmarked for two-wheelers.

The industry had hailed the FAME II announcement, especially considering India is a price-sensitive market and the cost of owning an EV is typically higher than a combustion engine vehicle.

The subsidy cut has hit the momentum of EV adoption—and it was largely expected to do so, no matter when it was withdrawn or phased out—but the effect has been more than what was expected-at least going by Ather's statement.

"The two-wheeler market is highly sensitive to prices, and in order to sustain the momentum of EV adoption, either EV prices need to be adjusted or subsidies may need to be extended to support the growth trajectory," said CareEdge Ratings in a report.

However, analysts continue to believe that the outlook for EV adoption in India remains optimistic in FY 2024, when EV two-wheeler volume sales are expected to surpass 1.5 million units, as per CareEdge. In FY 2023, nearly 847,000 units of E2Ws were sold.