Bajaj Auto has warned that demand for entry-level motorcycles could weaken further after the festive season as drought, inflation and potential financing constraints put pressure on rural consumers, even as premium motorcycles and electric two-wheelers continue to drive growth in India's two-wheeler market.
Speaking during a media interaction following the company's Q2 FY27 results on Tuesday, Joint Managing Director Rakesh Sharma said lower-income consumers had already been postponing purchases over the past two quarters, and the impact could become more pronounced during the January-March 2027 quarter.
"This has already been happening for the last two quarters. I feel that this will get accentuated with drought," Sharma said.
He pointed to difficult conditions in parts of Maharashtra, southern India and the Northeast, warning that weaker agricultural incomes could further affect customers who depend on regular cash flows to meet household expenses.
Sharma said the effects of rural stress could extend beyond purchasing power to vehicle financing. Lenders may become more cautious about extending credit in areas affected by crop failures, potentially making it harder for customers to purchase motorcycles.
He said the company was not yet experiencing severe financing-related pressure but would need to monitor the situation as agricultural conditions became clearer. "Right now, we're not experiencing it seriously, but going forward may become more serious," he said.
According to Sharma, the weakness reflects a broader shift in India's two-wheeler market, where higher-income buyers continue to spend on premium motorcycles and electric vehicles while more price-sensitive customers delay purchases.
He described this as K-shaped growth, with the 150cc-and-above motorcycle segment and electric two-wheelers outperforming the broader market, while the 125cc and lower-capacity categories have generally recorded slower growth.
Industry data supports the widening difference between motorcycle categories. Domestic motorcycle dispatches grew 10% to 69.2 lakh units during April-September 2026. However, the combined 100-110cc and 110-125cc segments grew only around 5% to 48.6 lakh units. Their share of motorcycle sales declined to 70% from 74% a year earlier. In comparison, motorcycles in the 150-350cc categories recorded growth of approximately 31%.
The divergence was also visible in Bajaj's own performance. Its sales in the 100-110cc segment declined 26% to 1,78,794 units during the first half of FY27, while volumes in the 110-125cc category fell 22% to 3,21,613 units, according to the same analysis.
Sharma acknowledged that Bajaj had deliberately prioritised profitability over volumes in the 100cc segment, raising prices to recover higher input costs even when competitors maintained lower prices.
"Our issue is in the 100cc class, where we have chosen profitability over growth," he said.
He added that Bajaj was prepared to accept the resulting volume pressure because its main competitive focus was on higher-capacity motorcycles and electric vehicles.
The company has also faced challenges in its 125cc and higher-capacity motorcycle portfolio, which Sharma partly attributed to ageing products and delayed model upgrades. Bajaj has since introduced refreshed motorcycles, with newer products accounting for 7% of its 125cc-plus portfolio in August, rising to 26% in September and 33% during the first 16 days of the festive period.
Despite concerns over entry-level demand, the broader two-wheeler industry continues to grow. According to SIAM, domestic two-wheeler sales increased 15.2% to 64.3 lakh units in Q2 FY27. Scooter sales grew 27.7%, compared with 7.4% growth for motorcycles.
Sharma said the first 16 days of the festive period had seen electric two-wheelers and motorcycles above 150cc record combined industry growth of approximately 24%, while Bajaj's sales in these categories increased 32%.
He expects overall two-wheeler industry growth to remain in double digits during the festive period, although the rate may moderate because of a higher base following last year's GST-related demand surge.
The bigger concern, he said, is what happens after festive buying subsides and the effects of weak agricultural incomes become clearer.