India’s E-Two Wheeler Penetration Rises to 6.6%, Seen Hitting 8–10% by FY27: Study

India Ratings and Research (Ind-Ra) believes India’s electric two-wheeler (e-2W) market has entered a phase of structural acceleration, led by e-scooters and underpinned by strong economic and operational advantages. The shift is being driven by a compelling total cost of ownership (TCO) edge, deeper participation from original equipment manufacturers (OEMs), and rising electrification across fleet segments. Ind-Ra’s research highlights a sharp surge in e-2W penetration, rising to nearly 6.6% in FY26 from 1.8% in FY22, with the share projected to climb further to 8%–10% by FY27. This growth outlook holds despite near-term moderation following GST rationalisation for internal combustion engine (ICE) vehicles. Photograph: (Indi-Ra) Additional tailwinds—including persistently volatile fuel prices, declining battery costs, and expanding product portfolios from incumbent OEMs—continue to strengthen the medium-term outlook. From a credit perspective, while profitability remains under pressure, strong balance sheet support from large OEM parents and improving scale help mitigate near-term risks for rated entities. “We believe the e-2W opportunity is transitioning from a policy-led story to a scale-led one. While near-term profitability remains uneven, capital-backed OEMs with diversified portfolios, strong distribution, and balance sheet support are better positioned to absorb EV investments and emerge stronger as volumes scale. The key monitorables are execution discipline, localisation progress, and the pace at which EV losses narrow relative to ICE cash flows,” said Shruti Saboo , Director, Corporate Ratings, Ind-Ra . E-2W Adoption Seen Rising; Pre-Buying Ahead of July 2026 Deadline Ind-Ra expects the e-2W adoption curve to steepen as the operating cost advantage over ICE vehicles remains decisive, even after GST cuts narrowed upfront price gaps. Running costs for e-scooters, at Rs. 0.2–0.4 per km, remain significantly lower than Rs. 2–3 per km for ICE vehicles, reinforcing a strong TCO advantage. Although penetration growth moderated in FY26 following the September 2025 GST cut on ICE vehicles (28% to 18%), Ind-Ra expects underlying demand drivers to reassert in FY27. Potential pre-buying ahead of the PM E-Drive subsidy expiry in July 2026 could also provide a short-term demand boost. Commercial Fleets Key to E-2W Growth; BaaS Cuts Costs 35–40% Commercial and fleet adoption is emerging as a critical growth driver, particularly for e-scooters, as logistics, quick-commerce, and shared mobility players prioritise fuel savings and lower maintenance costs. While commercial fleets account for just 5%–7% of overall two-wheeler registrations, EV penetration within fleets is significantly higher at 9%–11%, compared to around 6% for the broader market. Policy mandates—such as Delhi-NCR’s requirement for EV/CNG fleets from January 2026—along with corporate sustainability commitments, are accelerating this shift. New ownership models, including Battery-as-a-Service (BaaS) and expanded battery-swapping infrastructure, are reducing upfront costs by 35%–40% while addressing downtime concerns, improving adoption economics for high-utilisation users. OEMs Overtake Start-Ups, Take 72% Share of E-2W Market Ind-Ra points to a clear structural shift from start-ups to incumbent OEM-led growth in the e-2W market. Established players such as TVS Motor Company Limited , Bajaj Auto Limited , Hero MotoCorp Limited , and Ather Energy Limited now account for nearly 72% of e-2W registrations, up sharply from 27% in FY23. Strong brand equity, extensive dealer networks, and robust after-sales capabilities have significantly lowered adoption barriers. Aggressive multi-model launches across battery sizes, ranges, and price points have also positioned e-2Ws firmly within the mass-to-premium commuter segment, improving funding access and credit stability. PLI Push to Anchor EV Growth as Subsidies Gradually Ease Policy support continues to underpin demand through lower GST, state-level incentives, and the PM E-Drive scheme. However, Ind-Ra notes that current incentives (INR2,500/kWh, capped at INR5,000 per vehicle) are materially lower than FAME-II benefits and are being phased out gradually, reducing the risk of abrupt demand shocks. Over the medium term, the Production-Linked Incentive ( PLI ) scheme and phased manufacturing mandates are expected to strengthen localisation and supply-chain resilience. Growth, however, is expected to increasingly hinge on cost competitiveness and scale economics rather than subsidies. Battery Imports, Infra Gaps Continue to Hinder EV Adoption Despite robust demand drivers, structural challenges persist. Dependence on imported batteries and critical minerals continues to expose the sector to geopolitical and currency risks. While investments in domestic cell manufacturing and power electronics are underway, tangible benefits are likely to materialise over the next few years. Infrastructure gaps also remain, with charging and battery-swapping networks still uneven beyond major urban centres. Additionally, motorcycles—which account for 55%–60% of total two-wheeler volumes—continue to see low EV penetration due to engineering complexity, limited model availability, and weaker unit economics. As a result, e-2W adoption is expected to remain skewed towards urban scooters in the near to medium term. E-2W Margins Lag ICE, But Scale to Drive Break-Even in 2–3 Years Ind-Ra notes that most e-2W manufacturers operate with lower gross margins (18%–20%) compared to ICE peers (30%–35%), while continuing to report EBITDA losses due to high fixed costs, marketing spend, and warranty provisions. However, the agency expects EBITDA to break even over the next two to three years, supported by scale benefits and localisation. A significant share of Ind-Ra’s rated e-2W exposure remains either net cash positive or backed by financially strong parent OEMs, providing balance sheet comfort. Recent rating actions reflect Stable to Positive outlooks, driven by strong parentage, liquidity buffers, and improving diversification, despite near-term profitability pressures.