MUMBAI, 18th April 2025
Even though low total cost of ownership will continue to boost electric two-wheeler manufacturers’ market presence, the road to profitability for this sector remains long, according to the most recent CRISIL study.
The ratings agency’s report speaks of escalating competition that is likely to result in operating losses, with original equipment manufacturers (OEMs) expected to incur higher cash expenditures to secure a larger share due to established internal combustion engine (ICE) expansion efforts, making life more difficult for EV startups, who will continue to face challenges.
To address this challenge, the CRISIL report notes that while legacy manufacturers can leverage robust cash flows from their ICE operations, pure e2W companies will need to depend on incremental equity financing in the medium term.
Anand Kulkarni, Director at Crisil Ratings Ltd., stated, “The increasing competition and emphasis on market share are extending the break-even timeline for e2W companies. Some may require 2-3 years to achieve EBITDA breakeven at the current growth rate of the industry. We project that the average EBITDA loss per vehicle for pure e2W manufacturers will exceed Rs 20,000-30,000 in fiscal 2025. Although the industry’s operating losses have diminished over time, attaining economies of scale is essential for enhancing profitability.”
The e2W sector has been lowering prices to boost sales volumes, influenced by two main factors. First, manufacturers are introducing more affordable models equipped with smaller battery packs, which has reduced the upfront cost gap with ICE vehicles to 5-10%. Second, approximately 20% of the decrease in battery prices in fiscal 2025 has been transferred to consumers.
The long-term recovery trajectory suggests that the stabilization of battery prices is expected to remain within a certain range, thereby supporting the industry’s cost structure. Additionally, production-linked incentive programs for the automotive sector and battery manufacturing will assist manufacturers in improving profitability as sales volumes increase.
Research conducted by India’s foremost credit rating agency indicates that competition will propel industry volume growth to exceed 25% in the current fiscal year, following the achievement of over one million units (~6% of the total two-wheeler market) in fiscal 2025. This growth is supported by an increasing variety of models and the expanded distribution networks of established players.
The advantageous cost structure of electric two-wheelers (e2Ws) compared to internal combustion engine (ICE) variants will facilitate growth, even as government incentives begin to decline.
An analysis of manufacturers responsible for more than 80% of e2W sales volume in fiscal 2025 supports this outlook. The market share of e2W volumes held by legacy manufacturers rose to approximately 45% in fiscal 2025, up from just 15% in fiscal 2023, attributed to their strong brand reputation and well-established distribution channels. In fiscal 2026, two additional legacy manufacturers are set to launch e2Ws, which is anticipated to intensify competition.
Currently, pure e2W manufacturers possess sufficient liquidity to sustain their operations despite ongoing losses. However, if these losses extend beyond a few years, they may need to seek additional equity funding. In contrast, legacy manufacturers benefit from robust profitability in their ICE product lines, which can offset losses in the e2W sector. Since e2W revenue constitutes only about 5-6% of their total income, these losses are unlikely to significantly impact their overall profitability.
Nonetheless, competition will be crucial for driving overall industry volume growth and increasing e2W penetration. Over the medium term, pure e2W manufacturers are expected to continue expanding their dealership networks, while legacy manufacturers will utilize their established nationwide presence to penetrate less developed markets. These dynamics are likely to enhance consumer awareness and promote further adoption of e2Ws, thereby supporting volume growth in the current fiscal year, as noted by Crisil.
Nitin Bansal, Associate Director at Crisil Ratings Ltd, stated that a favorable total cost of ownership (TCO) will significantly contribute to industry growth in the medium term. This fiscal year, the TCO for electric two-wheelers (e2Ws) is anticipated to be 15-20% lower than that of internal combustion engine (ICE) models, even with a reduction in subsidies.
The operating cost for e2Ws is projected to be 15-20 paise per kilometer, in contrast to Rs 2.0-2.25 per kilometer for standard petrol models, thereby enhancing the cost-effectiveness of e2Ws over the lifespan of the vehicle.
