EV demand charges ahead but supply runs low

Mumbai: India is experiencing a near doubling of demand for electric cars and two-wheelers, as sharply higher fuel prices due to the Iran war prompt a growing number of consumers to switch.

This has triggered an unprecedented demand-supply imbalance, catching the industry off-guard, with companies scrambling to fulfil the surge in orders. Their efforts are however crimped by suppliers unable to keep pace due to manpower shortage and supply chain issues.

“In the last 15 days, things have changed completely,” said Shailesh Chandra, managing director at Tata Motors Passenger Vehicles and Tata Passenger Electric Mobility on Wednesday. “It is an even sharper growth in interest than what I was seeing two to three weeks ago.”

At Tata Motors, the country's largest electric car maker, demand is running at 2 to 2.5 times its current monthly capacity of 9,000-10,000 cars.

“Whatever you give me, I will sell, just send me units," said Ravneet Phokela, chief business officer at electric two-wheeler maker Ather Energy, citing conversations with dealers.

The sales data reflect the intense market demand. Electric car registrations jumped 51% to 21,669 units this month as of May 27. Electric two-wheelers climbed 36% to 1,43,668 units over the same period, according to the government's Vahan portal.

Automakers say the real bottleneck is not on the factory floor. Chandra said Tata's in-house manufacturing is not the constraint — it is the inability of suppliers to ramp up fast enough. The company is targeting a 50% capacity increase within three to four months, taking monthly output to around 15,000 units.

Mahindra & Mahindra tells a similar story. The company hasn’t been able to produce enough EVs, particularly the BE 9S seven-seater electric SUV, which has been in strong demand since launch, due to labour shortages at suppliers. Though Mahindra declined to comment officially, its dealers confirmed the pressure.

"On an admittedly low base, enquiries have inched up 30% and conversion into sales has doubled to 20%," said a M&M dealer.

The share of electric SUVs in Mahindra's overall mix rose to 10% in May from 8% at the end of the March quarter. At Tata Motors, the share climbed to 18% from 14% in the same period.

Phokela explained that the supply crunch has been compounded by factors beyond the demand surge itself. A shortage of LPG that preceded the latest fuel price hikes disrupted component makers reliant on gas-fired equipment, while a wave of migrant labour returning to their hometowns due to elections in some states left suppliers short of hands even where materials were available.

"The supply chain cannot ramp up uniformly — one missing component, whether a battery or a bolt, means no scooter," he said.

Triggers for the demand surge go beyond the latest fuel price hike, said Phokela. He noted that there has been a steady increase in online searches for EVs for the past six to seven months, well before the Iran War that started February 28, making the current spike an acceleration of an already strong trend.

"The war and the nervousness around petrol has only fast-tracked it," he said.

For consumers doing the math, the case for switching has rarely been more compelling.

Chandra said a typical customer filling 100 litres of petrol a month will be incurring Rs 1,000 additional expense with every Rs 10 fuel price increase. This is helping accelerate the shift towards EVs, at a rate faster than the industry can respond.

"Even if fuel prices soften, oil companies have been making losses for so long that they may not fully pass it on to consumers,” said Chandra. “Some of this shift to electric is permanent.”

A spokesperson for JSW MG Motor said the company's EV bookings accelerated 30% in the second half of May compared to the first half, sparking a sharp drop in dealer inventory to 15 days from 30-45 days previously. The automaker is now racing to boost production by adding factory shifts but the supply chain constraints remain a drag.