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Solid reason for GST reduction on two-wheelers
Business, Equities, Market News, Markets - January 10, 2025

Two-Wheelers, Tractors to Outpace Cars, Trucks by FY27

Two-Wheelers, Tractors to Outpace Cars, Trucks by FY27

The report of Jefferies, an investment banking and financial services company stated that the volume of two-wheelers (2Ws) and tractors will increase by 13 to 15 percent of the compounded annual growth rate (CAGR). It will surpass passenger vehicles and trucks in the financial year 2025-27.

CAGR Projection
According to the report, the two-wheeler’s CAGR is expected to increase strongly by 13 percent and the CAGR for tractors is expected to grow by 15 percent during the financial year 2025-27. While, the two-wheelers and tractors’ CAGR is estimated to grow by 12 percent and 6 percent in the financial year 2025.

The report also states the volume growth for passenger vehicles and trucks segment is estimated to increase at a rate ranging from 5 percent to 8 percent. It is comparatively lower than the growth rate of two-wheelers and tractors.

Further, the report states that the CAGR of passenger vehicles and trucks is estimated to grow at 8 percent and 5 percent over the financial year 2025-27. While, the CAGR estimations for the financial year 2025 for passenger vehicles and trucks is positive growth by 2 percent and negative growth of 4 percent, respectively.

Growth Rebound
The growth prospects for two-wheelers between the financial year 2021 and 2023 were not good due to weakened demand. Its demand was lower than the passenger vehicle’s demand. The reasons for the slow demand were disruptions caused due pandemic and also increase in regulatory costs. It resulted in making two-wheelers less affordable for lower-income class people. The regulatory costs such as the On-Board Diagnostics (OBD) led to an increase in production costs, increase in commodity and input prices and also third-party insurance premiums hike for two-wheelers with engines bigger than 150cc. The Covid-19 pandemic was a period of financial difficulties for many people. This made it difficult, especially for people of lower income groups to purchase and maintain two-wheelers along with the issue of new regulations.

In the financial year 2024, the volume of two-wheelers in wholesales strongly bounced back. It increased by 14 percent year-on-year (YoY) growth, which exceeded the 8 percent of passenger vehicles growth.

Despite the two-wheelers’ recovery in the financial year 2024, it remained 13 percent lower than its peak growth in the financial year 2019. On the other hand, passenger vehicles were able to surpass its growth of the pre-pandemic level. Its volume surged by 25 percent above its pre-pandemic levels.

The tractor segment in the Indian automobile industry is showing signs of cyclical recovery. Indicating another good thing for the automobile industry in India. For the financial year 2025-27, the growth for the two-wheelers and tractor segments is estimated to be 12 percent and 15 percent, respectively.

In contrast to these growth prospects, the passenger vehicles and trucks segments is expected to grow at a moderate CAGR of 8 percent and 5 percent, respectively, during the same period.

Company-wise growth
The markets of traditional lead companies such as Maruti Suzuki and Hyundai observed a fall in the PV segment of around 12-year lows in the first half of the financial year 2025. In the midst of this shift in position in the automobile industry, Mahindra & Mahindra (M&M) is leveraging its position and is anticipated to surpass Hyundai as the second-largest original equipment manufacturer (OEM) in Passenger Vehicles by the financial year 2027.

Market shares of Electric Vehicles
According to the report, the market share of electric vehicles in two-wheeler sales has become sluggish in the range of 4 percent to 7 percent for the previous two years. Despite this, the period observed launch activity of lower-priced vehicles by the original equipment manufacturers (OEMs). The reasons for this weak demand was the growing concerns regarding the reliability, longevity and the resale value of the vehicles.

In contrast to this, the sales of electric vehicles in the two-wheelers segment is estimated to rise by 10 percent over the financial year 2027. The companies such as Bajaj Auto and TVSL are considered the leader in this segment.

On the other hand, the electric vehicle adoption in the passenger vehicles segment is considered to remain weaker at 2 percent growth rate. In this, Tata Motor is considered as the leading company in the midst of the rising competition.

The image added is for representation purposes only

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Automotive Leasing in India Likely to Reach 8% of Total Sales Within 5-8 Years

Automotive Leasing in India Likely to Reach 8% of Total Sales Within 5-8 Years

ORIX Corporation India Ltd, a mobility solution and financial service provider, anticipates that India’s automobile leasing market will experience 7 to 8 percent of the overall vehicle sales in the next 5 to 7 years. The company provides services such as self-drive rentals, leasing, and financial services. The Managing Director and CEO of ORIX Corporation, Vivek Wadhera states that the overall vehicles in the automobile leasing market will rise more than the current 2 percent in these 5 to 7 years. It is due to more young generation coming into the workforce. It indicates that car leasing is gaining popularity in India because of its convenience and cost-effectiveness facility. The leasing provides benefits such as lower monthly payments, no down payments, and gives the opportunity to change cars in a few years only. This is the reason that makes automotive leasing attractive for the younger generation coming into the workforce.

The company expects profits to be 30-35 percent higher in this current fiscal year as compared to the previous year and also considering good traction in its business operations. The profit of last year was around USD 12 million. While, the company is expecting to make a profit of 16 to 18 million in this current fiscal year.

Vivek Wadhera also states that compared to the western automobile and automobile leasing market, the Indian leasing market accounts for only 1 to 2 percent of the total number of automobile sales. According to the industry estimate, the passenger vehicle sales in India in the year 2024 were around 43 lakh units. While in western markets such as the US market and also the Japanese and Chinese market account for 30-40 percent.

ORIX corporation and its performance
ORIX India is a subsidiary of ORIX Corporation Japan. The parent company is a global leader with a network of over 38 countries and has 9 trillion yen worth of assets. In India, ORIX has two subsidiaries known as ORIX Auto Infrastructure Services Limited (OAIS) and ORIX Leasing and Financial Services India Limited (OLFS). ORIX corporation has collaboration with original equipment manufacturers (OEMs) such as Maruti Suzuki, Kia, Volkswagen, FCA, Honda, Skoda, Nissan, Tata Motors and Mahindra and Mahindra for subscriptions. The company has car leasing facilities in Mumbai, Bangalore, New Delhi, Hyderabad, Kolkata, Chennai, Pune, Jamshedpur, Ahmedabad, Gurgaon and Noida. He also states that many customers do not purchase vehicles, but Indians prefer to buy vehicles. However, it only accounts for 1 to 2 percent of total automobile sales via leasing or subscriptions. One of the growth drivers for the industry is to consider the type of younger generation entering the workforce. According to him, the younger generation entering the workforce now focuses more on rentals than ownership. They focus more on experience and travel. This type of mindset is observed in the real estate segment as well. In the eight-months of this fiscal year, the company was able to outperform its 12 months’ performance in the previous fiscal year. This performance was observed when RBI had not cut rates till now. It is a good sign indicating that the company will face good profits at the completion of this fiscal year.

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