Indian Two Wheelers Depend on China Neodymium Motor Magnets

The Indian electric two wheeled vehicle market is accelerating its development. Thanks to strong FAME II subsidies and the entry of several ambitious startups, the sales in this market have doubled compared to before, becoming the world’s second largest market after China.


Situation of the Indian two wheeled vehicle market in 2022

In India, there are currently 28 companies that have established or are in the process of establishing manufacturing or assembly businesses for electric scooters/motorcycles (excluding rickshaws). Compared to the 12 companies announced by the Indian government in 2015 when the Faster Adoption and Manufacturing of Hybrid and Electric Vehicles Scheme was announced, the number of manufacturers has increased exponentially, but compared to the current manufacturers in Europe, it is still negligible.

Compared to 2017, the sales of electric scooters in India increased by 127% in 2018 and continued to grow by 22% in 2019, thanks to the new FAME II program launched by the Indian government on April 1, 2019. Unfortunately, due to the impact of Covid-19 in 2020, the entire Indian two wheeled vehicle market (including electric vehicles) has significantly decreased by 26%. Although it recovered by 123% in 2021, this sub market is still very small, accounting for only 1.2% of the entire industry and is one of the smaller sub markets in the world.

However, all of this changed in 2022, when the segment’s sales jumped to 652.643 (+347%), accounting for nearly 4.5% of the entire industry. The electric two wheeled vehicle market in India is currently the second largest market after China.

There are many reasons behind this sudden growth. The key factor is the launch of the FAME II subsidy program, which has encouraged the birth of multiple electric two wheeled vehicle startups and formulated ambitious plans for expansion.

Indian Two Wheelers Depend on China Neodymium Motor Magnets

Nowadays, FAME II ensures a subsidy of 10000 rupees (approximately $120, 860 RMB) per kilowatt hour for certified electric two wheelers. The launch of this subsidy plan has resulted in almost all models on sale being priced close to half of their previous selling price. In fact, over 95% of electric two-wheelers on Indian roads are low-speed electric scooters (less than 25 kilometers per hour) that do not require registration and license. Almost all electric scooters use lead-acid batteries to ensure low prices, but this also leads to high battery failure rates and short battery life becoming the main limiting factors besides government subsidies.

Looking at the Indian market, the top five electric two wheeled vehicle manufacturers are as follows: Firstly, Hero leads with sales of 126192, followed by Okinawa: 111390, Ola: 108705, Ampere: 69558, and TVS: 59165.

In terms of motorcycles, Hero ranked first with sales of approximately 5 million units (an increase of 4.8%), followed by Honda with sales of approximately 4.2 million units (an increase of 11.3%), and TVS Motor ranked third with sales of approximately 2.5 million units (an increase of 19.5%). Bajaj Auto ranked fourth with sales of approximately 1.6 million units (down 3.0%), while Suzuki ranked fifth with sales of 731934 units (up 18.7%).


Trends and data on two wheelers in India in 2023

After showing signs of recovery in 2022, the Indian motorcycle/scooter market has narrowed the gap with the Chinese market, consolidating its position as the world’s second largest, and is expected to achieve nearly double-digit growth in 2023.

The market has finally developed rapidly driven by the success of several new original equipment manufacturers specializing in electric scooters, breaking the dominant position of the top five traditional manufacturers and forcing them to invest in electric vehicles and new, more modern models.

However, global inflation and supply chain disruptions pose serious risks to recovery, considering that India is most sensitive to price impacts and domestic production accounts for 99.9% of domestic sales. After the government significantly increased incentive measures and the demand for electric vehicles became a new positive factor in the market, India has also begun to accelerate the process of electrification.

In 2022, the sales of two wheeled vehicles reached 16.2 million units (an increase of 13.2%), with a 20% surge in December. The data confirms that the electric vehicle market has finally begun to grow in 2022, with sales reaching 630000 units, an astonishing 511.5% increase. It is expected that by 2023, this market will leap to a scale of approximately 1 million vehicles.


The Indian government’s 2025 goals

Among the 20 cities with the most severe pollution in the world, India accounts for 15, and the environmental risks to population health are becoming increasingly serious. The government has almost underestimated the economic impact of new energy development policies so far. Now, in order to reduce carbon dioxide emissions and fuel imports, the Indian government is taking active action. Considering that nearly 60% of the country’s fuel consumption comes from scooters, the expert group (including representatives from local manufacturers) has seen the best way for India to quickly achieve electrification.

Their ultimate goal is to completely change the 150cc (over 90% of the current market) new Two-Wheelers by 2025, using 100% electric engines. In fact, sales are basically non-existent, with some testing and some fleet sales. The power of electric two wheeled vehicles will be driven by electric motors instead of fuel engines, and the rapid development of cost effective rare earth permanent magnet motors provides technical support for achieving rapid electrification. The achievement of this goal inevitably depends on China, which produces over 90% of the world’s Rare Earth Neodymium magnets.

There is currently no announced plan to fundamentally improve the national public and private infrastructure, or to remove some of the existing hundreds of millions of outdated two wheelers from the roads.

Considering that the current industry scale of 0-150cc scooters is close to 20 million vehicles per year, achieving 100% actual production within 5 years would be a huge cost for local manufacturers. Looking at the balance sheets of Bajaj and Hero, one can realize that they are really profitable. However, in any case, the government’s goal will force local manufacturers to make huge investments, and the Indian government will also introduce various forms of subsidies to reduce some of the costs for manufacturers (which have not yet been disclosed).

Post time: Dec-01-2023