The ratings agency estimates total two-wheeler dispatches to grow 12-14% in this financial year, followed by 8-10% growth in the next financial year.
31 Jan 2025 | 1769 Views | By Kiran Murali
Two-wheeler dispatches from Indian automakers are expected to break previous records and reach new heights in the coming financial year, according to a report from CRISIL Ratings. The rating agency estimates 8-10% growth in the next financial year, following a robust 12-14% increase this year.
The industry clocked its ...
This is an Autocar Pro Plus article. Subscribe to continue reading.
Two-wheeler dispatches from Indian automakers are expected to break previous records and reach new heights in the coming financial year, according to a report from CRISIL Ratings. The rating agency estimates 8-10% growth in the next financial year, following a robust 12-14% increase this year.
The industry clocked its highest dispatches of 24 million units in 2018-19, but saw a decline in subsequent years as both domestic and international markets struggled under the weight of the pandemic and an economic slowdown. However, following a steady recovery, the sector is poised to exceed its previous peak and set a new record in the upcoming financial year.
“Next fiscal, the volume growth of 8-10% will be supported by a 7-8% rise in domestic demand driven by higher rural incomes and increased sales of premium ICE vehicles and e2Ws. Meanwhile, exports should grow relatively faster, at 11-12%, aided by demand from Africa, Latin America, and other emerging markets,” Crisil Ratings senior director Anuj Sethi said.
The robust outlook on the sector is driven by four key factors, which include strong rural demand, urban interest in premium vehicles, better export opportunities, and a diverse range of models, including electric two-wheelers. Crisil Ratings' outlook is based on an analysis of the top four manufacturers that account for nearly 90% of the industry sales volume. Domestic volumes account for around 85% of overall two-wheeler volume and the rest comprises exports.
While the urban market continues to embrace electric mobility, rural India continues to be the backbone of the traditional two-wheeler industry. In rural areas, two-wheelers are seen as a practical mode of transportation as they remain an attractive option for consumers looking for essential affordable mobility. Industry estimates suggest that rural India accounts for 40-50% of the two-wheelers sold in India.
Electrification is rapidly gaining prominence in the two-wheeler segment, paving the way for a cleaner transportation future. With Honda Motorcycle & Scooter India joining the electric vehicle race, all major two-wheeler manufacturers have unveiled their plans to electrify their product portfolios.
Electric vehicle penetration in India’s two-wheeler segment is now at around 5%, comprising mainly scooters with a growth rate of approximately 27%. The rating agency expects a similar double-digit growth in the next financial year.
“Falling battery costs have narrowed the price gap between ICE and e2W models to 10-12%, down from ~30% two years ago. Additionally, two-wheeler OEMs are introducing lower-priced models, which will provide demand tailwinds, especially in the fast-evolving e-commerce sector, supporting growth despite subsidy cuts,” the report said.
Meanwhile, on the revenue front, Crisil Ratings said automakers’ toplines are expected to grow 16% in this financial year, followed by 10-12% growth in the next financial year. Higher growth rate of revenue comes on the back of better sales volume and a continuing shift towards premium products.
Indian consumers are increasingly opting for high-end motorcycles, with the 125cc+ segment now accounting for more than half of all sales. The growth in the 125cc + segment has outpaced the overall sales as there has been a maturity in terms of demand for models with higher capacity amid the growing aspiration of India’s young consumers.
“Established OEMs are expected to improve their business profiles with higher sales volume, a premium product mix, and increased exports, with operating margins likely to reach a decadal high of ~15% this fiscal. These margins are likely to be sustained next year, even with the launch of lower-priced e2W models, through effective cost management and existing infrastructure utilisation,” Crisil Ratings senior associate director Anil More said.