InvestorQ : Why are the electrical two wheeler seeing a slowdown in growth?
Tisha Malhotra made post

Why are the electrical two wheeler seeing a slowdown in growth?

Tisha Malhotra answered.
4 weeks ago

The first signs of a demand contraction and supply chain constraint in the electric 2 wheeler space were visible when Hero Moto decided to put off the launch of its 2-wheeler, Vida. The reason cited by Hero Motor at that point was that on the one hand, there were serious supply chain issues and on the other hand, there have been serious safety concerns. This has sort of forced the manufacturers of 2-wheeler EVs to reassess their products

One of the best gauges of EV two wheeler growth is the registrations on a monthly basis. This is normally done on the government owned VAHAN portal. If you look at May 2022, then the registration of electric two-wheelers fell by 20% to 39,339 units on a sequential basis. However the general feel in the market is still that the slowdown is temporary in nature and most of these issues should get resolved on its own.

Manufacturers of electric two wheelers are cutting output for pragmatic reasons. For example, there is the supply chain disruptions and safety concerns over EV batteries. In the recent past, there have been several instances of two-wheelers catching fire and even Mr. Nitin Gadkari has warned EV companies not to compromise on safety aspects. Most of the two wheeler makers are now looking to use this gap to reassess their strategies.

There is also the demand factor. For example, a number of smarter customers are opting to delay purchases. They would rather wait for greater clarity from the government and the OEMs on new battery safety rules. Big names like Hero Electric had to shut production for more than a month to tide over the microchip crisis. The only risk is that while the supply chain issues will be rectified, it will come back to haunt once again.

Some of the fall in registrations are staggering on a MOM basis. For example, Ola Electric saw registrations fall 28%, TVS Motors 69%, Hero Electric 57% and Okinawa 16% over April. For now, the EVs are only a small part 2-wheeler registrations in India. So, it is a combination of the supply chain constraints and the safety issues. Both are not going away in a hurry. The next few months may be critical.