Supply improvements and cost advantages expected to boost electric two-wheeler sales to 16-18% growth despite current slowdown.
04 Feb 2026 | 248 Views | By Shristi Ohri
India's electric two-wheeler sector is poised for a rebound next fiscal year, with growth expected to accelerate to 16-18% after moderating to 12-13% in the current fiscal, according to Crisil Ratings.
The current year's slowdown has been attributed to temporary disruptions in the supply of rare-earth magnets and the ...
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India's electric two-wheeler sector is poised for a rebound next fiscal year, with growth expected to accelerate to 16-18% after moderating to 12-13% in the current fiscal, according to Crisil Ratings.
The current year's slowdown has been attributed to temporary disruptions in the supply of rare-earth magnets and the impact of GST rationalization on internal combustion engine models. However, analysts project a recovery as supply conditions improve.
"The supply disruption caused by shortage of rare-earth magnets had weighed on E2W volumes around mid-year," said Anuj Sethi, Senior Director at Crisil Ratings. He noted that availability has begun to ease, with a gradual resumption of magnet inflows from China and initial diversification efforts by manufacturers.
The sector continues to benefit from strong vehicle economics. Electric two-wheelers maintain a significant advantage in running costs at approximately Rs 0.3 per kilometer compared to Rs 2.0-2.5 per kilometer for ICE vehicles, supporting adoption even as subsidies taper.
Market penetration is expected to rise, with E2Ws projected to account for around 7% of total two-wheeler volume by next fiscal, up from the current 5.5%. Scooters remain the primary driver, representing 90-95% of E2W volumes with approximately 15% EV penetration in the segment.
A notable shift is occurring in market dynamics. Legacy players with both ICE and E2W portfolios have increased their market share to 62% by January 2026 from 47% a year earlier, according to Poonam Upadhyay, Director at Crisil Ratings. Their stronger dealer networks and supplier ecosystems have enabled faster rollout and more consistent execution.
The analysis, covering 10 manufacturers representing approximately 85% of E2W volume, reveals divergent risk profiles. For legacy manufacturers, electrification remains a portfolio extension with E2Ws accounting for only 5-6% of volumes, limiting earnings volatility. In contrast, new-age EV-only players are incurring losses of Rs 25,000-35,000 per vehicle.
Looking ahead, sustained growth will depend on factors including urban mobility demand, broader adoption beyond early adopters, cost reduction and localization efforts, subsidy policy evolution, raw material stability, and continued funding access for newer players.