Electric two-wheeler sales in India could decline 15-17% in FY21, says ICRA

Electric two-wheeler sales in India are expected to shrink 15-17% year-on-year this fiscal amid an evolving pandemic situation and persisting health concerns coupled with economic uncertainties, says ICRA. ICRA Limited is an Indian independent and professional investment information and credit rating agency. It was established in 1991 and was originally named Investment Information and Credit Rating Agency of India Limited.

The Faster Adoption and Manufacturing of Hybrid and Electric Vehicles (FAME-II) scheme aimed to push faster electric vehicle (EV) adoption crossed the halfway mark of its three-year tenure (FY2020-FY2022), on 30 September 2020. However, it has managed to achieve only 2% of its target (out of covering 10 lakh e-2Ws) sales during the period.

In the first half of FY21, the actual two-wheeler (2W) wholesale sales volumes were 38% lower on a year-on-year (y-o-y) basis, ICRA said. It also stated that despite an unprecedented demand shock caused by the pandemic, the outlook for the electric two-wheelers remains largely unchanged in FY2021 due to a low base.

As per the findings of a nationwide survey of 16 electric two-wheeler dealerships in November, the stringent eligibility criteria set for claiming the subsidy under the FAME-II scheme have been a deterrent mainly due to a minimum localisation requirement and exclusion of lead-acid based e-2W, says ICRA. In addition, lack of consumer awareness (regarding government subsidy), low acceptability led by lack of product knowledge and after-sales service concerns have been dominant reasons for the scheme's lacklustre performance, it added.

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Speaking in this regards, Shamsher Dewan, Vice-President, ICRA, said:

The electric two-wheeler segment was expected to witness faster penetration among all segments of the automobile market, given the favourable economics and limited reliance on widespread charging infrastructure. However, e-2W sales vis-a-vis targets set under FAME-II have been tepid so far, with the same constituting less than 1% of total two-wheelers (2W) sold in FY2020 in India.

ICRA notes that while the practicality behind the FAME-II policy target of 10 lakh e-2Ws by FY2022 could be debated at this juncture, the Covid-19 pandemic has been an unpredictable variable which has altered all the best laid out plans. Although the increased preference for personal mobility, to ensure social distancing, bodes well for 2W sales in the near-term, the demand for e-2Ws could be impaired as consumers face income uncertainties. Nonetheless, the Government’s thrust on the adoption of EVs, increasing awareness towards public health, and clean energy continue to favour EV adoption in the long run. Multi-level policy support (demand incentives) and policy push (firm transition date) will be imperative for the same.

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