Electric two-wheeler manufacturers in India are encountering significant cost pressures due to sharp increases in raw material prices and constrained supply chains worsened by geopolitical uncertainty and the redirection of critical components to AI technology production.
- Lithium prices surged from $8 to nearly $24 per kilogram recently
- Memory chip costs rose 2-4 times due to AI production demand
- Manufacturers have passed on some costs, with further hikes expected
What happened
Electric two-wheeler manufacturers in India are experiencing heightened margin pressure influenced by rising raw material costs and disruption in supply chains. These challenges stem largely from escalating geopolitical tensions, particularly in West Asia, which have exacerbated commodity price inflation and disrupted logistics channels. As a result, companies have raised prices to partly offset these surging costs during the recent quarter.
Critical raw materials such as lithium, nickel, cobalt, aluminium, copper, and steel have seen sharp price increases. Lithium has jumped nearly threefold, making lithium-ion battery cells 30-50% more expensive depending on sourcing. Additionally, AI infrastructure demand has intensified competition for memory chips, particularly RAM and DRAM, causing prices to spike by two to four times. Major manufacturers including Bajaj Auto, Hero MotoCorp, Ather Energy, and others have reported these impacts, highlighting challenges across electric two- and three-wheeler segments.
Why it matters
The price surge in battery materials and critical components threatens to slow the rapid growth trajectory of the electric two-wheeler market in India by squeezing profit margins and increasing retail prices. Since EV affordability is key to widespread adoption, persistent inflation poses the risk of dampening consumer demand, complicating manufacturers' ability to scale production effectively.
Furthermore, the crossover competition between automotive and AI sectors for semiconductor and memory chip supply adds a new layer of complexity to supply chain management. As chipmakers prioritize AI applications due to massive demand, automotive component supplies are redirected, pushing up costs and limiting availability. This dynamic represents a structural challenge in balancing emerging technology sectors that rely on overlapping materials and parts.
What to watch next
Industry watchers should monitor how manufacturers manage the balance between cost absorption and passing price increases to customers. Some companies have already initiated price hikes, but the extent of future adjustments will depend on the persistence of commodity inflation and supply disruptions. Innovations to reduce material dependency, such as Ather Energy’s shift towards steel frames over aluminium in new models, will be critical to cost control strategies.
Additionally, ongoing geopolitical developments in West Asia and global semiconductor production trends will influence supply stability. Stakeholders should watch for government policy responses, potential incentives, or domestic raw material sourcing initiatives that could alleviate pressures. The evolution of AI infrastructure demand and its effect on automotive chip availability will also remain a key factor shaping the cost landscape for electric vehicle makers going forward.