Tuesday, March 19, 2024
By Kamal Swami
Sluggish Demand Of E-Cars Surprises Makers
Electric car manufacturers in India were taken aback by the sluggish demand witnessed in February, marking a five-month low in sales despite significant price reductions. This downturn underscores the challenge of persuading consumers to embrace electric vehicles (EVs), emphasizing that merely reducing upfront costs may not suffice to drive adoption. Data from the government's Vahan portal revealed a cumulative decline in sales to 7,277 vehicles, the lowest since October. Daily EV registrations averaged 204 units this month, the weakest performance in 11 months, indicating a sustained softening of sales.
The impending expiration of incentives under the government's Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles in India (FAME India) scheme, with less than 20 days remaining, is expected to further decelerate sales. These incentives, particularly crucial for commercial fleet vehicles, are uncertain due to the upcoming general election, adding to automakers' apprehensions.
In anticipation of dwindling demand, Tata Motors has adjusted its production plans for April and May, following a similar reduction in March. March saw a 13% sequential decline in Tata's EV registrations. The company plans to produce 2,200 to 2,500 EVs this month, down from a peak of 4,500 units several months ago, with similar production levels expected for the next two months.
A Tata Motors spokesperson noted a positive response to last month's price reduction, with increased inquiries and bookings resulting in a 30% year-on-year growth in EV wholesales in February 2024, and an 8% month-on-month increase. However, industry-wide February volumes were naturally lower due to the month's brevity and the tail-end effects of year-end promotional schemes.
Despite recent price cuts by major players like Tata Motors, MG Motor, and M&M, dealers observed that the move failed to significantly stimulate demand. While inquiries surged post-price reduction, conversions to actual sales remained subdued, highlighting the complexities of customer decision-making in a nascent market segment. Nalinikanth Gollagunta, CEO of the automotive division at M&M, acknowledged the challenges of establishing a new category and emphasized the time required to reshape consumer decision journeys, attributing short-term trends to cyclical patterns.
