The Indian market is the second-largest E2W market in the world. Considering that most outside-China players would not have a business plan to target the Chinese market, and most Chinese players won’t think of entering the Indian market directly, India is the most important E2W market in the world.
Statistically, the market for electric two-wheelers was 1.15 million units in 2024. On a rolling twelve-month basis, more than 1.2 million electric two-wheelers have been introduced. It is still a fairly consolidated market with the top four players accounting for nearly 950k in sales in 2024.
It is also a market that has sucked in more than half of all private investments in the sector globally.
InsightEV – Global Electric Mobility
And yet, despite all the excitement and the fairly large numbers, the market has been stagnant when we consider the overall picture.
E2W Penetration Levels are Not Rising
We plotted the Vahan retail sales data for the last 29 months for electric two-wheeler penetration in the Indian market. Penetration is the share of electric two-wheeler sales in the overall sales mix.
Depending on how you want to compare, it is very clear that the penetration level is struggling to improve significantly. In January 2023, the E2W penetration was at 5.1%, which improved to 5.61% in January 2024. This further inched up to 6.41% in January of this year.
However, if we look at the E2W penetration last month, that is May 2025, it was at 6.07%. Compared to this, it was at 5.02% in May 2024 but was 7.04% in May 23. Penetration actually declined over the last two years if we are myopic enough to look at the data for May in isolation.
Instead, we decided to draw a band between the 5.0% penetration level and the 6.5% level and realised that there are very few months that are outliers from this band. In fact, there are more months outliers on the downside than above the band.
At the macro level, it indicates that the Indian electric two-wheeler market has been stagnant at worst, and crawling upwards at best, over the last 2.5 years.
Overall data indicates that the average penetration level has increased by a mere 1% this year as compared to last year. That is not impressive for a market that has captured more than 51% of all global private investments in the sector.
Sure, there have been months where the penetration level has spiked up like it did in March 2025, when it stood at 8.63%. However, these months are rare and mostly a result of a short-term volatility event. In March 2025, the E2W incentive scheme was closing down, and the incentive per scooter would have reduced by INR 5,000 from April onwards. Hence, there was a rush of buyers to the electric side of the market. As an immediate consequence, the next month saw a slump with E2W penetration dropping to 5.45%.
From the data, it is apparent that India is going steady when it comes to electric two-wheelers, but there is no rush towards a very fast conversion to electric mobility, and the dream of going fully electric may need at least 10 years, if not more, to realize. That much-beloved hockey stick curve of E2W sales growth, which start-ups throw in front of investors, may take time.
Why isn’t the Penetration Level Improving?
The Indian market is surprisingly stubborn. A country that is a net importer of crude with high pump prices should have been an easy convert to electric. That is not happening, not at least at the speed that was forecasted.
Two-and-a-half years is a long time, and the Indian electric two-wheeler market remains flat in terms of penetration. At the same time, we can see patches of the market where there has been a huge impact.
For understanding the market, as large and as complex as India is, we should segment it. I like to look at the scooter market (we stick to scooters because electric motorcycles are in their nascent stages) as made up of three bands.
First, we have the top creamy layer of the market. These are premium scooters. Before the Ather 450X (and the Ola S1 for a short time) started getting serious, this was a segment dominated by the Vespas and the Aprilias. Both brands are now near dead. As an illustration, in FY 25, Vespa+Aprilia sales went down by more than 15% even though the scooter market gained 12%.
The World Below the Horizon
Even below the scooters at the bottom band are the ones that fly under the radar. The bottom band is captured in the data as they are (by regulations) high-speed scooters, as their top speed is more than 25 kph. They need to be registered and need a driver’s license.
However, thanks to the growing popularity of food delivery in large cities, the sub-25-kph class has been growing fast. We estimate more than a million of them are on the road and growing fast. However, the data is not captured as they don’t need registration.
I would like to look at the top players as the early adapters, the trendsetters, the fashionistas, and in a market like India, the iPhone buyers. In short, young people with money. The Vespas+Aprilias delivered on style and power but not on connectivity, infotainment, and environmental awareness. Premium electric scooters added everything, grew the segment, and moved Piaggio Group’s cheese. This segment was very small – less than 0.5% – of the scooter market. With Ather volumes improving and Ola still selling some S1 Pros, I count this segment at about 300,000 units or about 4.5% of the overall market. Almost all of this is electric scooters – Athers and top-end Olas.
Then there is the middle segment of the market, where the Honda Activa and its direct competitors play. These are 110cc-125cc ICE variomatic scooters, and India is used to them. They are a habit, good or bad, and as stubborn as habits are supposed to be. They account for more than 99% of the ICE scooter market. If I combine the electric scooter sales, the middle segment is 82% of the overall market. Not much of this market has been replaced by electric scooters, and we will come to it later.
