Electric Two-Wheelers Poised for Strong Recovery in FY28 as Supply Chain Constraints Ease
According to a recent analysis by Crisil Ratings, the electric two-wheeler (E2W) market in India is expected to witness a significant rebound in volume growth, reaching 16-18 per cent in the fiscal year 2028. This optimistic projection comes after a period of moderation, with growth anticipated to slow to 12-13 per cent in the current fiscal year due to ongoing supply chain disruptions.
Supply Chain Challenges and Market Dynamics
The current fiscal year has seen E2W growth tempered by temporary disruptions in the supply of rare-earth magnets, which are crucial components in electric vehicles. Additionally, the rationalisation of Goods and Services Tax (GST) on internal combustion engine (ICE) models has introduced competitive pressures. In the previous fiscal year, E2W volume growth stood at a robust 22 per cent, highlighting the market's potential when supply conditions are favourable.
Anuj Sethi, Senior Director at Crisil Ratings, explained, "The shortage of rare-earth magnets significantly impacted E2W volumes around mid-year. As availability began to improve, coinciding with GST-led price revisions in ICE models, original equipment manufacturers (OEMs) responded by offering discounts and introducing lower-priced electric models to narrow the price gap between ICE and electric vehicles."
While these measures have supported a recovery in recent months, the earlier supply disruption is expected to limit full-year growth to 12-13 per cent. However, with supply conditions showing signs of improvement, growth is projected to re-accelerate in the coming fiscal year.
Factors Driving Future Growth
The anticipated growth of 16-18 per cent in FY28 is underpinned by several key factors. Firstly, the gradual resumption of magnet inflows from China, coupled with initial steps by OEMs to diversify their sourcing strategies, is expected to stabilise rare-earth supply. This improvement in availability is crucial for sustaining production and meeting rising demand.
Sethi added, "Assuming stable availability of rare-earth magnets, growth is expected to re-accelerate to 16-18 per cent next fiscal. This recovery is further supported by a structural ownership-cost advantage that continues to favour electric two-wheelers."
Despite GST rate cuts reducing the purchase cost of ICE vehicles, running costs remain significantly lower for E2Ws, at approximately 3 paisa per kilometre compared to ₹2-2.5 per kilometre for ICE models. This economic advantage ensures that E2Ws maintain a lower total cost of ownership, even as government subsidies are gradually phased out.
Competitive Landscape and Market Share Shifts
The E2W market is characterised by increasing competitive pressures, which have created divergent risk profiles among players. Legacy OEMs, with their established ICE and E2W portfolios, are better insulated against market fluctuations, while new-age, EV-only players continue to face challenges related to unit-vehicle economics.
An analysis of 10 OEMs, accounting for about 85 per cent of E2W volumes, reveals that legacy players have significantly increased their market share. Poonam Upadhyay, Director at Crisil Ratings, noted, "The market share of legacy players has risen to 62 per cent by January 2026, up from 47 per cent a year earlier, clearly outperforming new-age players."
This gain in market share can be attributed to several factors, including stronger dealer networks, robust supplier ecosystems, and an expanded range of entry-level and mid-priced electric models. These advantages enable faster rollout, wider availability, and more consistent execution, giving legacy players a competitive edge.
Evolving Differentiators in the E2W Market
As incentives are phased out and the pace of decline in battery costs slows, price-led competition has narrowed. In this evolving landscape, reliability and service are becoming increasingly important differentiators. Legacy OEMs are currently scoring high in these areas, further strengthening their market position.
Upadhyay emphasised, "The share gain reflects their stronger dealer reach and supplier ecosystems, alongside an expanded range of electric models that enable faster rollout and wider availability."
With supply conditions improving and competitive dynamics shifting, the electric two-wheeler market in India is poised for a robust recovery in FY28, driven by structural advantages and strategic adaptations by key players.
