The entry and scale-up of established internal combustion engine (ICE) manufacturers into the electric two-wheeler (e2W) market are intensifying competition, which will likely prolong operating losses across the industry. While legacy players can cushion these losses with strong cash flows from their traditional ICE businesses, pure-play e2W manufacturers will depend on raising additional equity in the medium term to sustain operations.
This competitive environment is expected to drive the industry’s volume growth to approximately 25% in the current fiscal year, following the milestone of crossing one million units in fiscal 2025 — accounting for nearly 6% of the overall two-wheeler market. The launch of new models and the extensive distribution networks of legacy companies will help boost this growth, alongside the favorable cost advantage of e2Ws over ICE vehicles, despite a reduction in government incentives.
An analysis covering manufacturers responsible for over 80% of fiscal 2025’s e2W sales reveals this trend. Legacy manufacturers expanded their share of the e2W market dramatically, from about 15% in fiscal 2023 to around 45% in fiscal 2025, leveraging their brand strength and well-established dealer networks. The competition is set to intensify further in fiscal 2026 with two more legacy players announcing their entry into the e2W space.
According to Anand Kulkarni, Director at Crisil Ratings Ltd, the heightened competition and race to capture market share are extending the time needed for e2W players to achieve break-even. Some companies may take two to three years to reach EBITDA breakeven at the current pace of industry growth. Crisil estimates that pure-play e2W manufacturers will face an average EBITDA loss of Rs 20,000-30,000 per vehicle in fiscal 2025. Although industry-wide operating losses have been declining, achieving economies of scale remains crucial for profitability.
To stimulate demand, the e2W industry has been lowering prices, supported by two key factors: the introduction of more affordable models with smaller battery packs, which has narrowed the upfront cost difference with ICE vehicles to about 5-10%, and the passing on of battery price reductions—around 20% in fiscal 2025—to consumers.
Looking ahead, battery prices are expected to remain stable, helping maintain the current cost structure. Additionally, production-linked incentive schemes for automotive manufacturing and battery production are expected to bolster profitability as sales volumes increase.
Currently, pure-play e2W makers have enough liquidity to support their operations. However, if losses persist beyond a couple of years, they will need to seek further equity infusions. In contrast, legacy manufacturers can absorb losses in their e2W segments, as these account for only about 5-6% of their total revenues and will not significantly impact their overall profitability.
Nevertheless, competition will be a major driver of industry-wide volume growth and e2W penetration. Pure e2W players will continue expanding their dealer networks, while legacy manufacturers will leverage their pan-India networks to target under-penetrated regions, boosting consumer awareness and adoption, thus supporting volume growth this fiscal year.
Nitin Bansal, Associate Director at Crisil Ratings Ltd, added that the favorable total cost of ownership (TCO) will be another growth driver. Despite a sharp reduction in government subsidies, e2Ws are expected to offer a 15-20% lower TCO compared to ICE variants this fiscal year. Furthermore, the running cost for e2Ws—at 15-20 paise per km—remains far lower than the Rs 2.0-2.25 per km for petrol two-wheelers, strengthening the economic case for consumers.
Going forward, the industry’s ability to quickly ramp up volumes while addressing challenges like safety concerns, raising consumer awareness, and ensuring timely equity infusions, especially for pure e2W makers, will be key factors to watch.
