Electric two-wheelers will see volume growth of 16 to 18 percent in FY28 as rare earth supply declines: Crisil Ratings

The easing of rare earth supply is expected to push volume growth of electric two-wheelers in India to 16-18 per cent next fiscal after falling to 12-13 per cent in the current fiscal due to supply chain constraints, Crisil Ratings said. This fiscal growth in electric two-wheelers (E2W) is expected to moderate due to temporary disruptions in rare earth magnet supply and rationalization of goods and services tax (GST) on internal combustion engine (ICE) models, Crisil Ratings said in a statement.

In the previous fiscal, E2W volume growth was 22 percent, the report said.

“The supply disruption caused by the shortage of rare earth magnets negatively impacted E2W volumes around mid-year. As availability started to decline, coinciding with the GST-led price revision of ICE models, OEMs relied on discounts and introduced cheaper electric models to narrow the price gap between ICE-EVs,” said Crisil Ratings Senior Director Anuj Sethi.While this has supported a recovery in volumes in recent months, the impact of the previous supply disruption is expected to limit full-year growth to 12-13 percent, he added.

“As supply conditions improve, following a gradual resumption of magnet inflows from China alongside initial steps by OEMs to diversify sourcing, growth is expected to accelerate again to 16-18 percent next fiscal, assuming stable availability of rare earth magnets,” Sethi said.

According to Crisil Ratings, the expected growth of 16 to 18 percent is supported by a structural advantage in cost of ownership. However, competitive pressures are creating divergent risk profiles, with older players being better insulated, while new players still suffer from weak unit vehicle economics. “An analysis of ten Original Equipment Manufacturers (OEMs), consisting of four legacy players with ICE and E2W portfolios and six new, EV players, indicates this,” the report said, adding that these OEMs account for approximately 85 percent of E2W volume.

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

With incentives being phased out and the pace of decline in battery costs (which account for 35 to 40 percent of total costs) slowing after a sharp correction in the last two Budgets, Crisil Ratings says price-driven competition has diminished.

Reliability and service are becoming increasingly important differentiators, and this is where legacy OEMs currently rank highly, the company said.

“The market share of older players has increased to 62 percent in January 2026 from 47 percent a year earlier, clearly outperforming new players,” said Poonam Upadhyay, director, Crisil Ratings.

The market share gains reflect their stronger dealer reach and supplier ecosystems, in addition to an expanded range of entry- and mid-price electric models that enable faster rollout, wider availability and more consistent execution, Upadhyay said. PTI