Rating agency cites replacement demand and potential GST reduction as key growth drivers despite July retail decline.
25 Aug 2025 | 5227 Views | By Shruti Shiraguppi
ICRA Limited has forecasted a 6–9% year-on-year expansion in India’s domestic two-wheeler market for FY2026, driven by steady replacement demand, improving urban consumption, and resilient rural incomes—contingent on favorable monsoon conditions.
Despite this optimistic outlook, recent performance indicators show mixed trends. Retail sales in June 2025 rose 4.73% ...
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ICRA Limited has forecasted a 6–9% year-on-year expansion in India’s domestic two-wheeler market for FY2026, driven by steady replacement demand, improving urban consumption, and resilient rural incomes—contingent on favorable monsoon conditions.
Despite this optimistic outlook, recent performance indicators show mixed trends. Retail sales in June 2025 rose 4.73% year-on-year to 14.46 lakh units, up from 13.81 lakh units in June 2024. However, sales declined 12.48% month-on-month. Wholesale volumes in July 2025 dipped 3% compared to the previous year, largely due to a 6% drop in motorcycle shipments. May 2025 volumes remained stable at 1.58 million units.
Hero MotoCorp, the world’s largest manufacturer of motorcycles and scooters, reported dispatches of 553,963 units in June 2025, underscoring its continued dominance in the segment.
The industry continues to advocate for a reduction in the Goods and Services Tax (GST) on two-wheelers. Currently, vehicles under 350cc attract 28% GST, while those above 350cc face an additional 3% cess, totaling 31%. A proposed cut to 18% could significantly enhance affordability and stimulate demand.
Electric two-wheelers are gaining traction, with sales reaching 910,930 units in FY2023–24, up from 682,937 units the previous year. Monthly penetration now stands between 5% and 6%.
India’s two-wheeler market, valued at 24.9 million units in 2024, is projected to grow to 92 million units by 2033, reflecting a CAGR of 15.64%. Financial estimates suggest the market could reach USD 315.94 billion in 2025 and expand to USD 347.41 billion by 2029 at a CAGR of 2.40%.
Key industry players include Bajaj Auto, Hero MotoCorp, Honda Motorcycle & Scooter India, Maruti Suzuki, and TVS Motor Company.
ICRA anticipates a surge in retail demand during the upcoming festive season, with the potential GST revision offering further momentum to exceed current growth projections.