Synopsis
Electric two-wheeler manufacturers are facing significant margin pressure and potential price hikes due to soaring raw material costs and supply chain disruptions. Geopolitical tensions and increased demand for AI infrastructure are exacerbating these challenges, impacting critical components like lithium-ion cells and memory chips.Companies warned of near-term margin pressure and potential price hikes during earnings calls for the quarter ended March.
Competition with AI infrastructure players for the same critical raw materials is also pushing up costs as well as constraining supply chains, companies told ET. The West Asia crisis has worsened the situation.
Manufacturers including Bajaj Auto, Hero MotoCorp, and Ather Energy as well as unlisted Euler Motors, Ultraviolette and Revolt Motors have flagged rising costs of lithium-ion cells, rare earth magnets, memory chips and key metals used in EV manufacturing.
Prices of battery materials such as lithium, nickel and cobalt, along with aluminium, copper, steel, plastics have also increased. Prices of lithium have surged from about $8 per kilogram to nearly $24 in a short span, while lithium-ion cells have become 30-50% costlier depending on sourcing timelines, industry executives said.
Raw material and component price hike is already putting pressure on profitability. Bajaj Auto estimated commodity inflation could impact costs by around 3.5-4.0% during the quarter, while Hero MotoCorp said bill-of-material inflation was running in a high single digit. Ather Energy too warned of near-term margin pressure as commodity and electronic component prices remain high.
“We expect the hit on not just the supply of material, but also the cost of raw materials to remain inflated for a while,” Ather chief executive Tarun Mehta said during the company’s earnings call last week. The company has already taken blended price hikes of nearly Rs 4,000 this calendar year and indicated that more increases could follow.
Bajaj Auto said LPG shortages, manpower migration and outbound logistics disruptions have affected its ability to service demand by 10-15% in the current quarter. The company said it had already partly passed on the increase through price hikes taken from April 1.
“We have seen inflation across steel, copper, aluminium and noble metals because of the event-led supply shock,” chief financial officer Dinesh Thapar said, adding that further pricing action could be considered if inflation persisted.
Hero MotoCorp also flagged rising pressure on margins due to higher prices of aluminium, steel, rubber and plastics. The company said it has already taken price hikes of about 2% across products, ranging from Rs 700 to Rs 3,500, though the increase does not fully offset higher bill-of-material costs.
“The broader economy is navigating certain short-term uncertainties due to developments in West Asia that have impacted the entire industry in terms of commodity costs,” said CFO Vivek Anand.
Manufacturers said they have so far absorbed most of the increase, though some of the burden may be passed on to customers through price hikes over the coming quarters.
Ather said its upcoming EL scooter platform has been designed with lower dependence on expensive commodities such as aluminium and copper by shifting to steel frames and simpler transmission systems.
AI demand adds to EV supply worries
EV makers said the growing demand for AI infrastructure is adding pressure on the automotive supply chain, especially for memory chips used in vehicles and battery systems. Industry executives said prices of RAM and DRAM chips have risen 2-4 times in some cases as manufacturers shift production towards AI applications.
Saurav Kumar, founder of Euler Motors that operates in the electric cargo three-wheeler segment, said: “Memory chip prices surged due to AI-driven demand, in some cases rising 2-4x. Lithium (battery) prices will impact overall vehicle costs by around 4%, going forward."
Niraj Rajmohan, cofounder of Ultraviolette Automotive, said memory-linked components have seen the biggest impact in recent months.
“What’s happening globally is that companies manufacturing these components are reallocating production lines towards AI applications because the demand there is massive. The same lines that were earlier supplying components for automotive applications are now being redirected for AI workloads,” he told ET.
Memory prices in some cases jumped 20-30% within a short span, Rajmohan said.
At the same time, EV companies said the silver lining in the fuel and LPG supply disruptions is the gradual shift in customer behaviour, with more buyers evaluating electric vehicles for long-term savings.
India’s electric two-wheeler market, however, saw a correction in April after hitting peak volumes in March, with registrations falling 22% month-on-month to around 148,000 units, according to vehicle registration data from the government’s Vahan portal.
