Two wheeler EV sales slowdown; is it for real

Two wheeler EV sales slowdown

by 5paisa Research Team Last Updated: Jun 07, 2022, 09:53 AM IST

Earlier this month, when Hero Moto decided to put off the launch of its 2-wheeler, Vida, it was a classic example of all the challenges faced by the 2-wheeler EV space. There have been supply chain disruptions and to top it there have been safety concerns.

All these factors have compelled the manufacturers of 2-wheeler EVs to reassess their products and their plans as well as their volume projections. Above all, even the 2-wheeler EV registrations saw a sharp fall amidst tepid sentiments in the market.

One of the very reliable high frequency indicator of demand for 2-wheeler EVs is the registrations on the VAHAN portal. The registration of electric two-wheelers actually fell by 20% to 39,339 units in May 2022 as compared to the April 2022 numbers.

The sequential fall of 20% is a rather serious fall. However, for now most of the analysts are veering more towards optimism. They believe that this slowdown is more temporary in nature and over the next few months most of these issues should be automatically addressed.

However, the reality is that many manufacturers of EVs have been forced to cut down on production. There are several reasons for the same. For instance, supply chain disruptions and safety concerns over EV batteries are two factors that has forced a tapering in demand and in supply.

There have been several instances of two-wheelers catching fire and no less a person than Nitin Gadkari has warned EV companies not to compromise on safety aspects. All these strictures mean that production delays have become the norm.

One of the reasons for the dip in demand is that a number of customers are opting to delay purchases. For now, they await clarity from the government and the original equipment manufacturers (OEMs) on the subject of new battery safety rules.

That has forced a lot of potential buyers to put off purchases till there is regulatory clarify on this front. This has resulted in one of the top players in terms of EV registrations, Hero Electric, sliding to the fifth place. Production had to be curtained due to supply chain issues.

The crux of the problem has been highlighted by Hero Electric. In fact, the supply chain issue were so serious that they had to shut production till 15th May. The supply chain crisis has just been overcome, but there is no guarantee that it will not recur.
 

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In fact, it is very likely it may recur. It was planning to reach a capacity of 2 lakh units but that still looks some time away amid all these supply chain issues. 

There were some electric EV players like Bajaj Auto, Revolt Motors and Ather Energy that showed growth in sales in May. Other than that it was a sea of red. For example, Ola Electric saw registrations fall by 28%, TVS Motors saw registrations fall by 69%, Hero Electric by 57% and Okinawa by 16% over April. The one reason for this sharp fall was the supply chain constraints created by the microchip shortage and the arrival of other inputs.

EVs are still a small part of the overall 2-wheeler registrations in India. In April 2022 it was 4.1% but fell sharply to 3.2% in May 2022. For now, it looks like the sole reason for this fall in 2-wheeler EV output in May was the supply chain constraints. However, there is also the safety issue and the sooner the safety norms are defined the better.

For India, the 2-wheeler EVs are still work in progress. The next few months may be tough amid the supply chain bottlenecks. In the longer run, it is surely an idea whose time has come.

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