Then there is the bottom band, one that did not exist before the advent of electric mobility. It has come into existence and is thriving now because of the rise of the gig economy and the extensive proliferation of e-commerce across the country, especially in major cities. I count this market at 900,000 units, or 13.5% of the overall scooter market.
These are low-cost electric scooters that dominate major cities. It’s an altogether different market, and in almost all cases, the rider is not the customer. He is the user, most often renting the scooter from a fleet operator.
That leads to complexities. Most sales are then to fleet operators – B2B sales – that need to be handled from the central office. Typical ICE and even EV OEMs work through dealerships. ICE incumbents have nurtured tens of thousands (collectively) of dealers across the country. These dealers have a substantial influence within the organisations, and developing a separate sales channel without making dealers anxious is challenging.
The bottom band of the market is also brand agnostic. Hear me out. Fleet operators make their business plans and models on the lifetime expectancy and salvage value of the deployed fleet. Most fleet-deploying startups design plans with a 2-3 year lifetime of the vehicle modelled in. Here, the cost of the vehicle becomes the key aspect, and the brand is secondary. Even the build quality is not the most important aspect.
There is no impact of word-of-mouth, no marketing, no other activities that are expected from a product launch. Sales is dependent on how much the manufacturer can sweeten the deal for the fleet deployer in terms of prices, maintenance, and warranty.
It is not surprising that most ICE incumbent OEMs playing in the Middle-Segment have no interest in the bottom band.
Why is the Middle Segment so Hard to Penetrate?
The typical Indian mass market customer likes familiarity. Once a product has achieved market leadership, it is challenging for market perception to change, unless there is a severe dip in quality. Market leaders have a habit of staying leaders for a long time. Take, for example, the market leader in the motorcycle segment, the Hero Splendor. It has been around since 1993. Its stablemate, the HF Deluxe, has been around even longer. Similarly, the market leader in scooters, the Honda Activa’s first generation was introduced in 1999 and has been the market leader for more than 20 years with no sign of slowing down, even with the onslaught of electric mobility and scooters with more features, power, and arguably better styling. The Activa still manages to control nearly 50% of the scooter market, and that is no mean feat. The same is the case for the Hero Splendor.
On paper, the Splendor or the Activa are not the best products in their segment. However, they have been around for decades, and the prospective customer has a certain familiarity and receives a very positive word-of-mouth from existing customers. This pushes sales.
The peculiarity of the Indian market stems from the fact that the two-wheeler commuter machine is the first big-ticket purchase for any middle or lower-income Indian. They tread carefully and desire sturdiness and longevity. Mass market, Indian scooters, and motorcycles are expected to last at least 8 to 10 years, if not longer.
While the Splendor and Activa are not the best in their class on specs, they have delivered what they promised, and they have continued to deliver for decades. The most important attributes that both deliver are reliability and a hassle-free experience. As a result, the word-of-mouth feedback to new customers from their neighbours and relatives is extremely positive. When a product has been around in the market for more than two decades, advertising ceases to matter. It is the reputation that you have earned for yourself that makes the product. In the case of both the Activa and Splendor, the reputation is extremely positive, resulting in good feedback for new customers.
We have often seen that a Honda Activa or a Hero Splendor is replaced by another one in the household. Both products continue to attract very high resale value, another reason to buy, and a factor that electric vehicles fail to measure up to.
Then There is the Reach
Hero and Honda have two of the largest sales and service networks in the country. They reach not only the big cities and the smaller towns but also up to the village level across the country. This gives them an undeniable advantage over any new entrant in the market.
This is a difficult market for any new entrant with a handful of experience centers to break into.
Familiarity Breeds Sales
The common trait here is the extensive similarity of the market leaders being in the market for a very long time and earning a fuss-free reputation. When you see scooters on the road, that is the best advertising.
It is a good starting point for market domination
Unfortunately, most electric scooters do not have that long-term familiarity across the country. The Bajaj Chetak was launched in early 2020, but Bajaj extensively started pushing it in the market much later.
The Ather 450 X has been around longer than the Chetak, but for a long starting phase of its life, Ather was a predominantly Bangalore-based company with a single experience center presence. The long-term familiarity is limited to Bangalore.
Other players like TVS and Ola have been in the market for an even shorter period of time. Long-term familiarity across the country and a positive word of mouth have not accumulated. Actually, in the case of Ola, the word of mouth is very negative, and that (considering Ola is still 20% of the industry) pulls down the industry’s overall credibility.
Price Gap is still Massive
Even with the prices of ICE scooters consistently going up every year and the prices of electric scooters coming down, there is still a 20-25% gap in prices on an on-road basis. We are talking of the middle-bad, that is.
