Two-wheeler sales may cross pre-Covid levels in FY26 on export rebound

CareEdge sees 8-9% growth in FY26 as domestic recovery, exports, EV adoption, and affordability drive two-wheeler demand beyond pre-Covid highs

India’s two-wheeler industry is expected to cross its pre-Covid peak in FY26, with sales volumes projected to grow by 8–9 per cent, according to a new report by CareEdge Ratings. This follows an 11 per cent growth in FY25, driven by robust domestic demand and a strong rebound in exports.

 

Despite a high base and headwinds like the implementation of the new OBD-II Phase-B emission norms, the overall outlook remains upbeat. Factors such as easing inflation, improved rural sentiment, rising disposable incomes—helped by new tax rebates for individuals earning up to ₹12 lakh annually—and a cumulative 100 basis points (bps) interest rate cut by the Reserve Bank of India (RBI) since February are expected to bolster demand.

 

“The two-wheeler industry is set to vroom past pre-Covid levels in FY26, aided by strong export momentum, rising EV penetration, and improved affordability,” said Madhusudhan Goswami, Assistant Director at CareEdge Ratings.

 

In FY25, India’s two-wheeler industry recorded 11 per cent overall volume growth, driven by a 9 per cent rise in domestic sales and a robust 21 per cent recovery in exports. Scooter sales led the growth trajectory with a 17 per cent increase, while motorcycle sales grew steadily by 9 per cent, reflecting sustained demand across segments and geographies.

 

Volume growth has remained steady over the last three years — 8 per cent in FY23, 10 per cent in FY24, and 11 per cent in FY25. Notably, rural India contributed 58.3 per cent to total retail registrations in FY25, up from 57.9 per cent in FY24.

 

Scooters have led the growth curve, registering three consecutive years of double-digit expansion — 26 per cent, 13 per cent, and 17 per cent. While motorcycles continue to dominate volumes due to their fuel efficiency and affordability, scooters are rapidly gaining ground in urban markets.

 

Electric two-wheelers (E2Ws) are also emerging as a key contributor. E2W sales hit 1.2 million units in FY25, accounting for around 5 per cent of total two-wheeler volumes. The segment grew 29 per cent in FY24 and 19 per cent in FY25, reflecting growing consumer acceptance.

 

In FY25, entry-level motorcycles held a 72 per cent share of the market, registering 8 per cent year-on-year growth. Executive motorcycles made up 20 per cent of sales and grew 12 per cent, while premium motorcycles held an 8 per cent share, growing 10 per cent during the year. This reflects a gradual diversification in consumer preferences across price points. 

 

Though entry-level motorcycles remain the volume driver, their share has declined from 75 per cent in FY19 to 72 per cent in FY25. A recovery has been visible since FY23, supported by improved rural demand and affordability.

 

Executive and premium motorcycles are gaining traction, supported by aspirational urban buyers and a slew of new model launches. This trend signals a maturing market with more diverse consumer preferences.

 

Exports, which accounted for 18 per cent of total volumes in FY25, are expected to rise by 12–14 per cent in FY26. This rebound follows stabilisation in key African and Latin American markets that previously faced inflation and currency pressures.

 

Arti Roy, Associate Director at CareEdge Ratings, said: “The domestic market may see a slight moderation in growth due to a higher base, but exports and EVs will help sustain overall momentum.

 

While manufacturers remain optimistic, data from the Federation of Automobile Dealers Associations (FADA) indicates cautious optimism among dealers.

 

Dealers expect mid- to high single-digit growth in FY26, supported by festive demand and new launches. However, concerns remain around tight credit norms, lingering consumer caution, and the potential impact of global tariff tensions on investor sentiment and disposable incomes.

 

Month-on-month retail sales rose 11 per cent in May, buoyed by Gudi Padwa and Eid. However, year-on-year sales dipped 1.7 per cent, reflecting subdued sentiment and pre-buying slowdowns ahead of OBD-II Phase-B price hikes.

 

Additional pressure points include low footfalls, rising operating costs, over-expansion of dealer networks, and intensifying competition from electric vehicle startups.