Two-wheeler industry set for moderate growth in FY26, electrification remains slow: Report

The two-wheeler industry is looking at a modest growth trajectory in the upcoming fiscal year, with electric scooters emerging as a game-changer in urban markets. Rural demand and export improvements are providing additional momentum to the sector's recovery. Despite slow electrification, the industry is expected to grow between 6-8% in FY26, with multiple new vehicle launches on the horizon. The shift towards electric vehicles, particularly in the scooter segment, signals an interesting transformation in the automotive landscape.

"We believe that electrification has impacted the urban demand of the economy motorcycle segment the most." - HSBC Research Report

by ANI January 29, 2025 134 views

New Delhi, January 29: The two-wheeler (2W) industry has seen a slowdown in growth over recent months, however, analysts expect the sector to expand at a high-single-digit rate in FY26, according to HSBC Global research report.

Key Points

1. Rural demand recovery driving two-wheeler industry growth

2. Electric scooters gaining market share in urban areas

3. Management projecting 6-8% industry expansion in FY26

4. Multiple new vehicle variants expected in coming months

The past decade's compounded annual growth rate (CAGR) of the two-wheeler segment remains below 3 per cent, making it one of the slowest-growing segments in the automobile industry.

Electrification in the 2W segment has been progressing slowly, despite substantial government incentives. HSBC noted that urban demand for economy motorcycles has been impacted the most due to the rising popularity of electric scooters.

These e-scooters are becoming more favourable in urban areas, where better roads, improved charging infrastructure, and cost-effective commuting options support adoption.

"We believe that electrification has impacted the urban demand of the economy motorcycle segment the most. E-Scooters present a better proposition in urban markets due to better roads, charging infrastructure, and cost-efficient commuting." said the report.

On a positive note, rural demand is witnessing a recovery, backed by favourable water reservoir levels. The export market is also showing signs of improvement, contributing to a more optimistic outlook for the industry.

Management projections indicate an overall industry growth of 6-8 per cent in FY26, with the 125cc motorcycle segment expected to outpace the broader market.

Additionally, between December and March, various companies are gearing up to launch over nine new variants, in both electric and internal combustion engine (ICE) models, offering consumers multiple price points.

Scooter sales (both ICE and EV) have reached a new high of 36 per cent in FY25, after declining to 31 per cent in FY21 from 35 per cent in FY18. This surge is primarily driven by the rise of electric scooters, which have taken market share from the economy motorcycle segment (75-110cc).

Overall, while the industry faces challenges, the combination of recovery in rural demand, improving exports, and a growing scooter market--especially in the EV segment--presents a mixed but promising outlook for FY26.