Motilal Oswal believes that electric two-wheeler vehicle sales will slow down in 1QFY25 after the electric 2W (e2W) segment posted a much slower growth rate of 30 percent year-on-year YoY in FY24 to 944k units.

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Further, it reckons that the industry will need government support in the form of subsidies for at least one more year, and thereafter, a combination of operating leverage benefits, a reduction in input costs, localisation, and PLI benefits for the industry to stand on its own feet.

Given sharp pre-buying in March 2024 and uncertainty around subsidy after July 2024, analysts expect e2W industry volume to slow down at least in 1QFY25.

Why did e2W segment witness a slow down in FY24? 

The deceleration in e2W growth as per the report can be attributed to multiple headwinds in FY24, which included:

>>FAME-II subsidy cut with effect from June 23. FAME II (Faster Adoption and Manufacturing of Electric Vehicles Phase II) subsidy is a benefit given to the purchaser of the electric vehicle in the form of an upfront price reduction. 

>>Original equipment manufacturers (OEM) were asked to upgrade their vehicles to meet new safety norms.

>> A few OEMs were denied FAME benefits and penalized for not following localization norms.

>>Fire incidents created negative sentiment about electric vehicles (EVs).

Furthermore, as per the report, in FY24, the e2W segment saw a major shake-up after the levy of hefty penalties on some of the existing players, including Hero Electric, Okinawa, Ampere, etc. Players like Hero Electric and Okinawa, which were erstwhile market leaders up to FY23, have suffered a major setback due to these penalties. 

Additionally, some new entrants, which showed initial promise, failed to ramp up, including Pur Energy, Revolt, and Simple Energy. 

However, players like Ola, Ather, Bajaj Auto, and TVS Motor Company have emerged as major beneficiaries of this shake-up. As per analysts at Motilal Oswal, these four companies gained market share and became market leaders in e2Ws in FY24.

>>Ola has been the biggest gainer as its market share increased from 21 per cent in FY23 to close to 35 per cent in FY24, driven by continued new launches and aggressive discounting toward the end of the year. >>Incumbents TVS Motor and Bajaj Auto now command 19 per cent and 11 per cent market share, against 11 per cent and 4 per cent in FY23 respectively. 

>>Ather also gained 100 bp market share YoY to reach 12 per cent.

What lies ahead for e2W?

“There is a role that incentive has to play, but only up to a time. The ecosystem of the auto industry will need at least 15-20 per cent penetration, until which we will need demand incentives. The following 10-15 per cent penetration can be driven by supply incentives. I see the role of incentives for the next 24-36 months in this industry,” said Sanjay Behl, CEO - Greaves Electric Mobility.

Dr. Anshul Gupta, Managing Director - Okaya Electric is optimistic about the gradual decline in electric scooter prices 

"Looking ahead, our evolving landscape maintains an optimistic outlook, envisioning a gradual decline in electric scooter prices as the market matures and technological advancements further refine production processes,” said Dr. Anshul Gupta. 

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