The price gap should not have mattered if we did the TCO calculation – electric would shine brighter. However, the customer also accounts for resale value and maintenance costs in TCO, and that makes the electric side a bad bargain.
What can pull the Industry Through?
The middle segment of the market, which is nearly 82% of the market, needs a lot of credibility and reassurance from electric vehicles before they would flip. The two major pain points are battery life and resale value.
Extrapolating this, what would work for the industry is offering a long-term battery warranty and assured vehicle buybacks.
As of now, the industry operates at a three-year standard battery warranty across brands. That is clearly not sufficient, considering the battery is 40% of the scooter’s value by cost.
Some manufacturers, like Ola Electric, started offering an eight-year battery warranty, a significant time period. However, quality concerns mean that the customer is unsure of the longevity of the vehicle itself.
There are other players like Ather and Ultraviolette who also offer eight-year battery warranties. However, like Ola, they also charge extra for the warranty. The charging extra is the important bit here because the financial model perhaps reads:
If I charge INR 10,000 more for extended battery warranty and if X% of all batteries fail and I know my battery failure rate is X-ΔX, then I am likely to make Y because of the warranty scheme.
It does little to assure customers, and takeoff rates are low.
Honda’s Approach to Things
Meanwhile, Honda has taken a different approach to the market. They looked at the customer base for the Activa and saw that the scooter targets a wide range of customers: At the bottom end are customers, buy the Activa purely for its utility attributes. In the middle are families who look at the Activa as the dependable all-rounder. Then at the top-end are customers who desire much more from the Activa and would have likely upgraded to a different product, probably outside the Honda showroom.
Honda is offering the Activa e: and the QC1 in the market. The QC1 is targeted at the utility market and is the replacement of the ICE Activa at the bottom end of the market. The Activa e: targets the middle and top end of the ICE Activa customer range.
However, Honda pricing is quite conservative. It is clear that the company does not want to sacrifice margins to push electric mobility. We wrote about this extensively a few weeks back:
InsightEV – Global Electric Mobility
The Activa e: and QC1 appear to be placeholders for Honda to be a participant in the Indian electric mobility segment. The Activa e: has swappable batteries, and Honda has rolled out the swapping network in Bangalore only. Delhi will follow soon. As a result, sales are limited, and at this pac,e it may take up to 10 years for Honda to reach any significant penetration level that matches the ICE Activa.
What that also means is that Honda is not in a hurry to define the trend in electric mobility in India. They want to ride the trend when it happens, not force it.
ICE Incumbents Know the Constraints
That is not nitpicking from us. It’s a business decision, and we respect it. While every major ICE incumbent – Honda, Bajaj, TVS, Hero, and Suzuki – is already present in the Indian E2W market with a scooter, we find the efforts half-hearted. The industry has a conservative approach to electric mobility and rightly so. It is difficult to make money in electric scooters in India because the high BoM costs erode margins. At the same time, your prices are anchored to ICE scooter prices.
Further, the government of India has pulled back most of the direct subsidies, and the biggest incentive that still exists for electric scooters is limited to the free registration and road tax exemption in most states. Some states still offer a subsidy for electric scooters, but it is nowhere close to what it was in the past. The lack of subsidy means that margins have narrowed, and most manufacturers, including the incumbents, are selling scooters on a very narrow gross margin basis. On a net margin basis, there is no money that anyone is making.
This is a problem area for a manufacturer like Bajaj, TVS, or Hero MotoCorp, all of which are extremely profitable. Bajaj makes nearly net margins across its balance sheet. For them to sell 20,000 Chetaks every month on a very narrow gross margin means that the electric scooter is effectively dragging down the entire balance sheet.
The Startups are out of Fuel
Public financial filings indicate that both Ola and Ather, the two most prominent startups in the Indian electric scooter market, make heavy losses on every scooter they sell. This was okay till private money was abundant – they burned investor money to drive sales. However, now both are public. The taps have to be closed and investors and shareholders want losses to be controlled. In short, they are unlikely to reduce prices to drop down to the middle segment, matching ICE scooters.
Summary: Till Now was Easy; No More Going Forward
Till now, the market was easy to capture. The creamy layer or the top band likes to experience new tech, has relatively more money, greater price elasticity, and welcomes electric scooters for the power, experience, and connectivity features.
The bottom band was created by electric, and that’s a segment that would continue to grow in the near term as e-commerce and food/grocery delivery economy spreads to Tier-2 and then Tier-3 towns.
The middle band, the meatiest of all, remains a tough nut to crack. The questions that customers ask are challenging for electric scooter manufacturers to answer.
InsightEV – Global Electric Mobility
InsightEV – Global Electric Mobility
InsightEV – Global Electric Mobility
