Starting today, in a three-part weekly series, we look at the InsightEV Indian market two-wheeler forecast and the reason why we keep our E2W penetration forecast at modest levels over the next five-year horizon. Part two of this series will be published on 29th April, and part three on 6th May.
March 2026 was epochal for the Indian E2W market. E2W penetration hit 9.79%, the highest ever. Nearly 191,000 electric two-wheelers found new homes.
Everyone declared victory, even Ola Electric.
Then you look at why it happened. Customers were rushing ahead of an expected PM E-Drive subsidy expiry. There was an ongoing war is an ongoing war, and it’s spooking people about fuel prices. Call it what it is — fear, not conviction.
Fear is a terrible foundation for a sustained bull market.
The right foundation is in healthy, organic demand, and an equilibrium where all market participants – manufacturers, suppliers, government, distributors, and the customers – feel a win-win.
We don’t feel that in the air.
No amount of made-up jubilation can mask the fact that the Indian E2W market is bumping up against structural hurdles. The industry has been growing, but the growth has been uneven, subsidy-dependent, and largely unprofitable for nearly everyone involved.
Until that changes, there won’t be a rapid, self-sustaining penetration.
Dream of Californication…
…sang Anthony Kiedis of Red Hot Chili Peppers…
Californication, climate consciousness in our case, sounds alluring, but it’s a costly vanity. The very core of doing a mobility business, even those masked as environment-tech, is to make money.
Let us remind you: India’s major two-wheeler manufacturers — Hero MotoCorp, TVS Motor, Bajaj Auto, and Royal Enfield — are publicly traded companies. The Japanese players are traded in their homeland. All of them are answerable to shareholders, and shareholders do not particularly enjoy subsidising a transition. They want to hold you accountable on a quarterly basis.
This is in stark contrast to Softbank or a Temasek backing a startup to change the very thread of the industry so that someday they can hand over the towel to the retail investors while exiting with a tidy profit. These institutions have a lot of money, patience, and a focus on changing habits.
Their investees are not focusing on profits. Not in the growth phase, at least. Instead, the focus is on growth at any cost. The quarterly reporting is different in nature. More forgiving.
The incumbents are also all highly profitable: TVS has a net margin of about 6%, Hero MotoCorp sits at 11%, while Bajaj sits at nearly 18%. Their shareholders expect them to preserve the margin and improve it.
Hero MotoCorp’s mass commuter motorcycles — the Splendor, the HF Deluxe — define the Indian two-wheeler industry. In 2025, the company shipped nearly 4.6 million of these motorcycles, representing over 20% of the entire market. These are not just products; they are the engine of Hero’s earnings. Every time Hero has to divert capital toward electric, every time they price an electric scooter at a loss or a razor-thin margin to stay competitive, it is a question their management must answer in the next earnings call.
Californication playing on a loop is not going to soothe shareholders.
Remember, every Vida leaving the showroom is like one less Xoom 110 being sold. The electric breaks even on a GM basis. The ICE one makes real money that can be returned as dividends. TVS has the same questions when every iQube sacrifices a Jupiter with healthy margins. Bajaj is relatively okay, as it has no ICE scooters, so the Chetak is incremental volume.
The Japanese did not even bother playing the game. Honda, Suzuki, and Yamaha have priced their scooters at the same margin levels as they enjoy for their ICE range. In all the cases, their e-scooters would end up cannibalising their ICE sales.
That is the fundamental problem. Almost all ICE two-wheelers in India are highly profitable. They have been amortised over decades by the Japanese and then the Indians to deliver extraordinary reliability, extremely low service costs, and predictable, healthy margins.
The economics for E2Ws today are not even close. Most players in the Indian market are gross margin positive. Some claim that they are now EBITDA positive, at a mixed level, combining both E2Ws and E3Ws. The fine print is that there is government PLI, central subsidies, state subsidies, and Production Linked Incentives (PLI) schemes, supporting this. Take that away, and you are staring at thin air.
Mind you, they are not net income positive.
Gross Margin Positive (GMP) means they recover more than the material cost of the vehicle after the sale, but everything else — R&D, marketing, distribution, service, overheads — is still bleeding red. The incumbent layer over this is by combining the electric mobility business with the ICE business. Management, HR, admin, marketing, and selling costs get cushioned because they are split over the portfolio. There is a hesitation when reporting numbers in isolation.
The Pureplay E2W Players can Play the Game…But for a Limited Time
It is not rocket science that if you do not make money in any business, you end up folding the business. No amount of fundraising will last forever. The private funds raised, and even the IPO proceeds, are for you to tide over the journey as you get your costs in check and hope that the market acceptance of high prices and the customer’s awareness of TCO catch up to the point that there is a natural draw of customers to the showrooms.
I put this scribble here again.
Ola Electric is the most public case study here. After the last quarterly results, Ola has less than seven months of cash left, a sobering reality for a company that raised over USD 2 billion in its IPO and from various venture rounds. The company has been redirecting IPO money meant for R&D to pay off debt. It is running aggressive buyback schemes and discounting campaigns, almost certainly sacrificing the thin EBITDA margins it was inching towards.
Ola Crashes Sales to Improve Margins was the headline just a few months ago. Now it is crashing margins to improve sales. It cannot do both.
Ather is a more disciplined operator, with improved EBITDA and margins to show for it. But Ather is relatively small when compared to the incumbents. It is also a premium-positioned player, and we do not doubt that the journey would cross the EBITDA margin positive goalpost in a few quarters.
The challenge is not at the top of the market. It is in building a profitable business in the volume segment — sub-INR 100,000 scooters — where the mass market lives.
That is where the ICE BoM advantage is most brutal.
A 100 cc mass commuter motorcycle has a BoM that has been wrung dry by decades of supply chain optimisation, domestic manufacturing scale, and commoditisation. The electric scooter BoM has none of those advantages yet. The cells are imported. The power electronics carry significant cost premiums over ICE drivetrain equivalents. The software and connectivity layers — features that the ICE world doesn’t have to carry at all — add cost without adding perceived value for the average consumer in tier 2 and tier 3 markets.
The E2W industry is optimistic that over the next few many years, the BoM will come down steadily, and hopes that the BoM for ICE OEMs will increase steadily.
Here is another scribble.
So why is ICE Playing the Game?
They own the customer and have no plans to transfer the ownership to the pureplay E2W players. Nowadays, the world shifts fast before you realize, and then there is the pertinent question on the horizon.
What if Californication is a big hit?
For the large, publicly traded OEMs, the calculus is simple: why accelerate an electric transition that destroys your margins for the next five years? The answer, at this point, is primarily regulatory pressure and the fear of being left behind. Neither of those is a comfortable foundation for aggressive capital allocation.
So we see TVS, Bajaj, and Hero playing the game. On the surface, they are very optimistic, gung-ho, and aggressive. In reality, it bleeds. They have only scaled up when they could make their products gross-margin positive. For the TVS iQube, the Bajaj Chetak, and the Hero Vida, core suppliers have changed multiple times to optimize BoM costs in a quest for profitability. They are also the most reluctant to play an aggressive price war. There are no knee-jerk ‘this weekend discounts’. The products are break-even but not profitable today. They are forced to play.
Forcing them to play is the biggest achievement for the pure-play E2W manufacturers.
