Reduced tax gap and rare‑earth magnet shortages weigh on electric two‑wheeler adoption.
29 Dec 2025 | 4463 Views | By Kiran Murali & Ketan Thakkar
The two-wheeler market has been seen as an early and faster adopter of electric vehicles in the country, especially when compared with other passenger vehicles. In 2025, electric two-wheeler sales continued to grow at a steady pace and managed to hit double-digit levels for the year. However, growth has slowed ...
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The two-wheeler market has been seen as an early and faster adopter of electric vehicles in the country, especially when compared with other passenger vehicles. In 2025, electric two-wheeler sales continued to grow at a steady pace and managed to hit double-digit levels for the year. However, growth has slowed significantly as the market expands.
Electric two-wheeler registration between January and November this year has grown 10% to 1.18 million units. For the full calendar year, electric two-wheeler sales are likely to be around 1.30 million units, which could represent a growth of around 13%. In 2024, electric two-wheeler sales growth was over 30%.
One of the major trends that stood out in the EV market was that the EV penetration in the two-wheeler market remained mostly flat at around 6%. Industry players point to several reasons such as the reduced-price difference between EV and ICE models after GST 2.0, and the impact of the shortage of heavy rare earth magnets on production and supply of some manufacturers for a brief period.
EV adoption in India continues to be economics-led, with buyers considering it due to its total cost of ownership benefits, not for climate-led or net-zero emission reasons. The GST 2.0, which was rolled out in September, reduced the GST on ICE bikes and scooters up to 350cc to 18%, while the GST on EVs has been retained at 5%.
In the past, the gap between the 28% tax on ICE two-wheelers and the 5% tax on EVs made switching to EVs attractive. This tax difference, along with government subsidies, helped make electric scooters cost about the same as traditional ones.
However, now the tax on ICE two-wheelers has been cut to 18%, while EVs stay at 5%. This smaller tax gap, combined with reducing government incentives, is now making it harder for electric scooters to compete on price, according to industry experts. At the beginning of the year, penetration in this year was estimated in the range of 7-8%.
A temporary supply disruption in heavy rare-earth magnets from China affected production for several OEMs - particularly Bajaj Auto - exposing industry vulnerabilities at a time of rising demand for electrification. Industry players noted that the magnet shortage was a major bottleneck in the middle of the year and without it, EV sales adoption would have been higher.
“EV penetration is expected to rise from around 6% in FY25 to around 10% by FY28, driven by improving total cost of ownership, a wider range of product offerings, and rising aspirational appeal,” said Raghunandhan NL, director at Nuvama Institutional Equities.
Legacy OEMs Take Centre Stage
The year also reshaped the EV competitive landscape, with legacy ICE manufacturers strengthening their hold on market share and outpacing startups. Legacy players – TVS Motor Company, Bajaj Auto and Hero MotoCorp - together now hold 53% of the electric two-wheeler market, up from 39% in 2024.
Ola Electric, which was the market leader in 2024, ceded its leadership this year to legacy players and Ather as the automaker’s registrations more than halved. This resulted in sharp market share erosion to less than 16% from around 37% in 2024. Ola’s decline was one of the key factors behind the leadership shake-up, allowing legacy OEMs control the market.
While TVS Motor, Bajaj Auto and Hero MotoCorp rode on compelling products, already established retail footprint and trust factor, Ather Energy is gradually catching up as it more than doubled its retail footprint. During January-November, TVS Motor had a market share of 23.1%, followed by Bajaj Auto at 21.2%. Ather Energy’s market share jumped to 15.5% from 10.8%, and Hero MotoCorp’s Vida doubled its market share to 8% from 4%.
Interestingly, the Japanese players - Honda and Suzuki - appear to be taking a cautious route in the electric two-wheeler space. They were the last among the major legacy manufacturers to enter the EV scooter market and their rollout strategy remains deliberately measured.
Honda introduced two models this year - the Activa e, featuring a swappable battery system, and the QC1, while Suzuki introduced the electric version of its popular Access scooter. SIAM production data shows that both Honda and Suzuki have been manufacturing electric two-wheelers since August.