EV OEMs worry about supply chain breaks even as demand goes up on oil price shock

“On a month-to-month basis, our run rate is thrice of what it was at the beginning of the year. Next year, we are looking at straightaway tripling our volumes. But we have not been getting uninterrupted supplies,” said Sohinder Gill, CEO of Hero Electric, India’s largest-selling electric two-wheeler maker, and director general of the Society of Manufacturers of Electric Vehicles.

While he expects one million electric-two-wheeler sales in India by the end of the year, concerns emanating from disrupted cargo movement through Europe, an increasing shortage of electronic chips and elevated commodity prices may pose significant risks.

“High-volume players like us are likely to see disruption increase going forward. The supply pipeline could start to dry up in a month or two from now”, Gill said.

About 40% of the world’s palladium comes from Russia, and half of neon gas from Ukraine, both key ingredients in chip-making.

EV demand, which grew over 130% in 2021, is set to rise further as retail fuel prices follow the global crude price hike.

“So far, we haven’t experienced any material impact on our operations due to the war between Russia and Ukraine. But if the war does get protracted, there may be some impact on the pipeline. Freight rates and commodity prices are already very elevated,” Ravneet Phokela, chief business officer of electric scooter maker Ather Energy, said.

Ather scooters are pegged as performance vehicles and sport an aluminium chassis. Prices of the metal are up 18% since 22 February. However, Phokela says manufacturers have been grappling with high commodity costs and multiple supply chain issues for the last several quarters. “The incremental impact so far may not be significant but if the war drags on, instabilities will only increase,” he added.

“We had 500 bookings when fuel prices hit ₹100 a litre,” said Ayush Singhal, a Hero Electric dealer in Gurugram. “We could not have foreseen that kind of demand. We’re not able to cope with the demand. There’s about two months of waiting on all our high-speed models and we have had to stop taking further bookings,” he added.

“Every two-wheeler maker has had to take multiple price hikes in the last year to offset rising input costs. That has made electric two-wheelers more attractive. A lower total-cost of ownership and government subsidies have also tilted the balance towards electric vehicles,” M.P. Shyam, a large dealer of Ather electric two-wheelers in Karnataka said. Enquiry levels have increased multi-fold, but supply hasn’t kept up, he said.