India’s two-wheeler electric vehicle (EVs) market has shown immense growth in recent years, driven by government incentives, rising environmental concerns, and fuel costs. The two-wheeler EVs lead the country’s automobile market, making it the second largest in the world. According to a report by Statista, their sales rose exponentially with over 15 million units a year, making their penetration rate 4.4% in the 2023 fiscal year. Government incentives and subsidies have played a major role in this significant demand for EVs which has made EVs an accessible and attractive option for consumers.
For Instance, government schemes like Faster Adoption and Manufacturing Hyrbif and Electric Vehicles (FAME) and the recently launched PMEDRIVE scheme encourage consumers to purchase EVs by giving them major incentives and tax cuts on their purchase. This reduces the upfront cost of their vehicles and results in higher sales of EVs.
However, with recent cuts in subsidies, this landscape is slowly shifting, yet stimulating new potential for innovation and opening new avenues for the industry. As the market started adapting to this reduction in direct financial support, it encouraged the manufacturers to invest in quality improvement and sustainable practices, making India’s EV industry more sustainable and independent.
While one may think that loss of incentives may lead to short-term impacts such as fewer sales and higher upfront costs, it opens a plethora of opportunities for technological advancement, affordability, and infrastructure in the Indian EV ecosystem in the long run.
The Immediate Challenges
Indian market is price-sensitive, and reduced subsidies directly impact the affordability of EVs. Government subsidies aid in capping the price for EVs up 10-15%, reducing its upfront cost and making it more affordable. With these incentives scaled back, the market might experience a temporary decline in two-wheeler EV sales resulting in their slower adoption as consumers will face high upfront costs. This gap not only dwindles the adoption rate but also raises environmental concerns. As fewer consumers make their transition toward EVs due to their high cost and lesser range, the dependence on petroleum-based vehicles will more likely persist impacting India’s goal of reducing carbon emissions.
Technological Innovations Leading Two-wheeler EVs Ahead
While reduced subsidies present challenges, they came up with opportunities for innovations within the industry, Battery technology for instance remains a crucial driver for EV affordability and longevity. Leading manufacturers in the industry have committed themselves to in investing high-performance and energy-efficient batteries such as lithium-ion batteries that are cost-effective, durable, and have extended range. According to the International Energy Agency, the demand for lithium-ion batteries increased by almost 65 % in 2022. Thus, the focus has been shifted from incentives to producing efficient technology that will lower down EVs costs and make them more affordable for Indian consumers who prefer longevity and durability in their vehicles. By using advanced battery technology, manufacturers can easily offer a consistent and reliable performance to their consumers without holding much on government incentives.
Increased Focus On Product Quality and Durability
The diminishing incentives and subsidies have turned the focus on product quality. Manufacturers are now prioritizing giving better quality to stay competitive in the market. Higher energy-based and durable battery packs that not only extend the range but require minimal maintenance have started dominating the market. This shift towards quality also shows that even wth higher upfront cost, consumers can easily benefit from better performance, fewer breakdowns, and extended batteries. This will make EVs a practical and durable choice even without an added push of incentives.
Building A Sustainable and Self-reliant EV Market
Tax cuts and lowering subsidies may initially result in slow growth, but it push the industry towards becoming more self-reliant in every term from manufacturing to selling their vehicles. Manufacturers are increasingly investing in research and development to lower the production cost and their dependence on government incentives. This change will likely make the market more sustainable and competitive globally by using locally developed technology that caters to the unique needs of Indian consumers. As technology advances, costs will ultimately decrease, creating a more accessible EV market and fostering long-term independent growth.
Providing Long Term Value In The Total Cost Of Ownership
Another positive outcome that can be attributed to this shift is a greater focus on the total cost of ownership (TCO) of vehicles. Without heavily relying on incentives, manufacturers can promote long-term savings of EVs through lower fuel consumption and maintenance costs, As per Alliance for Energy Efficient Economy, two-wheeler EVs offer significant cost savings as their operational expenses are lower when compared to petroleum-based vehicles. As buyers become more aware of the TCO advantages of two-wheeler EVs, their appeal will ultimately get strong despite reduced incentives.
EVs are the future. According to a report by McKinsey, 86 % of consumers are willing to purchase two-wheeler EVs while 25 % of Indian consumers prefer hybrid vehicles which is higher than the global average of 15%, this shows consumers’ interest in transitioning towards an eco-friendly choice and taking a climate worthy risk for clean and green future.
By Mr. Samrath Singh Kochar, Founder and CEO, Trontek
