Two-Wheeler Peak Beckons In FY26; Scooters, Premium Push Drive Demand
After seven years, India’s two-wheeler market nears a pre-pandemic peak in FY26, driven by GST-led affordability, scooter outperformance, premiumisation, and a recovery in rural and replacement demand.
After seven years, India, the world’s largest two-wheeler market, is walking closer to surpassing its pre-pandemic peak of 21.1 million units recorded in FY2019, driven by accelerating premiumisation and a sharp pickup in scooter demand.
The renewed confidence came after the government implemented Goods and Services Tax (GST) reforms in September, which helped revive sentiment after years of sluggish growth following the pandemic. Under the revised GST regime, tax on internal combustion engine (ICE) two-wheelers below 350cc was cut to 18% from 28%, while electric vehicles (EVs) continue to attract a 5% levy.
Two-wheeler demand in India remained muted for nearly five years after the pandemic, before regaining momentum over the past two years.
Federation of Automobile Dealers Associations (FADA) President CS Vigneshwar told The Core, “We expect two-wheelers to touch lower double-digit growth, and record peak volumes in FY26.”
Rajesh Menon, director general of the Society of Indian Automobile Manufacturers (SIAM), said that two-wheeler sales crossed 20 million units in the January–December 2025 period, reaching 20.5 million units, a 4.9% increase year-on-year.
The industry remains hopeful of surpassing its FY19 peak volumes in FY26, he told The Core, but added that it is still a wait-and-watch situation.
Early this year, some concerns over potential price hikes linked to the planned January 2025 rollout of mandatory anti-lock braking systems (ABS) had also dented industry confidence. With the norms now deferred, those worries have eased, helping the sector edge closer to peak sales volumes.
Currently, ABS is compulsory only for two-wheelers with engine capacities above 125cc. It is designed to prevent wheel lock-up during sudden braking, improving vehicle control and reducing stopping distances, particularly on slippery surfaces. The transport ministry had last year proposed making ABS mandatory for all new two-wheelers manufactured after January 2025, irrespective of engine capacity, as part of efforts to improve rider safety.
Elara Capital expects two-wheeler volumes to grow 9% in FY26, followed by 10% in FY27 and 7% in FY28, with the industry seen returning to its FY19 peak in the ongoing financial year. ICRA has also maintained its growth outlook for the segment at 6–9%.
Speaking on the company’s earnings call for Q2, TVS Motor chief executive officer KN Radhakrishnan said he expects the internal combustion engine two-wheeler segment to grow about 8% and believes the industry is well positioned for healthy long-term growth.
What Is Riding The Momentum?
Industry executives and analysts said that India’s two-wheeler demand recovery would be supported by steady replacement demand, an expected pickup in urban consumption, and healthier rural incomes aided by a normal monsoon. The recent GST rate cut is improving affordability and lifting sentiment, with rural demand expected to outperform urban markets in FY26 as economic activity and farm incomes strengthen.
Growth across major auto segments in FY26 remained muted between April and August 2025, before momentum picked up sharply following the rollout of GST 2.0, which lowered vehicle acquisition costs. Vigneshwar described the year as a “tale of two halves.”
Past excise-duty cuts in 2003, 2008 and 2014 — when price reductions of 5%–8% were followed by sustained double-digit growth — offer a strong precedent, Hero MotoCorp’s chief financial officer Vivek Anand said during the company's earnings call for Q2. This time, prices have fallen by about 10%, translating into savings of Rs 5,500 to Rs 15,000 per vehicle, the steepest reduction yet. Backed by robust festive-season momentum, Anand said the company expects the demand cycle to endure.
While rural markets continued to account for the bulk of two-wheeler demand, urban sales grew at a faster pace, FADA data showed.
Ashutosh Verma, chief business officer at Hero MotoCorp, said earlier that the marriage season should support sales in the March quarter and again in the June quarter.
Looking ahead, Elara Capital expects rural demand to outperform urban demand, though it continues to monitor sentiment in parts of rural India, citing crop damage from unseasonal rains and pressure on kharif crop prices.
