Indian two-wheeler market to see 6-9% volume growth in FY26, says ICRA

The Indian two-wheeler market is expected to register up to nine per cent year-on-year (YoY) volume growth in the current financial year, according to rating firm ICRA. The firm has attributed multiple points that will play crucial roles in this growth trajectory. In its report, ICRA stated that steady replacement demand, recovery in urban consumption, and healthy rural income aided by a normal monsoon, will help in the growth of the domestic two-wheeler segment.

Prime Minister Narendra Modi has hinted that the central government is working on a simplified GST regime, under which the small passenger vehicles, as well as two-wheelers, would see GST reduced during the festive season. This possible reduction in GST rates could provide an additional boost to the two-wheeler industry. Also, the upcoming festive season, which is considered the most prosperous time of the year for any automaker to record a surge in demand and sales, is also likely to help the two-wheeler manufacturers to post heightened sales figures.

In its report, ICRA stated that the industry outlook for FY2026 remains positive. The company attributed this positive outlook to favourable demand-driving factors and an anticipated GST rate cut, which would provide additional stimulus to accelerate growth.

Domestic two-wheeler wholesale volume increased by nine per cent YoY in July 2025 to 15 lakh units. The OEMs maintained healthy dispatches ahead of the festive season. However, retail numbers contracted by 6.5 per cent YoY in July this year, owing to tepid urban demand and heavy rainfall that affected rural footfalls, weighing on two-wheeler sales. The rating agency expects retail demand to improve significantly during the upcoming festive season. ICRA noted that exports continued to gain momentum, reporting a healthy 32 per cent YoY growth in July 2025.

Meanwhile, electric two-wheeler sales moderated last month on a sequential basis, with volumes at 102,900 units in July, representing a two per cent decline. The rating agency said that electric two-wheeler penetration in the overall domestic two-wheeler segment remained steady in the range of six to seven per cent.

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