New Delhi: India’s top two-wheeler makers are bracing for pressure on margins and demand, as a surge in commodity costs linked to the ongoing West Asia war coincides with the impending withdrawal of electric vehicle (EV) subsidies. The twin blow has led to concerns that the companies, including TVS Motor, Bajaj Auto and Hero MotoCorp, may be forced to raise prices, absorb cost pressures, or risk slowing adoption of EVs.
Analysts and industry executives note that the removal of subsidies under the government's PM E-Drive scheme from April can lead to price hikes of up to ₹5,000 for electric two wheelers. The companies have been requesting for the scheme's extension.
This comes at a time when the manufacturers were already reeling under pressure from higher commodity prices, with analysts noting that US-Israel's war with Iran has only worsened the situation.
Two-wheeler majors had earlier said commodity cost inflation has been on the rise since October, but a robust volume growth in the December quarter had averted a big hit. Trading Economics data showed that prices of key input such as aluminum and platinum group metals (PGM) have surged 14-19% since October.
At least two analysts noted there will be at least a 300-basis-point impact on the companies' margins that they can either choose to pass on to customers or absorb, which can impact their profitability. India's automobile sector, especially two-wheelers, is seen very sensitive to price hikes.
“Ongoing geopolitical tensions may drive temporary commodity cost volatility (~300-400bps impact), with OEMs either raising prices or absorbing the impact (depending on the longevity of the impact),” analysts at Emkay Global wrote in a 16 March note. “The E-2W industry could see a price hike (Rs5k/unit) from April due to expiry of the PM E-Drive scheme in March 2026.”
Queries sent to TVS Motor, Bajaj Auto, Ather Energy, Ola Electric, and Hero MotoCorp did not elicit a response util press time.
Mint reported on 22 January that Hero MotoCorp, Bajaj Auto and TVS Motor had knocked on the government's doors to seek an extension of the scheme that gives them a ₹5,000-incentive on sale of each EV, which on an average, is about 5% of an e-two wheeler’s price.
A senior industry executive privy to the discussions told Mint there was no clarity from the government on whether the scheme would be extended. “Even if it is extended, it is unlikely to last beyond three to four months, so OEMs have to plan accordingly,” the executive said.
Market leaders
For legacy two-wheeler makers, such as TVS Motor and Bajaj, the removal of subsidies and any subsequent threat to demand for electric two-wheelers can be a blow, as they have emerged as leaders of the industry. TVS ended 2025 on the top spot with sales at 298,881 units, while Bajaj came second with 269,847.
In its 11 March report, a parliamentary panel had also said that the support for electric two-wheelers under PM E-Drive should be extended for two more years till end FY28.
Some analysts also said that an extension for the scheme could help the electric two-wheeler sector sustain momentum and increase penetration.
“If the PM E-Drive incentive of INR5k were to become zero, it could hit adoption in the short term,” analysts at Nomura said in a 16 March report. “The extension of PM E-Drive incentives for EV two-wheelers until March 2028, if materializes, could help support EV 2W penetration,” they added.
“We note that sharp increase in commodities and lithium prices would require ~300bp (3%) of price hike to pass on the costs,” Kapil Singh and Siddharth Bera of Nomura wrote.
The developments hold significance for electric two wheelers as their tax gap with ICE two wheelers has narrowed since September owing to GST cuts. While electric two wheelers remain taxed at 5%, tax on ICE two wheelers with less than 350cc capacity has come down from 28% to 18%.
In 2025, EV two-wheeler sales rose 11% to 1.2 million units, which was the slowest increase in electric category compared to EV passenger vehicles, three-wheelers and commercial vehicles.
Electric two-wheeler adoption in India has struggled to accelerate, rising only from 6.1% of total segment sales in 2024 to 6.3% in 2025, data from Federation of Automobile Dealers Association (FADA) showed.
However, some industry experts believe subsidy withdrawal may not significantly impact demand, arguing that underlying cost pressures and supply-side challenges are a bigger concern.
Deepesh Rathore, founder at InsightEV, an auto-focused consultancy, noted that the removal of subsidies should not become a big factor for electric two-wheeler companies, as the government has already halved it to ₹5,000.
“In my opinion, it is no longer a deciding factor for consumers that they cost ₹5,000 less due to these subsidies. For the industry, the bigger question is how to reduce dependence on imports for key raw materials like lithium-ion cells,” he said.
“Government’s focus should move towards supporting companies through PLI, especially new start ups which have been driving innovation in the sector instead of relying on demand side subsidies to push EV penetration,” Rathore added.
Electric two-wheelers are crucial for India's push to cut emissions and increase adoption of clean fuel vehicles, as over three-fourths of the country's total vehicle sales come from the two-wheeler segment.