Subsidy halt, price rise and supply-chain bottlenecks hit EV sales in 2023

After a surge in 2022, the retail market share and sales of electric vehicles began declining in January 2023. Industry players say the dip in sales is due to the halt of FAME-II (Faster Adoption and Manufacturing of Hybrid and Electric Vehicles) subsidies, rising cost of EVs, and supply chain constraints.

The dip comes after sales hit an all-time monthly high of 119,483 units in November. EV registration in January declined over 15 per cent to 100,852 units. January sales are lower than the December figure of 102,422 units, shows data on the Vahan portal of the Ministry of Road Transport and Highways.

According to data shared by the Federation of Automobile Dealers Associations (FADA), the EV market share declined across categories. “In two-wheelers it came down from 5.7 per cent in December to 5 per cent in January. Similarly, three-wheeler share dropped from 53.3 per cent to 50 per cent, passenger vehicles from 1.3 per cent to 1 per cent and commercial vehicles from 0.3 per cent to 0.2 per cent,” said Manish Raj Singhania, President, FADA. The dip comes despite the government's push towards green mobility. It had doubled the budgetary allocation for the FAME scheme and extended customs duty exemption to the manufacture of lithium-ion batteries.

In terms of retail sales data shared by FADA, on a year-on-year basis, the numbers more than doubled in electric two-wheelers to 64,363 units (115 per cent) this January, but were flat month-on-month. Ola Electric (18,245 units), TVS Motor (10,404), Ather Energy (9,139) and Hero Electric (6,393) were the top players during the month. Three-wheeler sales declined by three per cent sequentially to 32,911 units but were up 73 per cent YoY.

Interestingly, electric commercial vehicle sales were down 15 per from January 2022 and 23 per cent from December 2022. Passenger vehicle sales were up 116 per cent YoY and 11 per cent MoM. Though market leader Tata Motors saw a 73 per cent YoY increase, it saw a 17 per cent dip sequentially.

“EV penetration and volume have largely plateaued across segments in recent months. Though the reasons are varied, we believe for two-wheelers, it is the implementation of stricter norms; for three-wheelers, it is the absence of the market leader; and for passenger vehicles, it is the lack of a wide range of model offerings,” said a report by equity research firm BNP Paribas.

Based on industry data, the sales of largest barred OEMs — Okinawa Scooters and Hero Electric — declined 51 per cent and 29 per cent, respectively, since November. Dealers of both electric two-wheeler manufacturers claim that the decline in sales is due to price hikes and longer waiting periods. Majority of the dealers who are facing the brunt of the Centre’s decisions are from Okinawa Scooters and Hero Electric as they both contribute to 83 per cent of the total 243,310 vehicles sold by the 17 excluded OEMs and 20 per cent in the total EVs sold in calendar year 2022. Subsidies of both the OEMs were halted  in September.

The halt on FAME subsidies led to an increase in prices of EVs. A majority of EV players have increased the prices of their line-up in proportion to the subsidies they had received earlier, or by at least 20 per cent of the subsidy amount. “The prices of Okinawa’s electric scooters have seen an increase of Rs 13,000- Rs 40,000,” said an Okinawa dealer in Gurugram.  Of the 64 OEMs registered under FAME II so far, at least 17 have been debarred from seeking subsidies under the scheme.