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