The brokerage said that recovery in this segment has been led almost entirely by ICE models, which grew about 18% after the GST 2.0 rollout, compared with 2.5% growth in the earlier period. In contrast, EV growth slowed to 9.5% from 21%. It said the GST cut on sub-350cc ICE motorcycles narrowed the price gap with electric two-wheelers, pushing EV penetration down to 5.5% from 6.7%.
The Core had earlier reported how month-on-month demand momentum for electric two-wheelers stalled through the year. Analysts also flagged deeper market challenges, citing persistent hurdles ranging from affordability and limited model availability to range anxiety, patchy charging infrastructure and constrained financing.
Structural Shift To Premiumisation
Over the long term, OEMs continue to place strategic bets on the premium motorcycle segment.
A recent report by Yes Securities also said the motorcycles are seeing a shift toward larger engines, with the >300cc segment emerging as a key growth engine. The 350cc segment now accounts for 5.7% of all two-wheelers and 36% of premium motorcycles in YTD FY26, up from 2% and 16% in FY15. The report concluded that continued premiumisation and the decline of sub-125cc models are likely to shape the industry’s long-term trajectory.
The share of sub-125cc vehicles is expected to keep declining as consumers increasingly trade up to higher-displacement models, it said.
Replacements Could Quicken
GST cuts have also rekindled demand in the commuter segment, with the 100cc category staging a comeback.
Varma of Hero MotoCorp noted that many “fence-sitters” have entered the mobility market post-GST cuts, lifting the share of first-time buyers to 70–72% of sales—and as high as 81% during the festive season.
He expects replacement cycles to quicken and rural demand to strengthen in the coming months, pointing to a broader revival in a segment that had remained subdued. Hero is also targeting customers who have held on to vehicles for more than four years, working through its service network.
Dealers note that the January conversions will depend on the timely supply of in-demand models, competitive schemes and faster finance approvals, particularly in mass two-wheelers, where longer turnaround times risk customer drop-offs.
Demand for commuter motorcycles is likely to sustain into the next fiscal, Vigneshwar said. However, he added that we need to wait and watch to see whether this trend is durable and here to stay in the long term.
Scooters Grow Faster
Scooters are adding to the growth demand in the segment. Over the past 12–18 months, scooters have outperformed expectations, with both petrol and electric models contributing to robust growth.
The volume penetration of scooters has reached a record 36% year-to-date FY26, up from 33%, and rose to 38.4% when accounting for unreported electric two-wheelers, highlighting a structural shift in consumer preference. Scooter volumes outpaced the broader 2W industry, posting a 4.1% CAGR from FY20–25, the Yes Securities report said.
It attributes the growth to rapid urbanisation, limited public transport, rising demand in under-penetrated states such as UP, Bihar, MP, Rajasthan, and the East, and strong demand from e-commerce, delivery services, and two-wheeler taxis.
Newer models that are sporty, large-wheel cruisers, and traditional metal-body commuters under 100cc, each carving out a distinct niche and catering to varied consumer needs. This product evolution, analysts say, positions the scooter category for sustained momentum in the near term.
Demand for higher-displacement scooters has been concentrated in metros and Tier-1 cities, where 125cc models account for 45–50% of sales, driven by feature-rich offerings and value upgrades.
Exports Expand
Two-wheeler sales to international companies are on a growth trajectory too. During the January to December 2025 period, 4.94 million units were exported, which is the highest exports of calendar year period, with a growth of 24.2%, as compared to the corresponding period of 2024.
In Q3, SIAM said, the growth was driven by a combination of improving macro-economic conditions in key markets of Africa, steady demand from South Asian markets and industry-wide recovery in motorcycle demand.
For TVS Motor, growth in international sales continues to be driven by strong momentum across key overseas markets. The company described sharpening its focus on international markets as “critical to future growth.”
Radhakrishan said Africa and Latin America are emerging as key growth engines. In Asia, Sri Lanka and Nepal continue to post sequential growth, while network expansion in Bangladesh is expected to strengthen TVS’ regional presence.
Separately, premiumisation is also visible in exports for Hero MotoCorp. Anand said premium motorcycles account for more than 40% of the company’s global sales, with the models in this category consistently outperforming broader markets.
He added that Hero is increasingly developing products tailored specifically for international markets, reinforcing its focus on higher-value segments.
