The FAME-II scheme subsidy reduction and subsequent price increases in existing models will impact the growth of two-wheeler electric vehicles.

According to marketing rating agency CRISIL, the volume growth of electric two-wheelers (e2Ws) is predicted to slow to 25% this fiscal. Its units nearly tripled to 7.3 lakh last fiscal.

On a positive note, e2W manufacturers are adapting to the new subsidy regime. They are optimizing their product line-up. They are also releasing more affordable, smaller battery variants.

CRISIL said that three factors will accelerate the adoption of e2Ws over the medium term. These are:

• Favorable total cost of ownership (TCO)
• Anticipated initial acquisition cost reductions
• Increased component localization

Naveen Vaidyanathan, Director, CRISIL, said, “Despite the subsidy cut, industry growth continues to be supported by fundamentally favorable economics of scale for e2Ws. The TCO is estimated to be ~20% lower for e2Ws. This is compared with petrol variants under the current subsidy regime; and ~32% lower under the earlier subsidy regime. The average running cost of 25-30 paise per km compared with Rs 2-2.25 per km for a petrol vehicle. This makes a difference over the life of the two-wheeler.”

Pushan Sharma, Director, Research, CRISIL Market Intelligence and Analytics, said, “Newer models will enhance affordability by lowering the upfront cost by 10-15%. These steps by e2W manufacturers and the expected festive-season spurt would support growth in the second half, albeit on a high base, leading to an overall ~25% growth in e2Ws this fiscal.”