Two-wheeler manufacturers expect sales this year to test the pre-pandemic peak, hoping that lower EMIs because of a cut in interest rates and higher disposable income resulting from income tax reforms will encourage the middle class to spend on motorcycles, scooters and mopeds.
Forecast of favourable monsoons that will help rural sales, strong replacement demand and government support to purchase electric vehicles are also factors that would boost volumes, despite a price hike due to new safety and emission mandates, said Shailesh Chandra, president of industry body Society of Indian Automobile Manufacturers (SIAM).
In the passenger vehicle segment, he said, weak entry-level demand will weigh on sales growth, which will continue to be driven by utility vehicles.
Momentum likely to Continue
The two-wheeler industry posted its highest sales on record, 21.2 million units, in FY19. Demand then took a hit amid high medical costs and job losses during the Covid years, which led many people to postpone plans to purchase two-wheelers, particularly at the entry level. But growth has now returned to the market, with sales expanding more than 9% to 19.6 million units in FY25.
Chandra predicted the momentum to continue this year. “We expect the two-wheeler segment to continue to grow with the existing momentum in FY26, as there are many favourable factors that are still prevalent,” he told ET.
Yogesh Mathur, director (sales and marketing) at Honda Motorcycle & Scooter India, the country’s second-largest two-wheeler maker, expects high single-digit growth in sales, regardless of the price increase.
“The rationalising of income tax, providing relief to the middle class, will boost consumer sentiment. With increased disposable income, we expect demand in the entry-level segment to see a positive shift,” he said. “Additionally, measures to support domestic manufacturing will further support the industry’s growth.”
More Than Macros
General elections and fewer wedding dates impacted sales growth in motorcycles (a popular marriage gift) last fiscal year, but there are no such challenges this year, said Mathur.
KN Radhakrishnan, chief executive of TVS Motor, cited lower interest rates on loans, which will reduce EMI for consumers, as well as savings from income tax rebates, as factors that would support demand this fiscal year. “Overall, growth momentum in the domestic market, we are expecting, is likely to be like last year,” he said.
SIAM’s Chandra said sales of two-wheelers at the entry level have steadily improved over the last three years. “Last year, increased sales of two-wheelers were driven by farmers, salaried professionals and students. And, typically, the household incomes had also risen. Rural is expected to drive growth with continued support from the urban centres,” he said.
Growing demand for electric vehicles, too, is helping boost sales in the two-wheeler segment. The industry estimates sales of electric two-wheelers to grow by more than a fifth to 1.4-1.5 million units in FY26. The share of EVs in the two-wheeler segment has increased to 6.1% in FY25, from 5.4% in FY24.
Small Cars, Small Sales
In the passenger vehicle segment though, challenges persist due to tepid demand from buyers at the lower end of the market.
“Micro and mini passenger cars continue to witness a decline,” said Chandra, who is also managing director at Tata Motors Passenger Vehicles and Tata Passenger Electric Mobility. “This sub-segment is particularly impacted due to the increase in costs owing to introduction of multiple regulations in the recent past. Additionally, consumer preference has also shifted towards utility vehicles.”
Passenger vehicle sales grew about 2% to a record 4.3 million units in FY25. Utility vehicles accounted for as much as 65% of sales, compared with 60% in FY24.
Chandra said there is need for an increase in the number of first-time buyers for car sales to grow long-term. For FY26, he said carmakers remain optimistic due to conducive conditions.
