Electric 2-wheeler volume to see 16-18% growth in FY27 as rare-earth supply eases: Crisil Ratings

Electric two-wheeler (E2W) volumes in India are expected to rebound to 16–18% next fiscal as supply constraints of rare-earth magnets ease, Crisil Ratings said on Wednesday.

The electric two-wheeler growth volume growth in the previous fiscal was at 22% but moderated to 12–13% in the current year due to temporary disruptions in rare-earth magnet supplies.

The growth was also impacted by GST-led price rationalisation on internal combustion engine (ICE) models.

The rating agency said structural advantages in total cost of ownership will continue to support E2W adoption, even as competition intensifies and risk profiles diverge between legacy and new-age manufacturers.

“The supply disruption caused by shortage of rare-earth magnets had weighed on E2W volumes around mid-year. As availability began to ease, coinciding with the GST-led price revision in ICE models, OEMs relied on discounting and introduced lower-priced electric models to narrow the ICE-EV price gap,” said Anuj Sethi, Senior Director, Crisil Ratings.

While this supported a recovery in recent months, the impact of earlier disruptions is expected to cap full-year growth at 12–13%, Sethi said.

He also added that gradual resumption of magnet inflows from China and initial efforts to diversify sourcing should help accelerate growth to 16–18% next fiscal.

Crisil Ratings noted that although GST cuts have reduced purchase costs of ICE vehicles, E2Ws retain a strong running-cost advantage at around 30 paise per km versus ₹2.0–2.5 per km for ICE models.

E2Ws are projected to account for about 7% of total two-wheeler volumes by next fiscal, up from roughly 5.5% currently.

With incentives being phased out and the pace of decline in battery cost (which accounts for 35-40 per cent of total costs) slowing after a sharp correction over the past two fiscals, Crisil Ratings said price-led competition has narrowed.

Increasingly, reliability and service are becoming more important differentiators, and this is where legacy OEMs are scoring high at present, it added.

"The market share of legacy players has increased to 62% by January 2026 from 47% a year earlier, clearly outperforming new-age players," Crisil Ratings Director, Poonam Upadhyay, said.

She said electrification remains a portfolio extension for legacy OEMs, with E2Ws accounting for 5–6% of volumes, limiting earnings volatility. On the other hand, new-age players are incurring Ebitda losses of ₹25,000–35,000 per vehicle, which are currently being supported by investor capital.