With the global push for eco-friendly and energy-efficient solutions, electric two-wheelers (E2Ws) and three-wheelers (E3Ws) are experiencing rapid growth in emerging markets. According to BloombergNEF, electric two- and three-wheelers are among the most electrified vehicle segments, achieving nearly 50% electrification in 2023.
Global Market Size and Regional Development
The electric two-wheeler market reached $39.9 billion in 2023 and is projected to grow to $109.5 billion by 2032, with a compound annual growth rate (CAGR) of 11.5%, according to IMARC Group. International Energy Agency (IEA)’s research shows that E2Ws and E3Ws represented only 13% of global vehicle sales in 2023, they boast the highest electrification rate among vehicle types, with 8% of two- and three-wheelers now electric. McKinsey Center for Future Mobility (MCFM) predicts that 30% of all two-wheelers will be electric by 2030.
Regionally, China leads the E2W market, with sales nearing 6 million units in 2023, accounting for 78% of the global market. India and ASEAN countries follow, with sales of 880,000 and 380,000 units, respectively. Vietnam stands out in the ASEAN market, driven by local manufacturers like VinFast, Pega, and Dibao. Outside Asia, Turkey has the largest two-wheeler market, followed by France, the Netherlands, Italy, and Spain. In Europe, while growth is slower, increased environmental awareness and supportive policies are boosting the market. Subsidies, tax incentives, and emission regulations are encouraging adoption across these regions.
The electric rickshaw (lightweight three-wheeler) market, valued at approximately $1.55 billion in 2023, is projected to reach $4.11 billion by 2030, with a CAGR of 14.9%, as reported by the research firm Coherent Market Insights. While government policies and incentives are fueling growth, challenges such as limited charging infrastructure and battery range remain. In 2023, 21% of the world’s 4.5 million three-wheelers were electric, with India emerging as the largest market with 580,000 units sold and a 65% annual growth rate, from IEA’s research. These vehicles play a key role in urban “last-mile” transportation. China follows, with annual sales of 320,000 units. In rural markets, lead-acid batteries still dominate with a 55% market share, but India’s government aims to boost lithium-ion battery adoption through subsidies like the forthcoming Electric Mobility Promotion Scheme (EMPS) in 2024. McKinsey Center for Future Mobility (MCFM)’s research indicates that India is like to see more electric two-wheeler and three-wheeler sales than four-wheelers and heavy commercial vehicles.
Despite higher initial costs for electric three-wheelers—55% more than gasoline vehicles—the total cost of ownership (TCO) drops by over 50% after eight years. Even without subsidies, electric three-wheelers are over 40% cheaper than gasoline models. With logistics companies like Flipkart and Amazon championing decarbonization, demand for high-power (5 kW+) electric delivery three-wheelers is growing. Electric three-wheelers are emerging as affordable, zero-emission solutions for urban congestion, especially in dense areas with limited public transit options.
Technological Advances and Battery Innovations
Battery technology has been a crucial driver of growth in the E2W and E3W market. With extended battery life and faster charging, range anxiety has diminished, making electric two- and three-wheelers viable for daily commuting. While lead-acid batteries are currently dominant in Asia due to their low cost, they face limitations, including lower capacity, greater weight, and environmental concerns.
Lithium-ion batteries offer a compelling alternative, as they are three to seven times lighter, charge faster, and provide more than 90% stable energy release compared to 50% for lead-acid batteries. Environmental concerns have also heightened focus on recycling issues related to lead-acid batteries. For example, India’s FAME II program promotes sustainable battery solutions by offering subsidies only for advanced batteries like lithium-ion, excluding lead-acid options to encourage more sustainable practices.
McKinsey Center for Future Mobility (MCFM) previously noted that in many regions, the TCO of electric two-wheelers is now comparable to or even lower than that of internal combustion motorcycles. New batteries, such as lithium iron phosphate (LFP) and nickel manganese cobalt (NMC), offer energy densities of 180-250 Wh/kg, enabling travel distances of 80-120 kilometers per charge. With battery costs comprising 35% of the bill of materials (BOM) for two-wheelers, economies of scale and increased efficiency are driving costs down, particularly as manufacturers shift toward lower-cost LFP batteries.
Policy Support and Market Incentives
Government policies, including financial incentives, tax rebates, and subsidies, are pivotal to market growth. India, the world’s second-largest E2W market, saw 2023 sales rise 40% over 2022, driven by strong policy backing. Launched in 2019, India’s FAME II program will transition to the new EMPS in March 2024, providing over ₹4.9 billion (around $60 million) in subsidies for two- and three-wheelers. The EMPS initiative aims to put 372,000 lithium-battery electric vehicles on the road, supported by complementary policies such as the Production-Linked Incentive (PLI) scheme, GST tax reductions, and the “Go Electric” campaign. In 2023, these policies helped make two-wheelers 15% cheaper than gasoline models after incentives, and by 2024, the five-year TCO for E2Ws is projected to be 40% lower than for gasoline vehicles. In Indonesia, $455 million in subsidies will help reach sales of 800,000 electric motorcycles in coming years, along with plans to convert 200,000 gasoline motorcycles to electric.
Reducing Congestion and Promoting Energy Efficiency
Urbanization and resulting congestion have made transportation a major challenge in many cities, with electric two- and three-wheelers offering flexible solutions. In Southeast Asia, where public transit remains underdeveloped, electric two- and three-wheelers are crucial for “last-mile” transit, bridging the gap in public transportation.
Electric two- and three-wheelers provide significant economic benefits, particularly for daily commuting, commercial transport, and logistics. Compared to gasoline motorcycles, electric options are far more energy-efficient. According to the UNEP Global Electric Mobility Programme, a gasoline motorcycle costs around $4.50 to fuel for 100 kilometers, whereas an electric motorcycle costs only $0.80 to $3.00, depending on whether it’s charged at home or at a public station. This cost difference accelerates the payback period, especially for commercial use, with fuel savings alone covering the purchase cost within a year. This economic advantage is further enhancing market acceptance of electric two- and three-wheelers.
As demand for sustainable transport options grows, electric two- and three-wheelers are carving out a critical role in the global market. Their low emissions, energy efficiency, and adaptability to commuting, commercial transport, and last-mile logistics make them increasingly vital. With continued government support for green transportation, E2Ws and E3Ws are poised to transform urban mobility in the coming decades, advancing a more sustainable, eco-friendly transportation future worldwide.
Reference:
- Global EV Outlook 2024, International Energy Agency (IEA)
- The real global EV buzz comes on two wheels, McKinsey Center for Future Mobility (MCFM)
- Two wheels keep on turning, McKinsey Center for Future Mobility (MCFM)
- Electric Two-Wheeler Market Report, IMARC Group
- Electric Two and Three Wheelers – Global Emerging Market Overview, UNEP Global Electric Mobility Programme
