Electric 2-wheelers to see 16-18% volume growth in FY28 as rare-earth supply eases: Crisil Ratings

The easing of rare-earth supply is expected to drive electric two-wheeler volume growth in India to 16-18 per cent next fiscal after moderating to 12-13 per cent in the ongoing fiscal due to supply chain constraints, according to Crisil Ratings.

This fiscal, the electric two-wheeler (E2W) growth is expected to moderate due to temporary disruptions in the supply of rare-earth magnets and the goods and services tax (GST) rationalisation on internal combustion engine (ICE) models, Crisil Ratings said in a statement.

In the previous fiscal, E2W volume growth was at 22 per cent, it added.

"The supply disruption caused by the 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," Crisil Ratings Senior Director Anuj Sethi said.

While this has supported a recovery in volumes in recent months, the impact of the earlier supply disruption is expected to limit full-year growth to 12-13 per cent, he added.

"With supply conditions improving, reflecting a gradual resumption of inflow of magnets from China alongside initial steps by OEMs to diversify sourcing, growth is expected to re-accelerate to 16-18 per cent next fiscal, assuming stable availability of rare-earth magnets," Sethi said.

Crisil Ratings said the expected growth of 16-18 per cent is supported by a structural ownership-cost advantage. However, competitive pressure is creating divergent risk profiles, with legacy players better insulated, while new-age players continue to face weak unit-vehicle economics.

"An analysis of 10 original equipment manufacturers (OEMs), comprising four legacy players with ICE and E2W portfolios and six new-age, EV-only players, indicates as much," it said, adding these OEMs account for about 85 per cent of the E2W volume.

E2W adoption continues to be supported by strong vehicle economics. While GST rate cuts have reduced the purchase cost of ICE vehicles, running costs favour E2Ws, at about 3 paisa/km versus Rs 2-2.5/km for ICE, continuing their advantage in total cost of ownership even as subsidies taper, it said.

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 per cent by January 2026 from 47 per cent a year earlier, clearly outperforming new-age players," Crisil Ratings Director, Poonam Upadhyay, said.

The share gain reflects their stronger dealer reach and supplier ecosystems, alongside an expanded range of entry-level and mid-priced electric models that enable faster rollout, wider availability, and more consistent execution, Upadhyay noted.