In FY24, the growth was driven by combined factors like traction in EV volumes, wider range of models and new launches, it noted.
08 Jul 2024 | 1436 Views | By Autocar Pro News Desk
The two-wheeler industry is expected to sustain a steady volume growth rate of around 7-9% in FY25, considering both domestic and export markets. The growth in FY25 is expected to be driven by higher Electric Vehicle (EV) sales supported by Electric Mobility Promotion Scheme 2024 (though only till July 2024 ...
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The two-wheeler industry is expected to sustain a steady volume growth rate of around 7-9% in FY25, considering both domestic and export markets. The growth in FY25 is expected to be driven by higher Electric Vehicle (EV) sales supported by Electric Mobility Promotion Scheme 2024 (though only till July 2024 and likely extension), expectation of interest rate cuts in the second half of FY25, strong demand for new model launches, recovery in exports from its low base of FY24, and favourable monsoon which is likely to improve rural consumer sentiment and income levels, said Arti Roy, Associate Director at CareEdge Ratings.
In FY24, the growth was driven by combined factors like traction in EV volumes, wider range of models and new launches. However, the growth was restricted on account of subdued demand in H1FY24 due to increase in vehicle prices post the implementation of the phase-II of the BS-VI emission norms, higher interest rates and stressed rural incomes. However, the sales revived in H2FY24 on the back of festive season demand and uptick in rural sentiments. Sales grew at a robust double-digit pace in each of the two quarters ended March 2024 (y-o-y basis). This double-digit volume growth on a y-o-y basis continued during the months of April and May 2024 as well.
”Post-covid, sales volume of two-wheelers had consistently declined during FY20, FY21 & 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, launch of CNG powered two-wheelers and good traction in executive and premium segment motorcycles.” said Hardik Shah, 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.
During FY24, the domestic two-wheeler industry witnessed total sales volume of 17.97 million units, reflecting a growth rate of 13%, while the exports volume experienced a decline of 5% though recovered from FY23. The decline in exports was primarily due to challenges in the African markets, which traditionally accounted for a significant portion of India’s two-wheeler exports. Despite these headwinds, there are signs of revival. For instance, in each of the last 5 months (January 2024 to May 2024) two-wheeler exports reported robust double digit volume growth and in February 2024, two-wheeler exports reached a 19-month high with sales volumes of 0.33 million units. The recent improvement in export volumes is on account of marginal recovery and stabilization in some key export markets after they were impacted by inflation, high interest rates and currency issues in some of these markets. This positive trajectory in exports is likely to continue into the rest of FY25. While the road ahead is promising, challenges persist as the industry aims to regain pre-pandemic levels of FY19.
The overall volume growth in FY23 and FY24 was supported by the increasing demand for electric vehicles (EVs). In FY23, EV sales reached approximately 0.73 million units, accounting for 4.54% of total two-wheeler sales (compared to 1.87% in the previous year), reflecting a remarkable year-on-year growth of 188%; albeit on a low base. Continuing the positive trend, EV sales grew by ~30% in FY24 surpassing volume of 0.94 million units. 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. 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. Despite the higher initial cost of electric two-wheelers, consumers are increasingly making the switch to EVs.
Segment wise, motorcycles have consistently dominated the market, contributing to majority of the TW sales – while sales volumes of motorcycles grew by 8% in FY24 that of scooters grew by 13% during the year. This segment-wise growth trend is expected to continue in FY25. 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.
While sales volume of entry-level motorcycles grew by only 6% y-o-y in FY24 (PY: 1%), executive and premium motorcycle volumes grew by 14% (PY: 1%) and 16% (PY: 32%) respectively. Entry-level motorcycles accounted for 73% of the total sales volume whereas, executive and premium motorcycles accounted for 19% and 8% respectively. While the share of premium motorcycles in the product mix improved from 5% in FY17 to 8% in FY24, executive-level motorcycles contribution declined from 21% to 19% during the same period. In FY19, motorcycle volumes reached a pinnacle at 16.46 million units, with the entry level segment constituting 75% of the industry's sales volumes. While the share of this pivotal segment has marginally diminished in FY24, accounting for 73% in FY24, the industry's overall volumes have not rebounded to their FY19 levels indicating incremental volumes sold in the higher capacity (and consequently higher-priced) segments have not completely counterbalanced the decline experienced in the entry level segment.