Two-wheeler industry to see volume growth of 9% in FY25: CareEdge Ratings

Hyderabad: Two-wheeler industry is expected to sustain a steady volume growth rate of around 7-9 per cent 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 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, a media release says.

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 and 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 per cent growth compared to the previous fiscal year’s 18.01 million units. In FY24, the industry continued its upward trajectory, achieving 9.8 per cent 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 per cent, while the exports volume experienced a decline of 5 per cent 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 per cent of total two-wheeler sales (compared to 1.87 per cent in the previous year), reflecting a remarkable year-on-year growth of 188 per cent; albeit on a low base.

The Centre’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.