Two-Wheeler Sector Faces Slowdown, But High Growth Expected in FY26

The two-wheeler sector has experienced a deceleration in growth in recent months; nevertheless, analysts predict that the industry will grow at a high-single-digit rate in FY26, as stated in an HSBC Global research report. The compounded annual growth rate (CAGR) of the two-wheeler sector over the last ten years is under 3 percent, categorizing it as one of the least rapidly expanding segments in the automotive industry.

The electrification of the 2W segment has been advancing at a sluggish pace, even with significant government support. HSBC observed that urban demand for economy motorcycles has been most affected by the increasing popularity of electric scooters. These e-scooters are gaining popularity in urban settings, where enhanced road conditions, upgraded charging facilities, and affordable transportation alternatives facilitate acceptance.

"We think that electrification has influenced the urban demand in the economy motorcycle sector the most." "E-Scooters offer a superior option in city markets because of improved roads, charging facilities, and affordable travel." stated the report.

On a positive note, rural demand is experiencing a rebound, supported by favorable water reservoir levels. The export market is demonstrating signs of enhancement, leading to a more positive perspective for the sector.

Management forecasts suggest an overall industry expansion of 6-8 percent in FY26, with the 125cc motorcycle category anticipated to exceed the market's growth. Moreover, from December to March, several companies are preparing to introduce more than nine new variants, featuring both electric and internal combustion engine (ICE) models, providing consumers with a range of price options.