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India’s two-wheeler industry: Growth to surpass Covid-19 levels soon; driven by RBI rate cuts and robust domestic demand

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The two-wheeler industry in India is set to undergo a massive selling surge, surpassing pre-Covid-19 levels, driven by RBI’s rate cut, strong domestic demand and significant recovery in exports. According to a report by CareEdge Ratings, the sector is expected to register a healthy volume growth of 8–9% in FY26. This follows three years of strong performance, with volumes rising by 8% in FY23, 10% in FY24 and 11% in FY25.A key factor behind this growth is the Reserve Bank of India’s cumulative 100 basis points rate cut since February 2025, including a 50 bps reduction last week, which is anticipated to make vehicle loans more affordable and spur demand.“The cumulative 100 bps rate cut by the RBI since February 2025, with the recent 50 bps rate cut announced last week, is expected to enhance affordability and boost demand” said Madhusudhan Goswami, assistant director at CareEdge Ratings.The firm said that the FY25 growth was pushed by a 21% rebound in exports and a 9% uptick in domestic volumes.“While domestic two-wheeler sales growth may moderate slightly due to a higher base, strong export momentum and rising EV adoption will help to sustain overall industry volume growth,” Goswami told ANI.Other factors expected to aid demand include easing inflation, more disposable income for consumers due to a full income tax rebate for individuals earning up to Rs 12 lakh annually, and expectations of a favourable monsoon season that typically benefits rural sales.Scooters and motorcycle growthAmong segments, scooters have seen a particularly strong run, clocking double-digit growth for three years straight: 26% in FY23, 13% in FY24 and 17% in FY25. This trend is likely to continue, with scooters expected to outpace motorcycles in FY26, driven by rising popularity among urban commuters.Motorcycles, however, remain the backbone of the two-wheeler market due to their reliability and efficiency. In FY25, motorcycle volumes rose by 9%.“This growth trend is expected to continue in FY26. Motorcycles remain popular due to their fuel efficiency, cost-effectiveness, and versatility, while scooters have gained traction, especially among urban commuters,” CareEdge noted.

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