Domestic EV segment to account for 14-16% of new three-wheeler sales by FY25: ICRA

The country's electric vehicles segment is likely to account for 14% to 16% of new three-wheeler sales (excluding rickshaws) by FY25, driven by the government’s support and favourable cost economics, according to rating agency ICRA. The three-wheeler sales (excluding e-rickshaws) in the electric vehicle segment are estimated to rise to 35% to 40% by FY30 as the product gains more acceptance and financing-related challenges subside.

"e3Ws (including e-rickshaws) have been at the forefront of India's electrification journey, being among the early adopters. In 10 months of FY2023, the 3Ws (excluding rickshaws) recorded an electric penetration of 8%, compared to 4% for two-wheelers and 1% for passenger vehicles. While sales dropped substantially in the aftermath of the pandemic, they rebounded at a healthy rate in the current fiscal year, surpassing pre-pandemic levels by a solid margin," says Kinjal Shah, Vice President and Co-group Head, Corporate Ratings, ICRA.

"A favourable regulatory environment with central and state government subsidies to lower capital costs, as well as reduction or waiver of registration fees, road taxes, and permit requirements, continues to be supportive of e-auto adoption. Coupled with the inherently lower running costs, this results in a much lower (40-45%) total cost of ownership (TCO) than conventional diesel or CNG 3Ws, making the conversion to e-autos an attractive proposition," adds Shah.

In the past few years, the unorganised e-rickshaws segment has dominated the e-three-wheelers market, accounting for 90% of e-three-wheeler sales in the country. The rating agency has attributed electric three-wheelers to gaining traction and thriving over the last five to seven years owing to the government's focus on cleaner means of transportation (particularly for commercial applications), lower upfront expenses and operational savings, as well as minimal compliance requirements.

According to the rating agency, most e-three-wheeler dealers have seen double-digit growth in the last two years. This is due to a number of factors, including lower operating costs, exemptions from registration and road taxes, and higher demand for last-mile connectivity. However, despite an increase in demand, the e-three-wheelers segment has witnessed tepid sales limited by a lack of financing options with the loans offered to be at high-interest rates, poor loan-to-value ratios, and shorter EMI tenures.

"Overall, the outlook for e3W (including e-rickshaws) remains favourable in the medium to long term, due to growing demand for electric vehicles as a result of factors such as environmental concerns and higher CNG and diesel prices," says Shah.

"Furthermore, several cities are increasingly limiting the registration, admission, and usage of polluting vehicles, and as a result, e3Ws are expected to gain further popularity. Additionally, lower TCO, as well as the government's push for net zero targets and support from government incentives, are expected to propel e-auto sales in the medium to long term. With incentives under the FAME-II scheme set to expire in a year’s time, there is a likelihood of sales pace gaining further momentum in the upcoming fiscal," she adds.