Indian two-wheeler industry projected for continued growth in FY25: CareEdge Ratings

The two-wheeler industry is expected to sustain a steady volume growth this fiscal driven by improved domestic sales and good traction in executive and premium segment motorcycles, a report said on Monday.

According to CareEdge Ratings, post-Covid, sales volume of two-wheelers had consistently declined during FY20, FY21, and FY22 before starting to recover from FY23, with sales momentum continuing in FY24 as well.

"CareEdge Ratings anticipates two-wheeler sales volume growth to continue in FY25 and it would be more driven by improved domestic sales, higher EV sales, the launch of CNG-powered two-wheelers, and good traction in executive and premium segment motorcycles," said Hardik Shah, Director at CareEdge Ratings.

The growth in the two-wheeler segment in FY25 is also expected to be aided by the likely interest rate cuts in the second half of FY25, strong demand for new model launches coupled with recovery in exports from its low base and favourable monsoon which is likely to improve rural consumer sentiment and income levels, said Arti Roy, Associate Director at CareEdge Ratings.

In FY23, the Indian two-wheeler industry recorded sales of 19.51 million units, an 8% growth compared to the previous fiscal year's 18.01 million units.

In FY24, the industry continued its upward trajectory, achieving 9.8% growth with a total sales volume of 21.43 million units. However, this was still short of the peak sales volume recorded in FY19, when annual sales volume had reached 24.46 million units, it said.

During FY24, the domestic two-wheeler industry witnessed a total sales volume of 17.97 million units, reflecting a growth rate of 13%, while the export volume experienced a decline of 5%.

There are signs of revival, as in each of the last five months (January to May 2024) two-wheeler exports reported robust double-digit volume growth, with two-wheeler exports in February reaching a 19-month high at 0.33 million units, CareEdge said.

Also, the recent improvement in export volumes is on account of marginal recovery and stabilisation in some key export markets after they were impacted by inflation, high interest rates, and currency issues in some of these markets, the rating agency said, adding this positive trajectory in exports is likely to continue into the rest of FY25.

In FY24, the growth was driven by combined factors like traction in EV volumes, a wider range of models, and new launches but was restricted on account of subdued demand in the first half of FY24 due to an increase in vehicle prices post the implementation of the phase-II of the BS-VI emission norms, higher interest rates, and stressed rural incomes, CareEdge said in its report.

The demand for EVs is driven by a shift in consumer preferences towards options that offer lower fuel costs, reduced maintenance, and lower servicing requirements compared to internal combustion engine (ICE) models, it said and emphasised that the government's FAME II program till FY24 has made EV ownership more affordable, contributing to this volume growth.

The Indian government's newly introduced Electric Mobility Promotion Scheme 2024 (EMPS 2024) has continued to bolster electric two-wheeler sales in the fiscal year 2024-25 till July 2024, it said.

While motorcycles continue to be popular due to their high fuel efficiency, cost-effectiveness, and versatility, scooters have also gained traction, especially among urban commuters. Additionally, the rising appeal of electric two-wheelers (E2Ws) is contributing to overall growth which is expected to continue, CareEdge Ratings said.