The two-wheeler industry in India is looking at steady volume growth of 7-9% in FY25, driven by a combination of increasing electric vehicle (EV) sales, anticipated interest rate cuts, strong demand for new model launches, and recovery in export markets. This positive outlook, detailed by CareEdge Ratings, reflects a robust recovery from recent challenges and highlights the sector's resilience and adaptability.
The Electric Mobility Promotion Scheme 2024, effective until July 2024 with a likely extension, is a significant driver. Additionally, the expected interest rate cuts in the latter half of FY25, along with a favourable monsoon boosting rural consumer sentiment and income levels, will contribute to the sector's growth.
In FY24, the two-wheeler industry saw growth driven by the increasing traction in EV volumes, the introduction of new models, and the recovery of rural sentiments in the second half of the fiscal year. Although the industry faced subdued demand in the first half due to price increases following the implementation of phase-II BS-VI emission norms and higher interest rates, the festive season demand in the second half led to a significant revival. The sales grew at a double-digit pace in both quarters that ended in March 2024 and continued this momentum in April and May 2024.
Hardik Shah, Director at CareEdge Ratings, highlighted the post-COVID recovery trajectory, stating, 'Post-COVID, two-wheeler sales volumes declined during FY20, FY21, and FY22 before starting to recover in FY23. This momentum continued in FY24, driven by improved domestic sales, higher EV sales, the introduction of CNG-powered two-wheelers, and strong demand in the executive and premium segments.'
Sales Performance & Projections
The Indian two-wheeler industry recorded sales of 19.51 million units in FY23, marking an 8% growth compared to the previous fiscal year's 18.01 million units. This upward trend continued in FY24, with a 9.8% growth, achieving a total sales volume of 21.43 million units. Despite this growth, the industry has not yet returned to its peak sales volume of 24.46 million units recorded in FY19.
In FY24, the domestic two-wheeler market saw a total sales volume of 17.97 million units, reflecting a 13% growth rate. However, export volumes experienced a 5% decline due to challenges in African markets, which are crucial for India's two-wheeler exports. Nevertheless, there are signs of recovery, with robust double-digit export growth in the last five months of FY24. For instance, in February 2024, two-wheeler exports reached a 19-month high with sales volumes of 0.33 million units, indicating a positive trajectory expected to continue into FY25.
The rising demand for electric vehicles significantly supported the steady growth in FY23 and FY24. EV sales reached approximately 0.73 million units in FY23, accounting for 4.54% of total two-wheeler sales, up from 1.87% the previous year, representing a year-on-year growth of 188%. This trend continued with a 30% growth in FY24, surpassing 0.94 million units. The demand for EVs is driven by their lower fuel costs, reduced maintenance, and government incentives through the FAME II programme, which has made EV ownership more affordable.
The newly introduced Electric Mobility Promotion Scheme 2024 (EMPS 2024) further bolsters electric two-wheeler sales, encouraging consumers to make the switch to EVs despite their higher initial costs.
Motorcycles have consistently dominated the market, contributing to the majority of two-wheeler sales. In FY24, motorcycle sales volumes grew by 8%, while scooter sales increased by 13%. This segment-wise growth trend is expected to continue in FY25. Entry-level motorcycles grew by 6% year-on-year in FY24, while executive and premium motorcycle volumes grew by 14% and 16%, respectively. Although the entry-level segment's share has slightly diminished from 75% in FY19 to 73% in FY24, the overall volumes have not yet rebounded to FY19 levels.
While challenges remain, particularly in the export markets, the industry's resilience and adaptability, coupled with supportive government policies, position it well for continued growth and recovery.