Indian two-wheeler market expected to slow down

The Indian two-wheeler market might see a slowdown in the second half of this decade, as some of the positive factors driving the growth of the sector turn into headwinds, according to consultancy Avanteum. Overall, the Chennai-based firm projects the two-wheeler market to reach 26.08 million units by 2030-31, up 50% from the 17.44 million units sold in 2019-20. This reflects a compounded annual growth rate of 3.73% for the elevenyear period.

Avanteum pointed out that the two-wheeler market has benefited from brisk income growth and the rising proportion of young people in the Indian population. However, it noted that many of these positive factors — such as population growth — may turn into drags towards the end of the current decade. 

It further stated that growth up to the period 2019-20 was marked by two noteworthy trends. The first is the rising preference for scooters due to rapid urbanisation, which pushed up their share to 32.1% of all two-wheeler sales compared to 14.6% in 2009-10. The second is the emergence of two heartland states, Uttar Pradesh and Bihar, as the growth engines for the two-wheeler market. 

Uttar Pradesh recently overtook Maharashtra as India's top two-wheeler market and accounts for around 11.6% of the total sales. Bihar, however, is yet to break into the top ten. Between them, the two have gained 2.7 percentage points in terms of share during the 2010s, said the report.

"The five traditional growth markets of Gujarat, Tamil Nadu, Delhi, Punjab and Maharashtra are slowing down while Uttar Pradesh and Bihar along with Karnataka and Kerala are charging ahead in the growth story," it noted. After 2030, Avanteum said that there will be "a wide divergence in the growth story among the various states," leading to the creation of new stars in the market.

As of 2019-20, Uttar Pradesh is already the leader by twowheelers registered; a lead that it will hold on to, for the foreseeable future, it noted.

Challenges 

The two-wheeler growth story is likely to encounter "certain challenges," particularly in urban centres, the firm predicted. "Rapid scale up of metros with 15 cities with an operational network, five under construction and 17 more planned, is expected to impact two-wheeler purchases. A quick analysis of the Delhi Metro and a comparative study of the growth of two-wheeler registration in Delhi, Haryana and Punjab indicate that growth rates can be impacted by as much as 15%," it noted.

The growth momentum could also get impacted due to a change in the direction of demographic dividend, with Tamil Nadu expected to register a small degrowth in its population aged between 20 and 49 years, a prime two-wheeler buyer segment, it added. It noted that key buyer states, such as Kerala, Telangana, Karnataka, Andhra Pradesh and Punjab, are seeing population growth rates decline below 2% — less than the replacement rate — resulting in shrinkages in the population of these states. Two key states, Maharashtra and Delhi, are also seeing slowing growth rates at around 2.5%. 

The prospects of the two-wheeler market would depend on how well states like Uttar Pradesh, Bihar, Rajasthan, Madhya Pradesh, and Assam are able to fill the space being ceded by the above states, it pointed out. 

EVs and Premium Bikes

The report noted that the rise in incomes has encouraged the sale of premium products in India. "The sale of premium two-wheelers (products priced over Rs 1.25 lakhs (ex-showroom) has consistently accounted for about 15% of the total two-wheeler sales volumes between 2015-20. The trend is increasingly getting strengthened with lifestyle choices being the primary consideration."

The other change rapidly sweeping the market is proliferation of EVs. The government has set a target of raising the share of EVs to 30% of the total sales by 2030. As of 2022-23, electric two-wheelers accounted for only 5% of the total two-wheeler sales. Avanteum believes that this may rise to about 20% by 2030. 

"This initial growth of EVs was achieved with the government doing the heavy lifting through support that included proactive policies, incentives, and messaging. Growth beyond 20% share and sustainability will have to be industry driven through innovation, and localisation of supply chain, as governments will increasingly find it difficult to sustain demand incentivisation. The key challenge to make electric the customer powertrain choice is in finding solutions addressing costs, range and charging infrastructure," it noted. 

This feature was first published in Autocar Professional's July 1, 2024 issue.