Beyond Euro 5+ and Rare Earths: The 2025 Global Motorcycle Market Analysis

Part I: The European Motorcycle Market – A Regulatory and Economic Contraction

The Quantifiable Decline (H1 2025) and The Role of an Inflated Baseline

The new motorcycle market in Europe experienced a significant downturn in the first half of 2025, with registration data pointing to a substantial contraction. Across the five largest European markets—France, Germany, Italy, Spain, and the UK—new motorcycle registrations totaled 542,361 units during the first six months of the year. This figure represents a notable decrease of approximately 11.3% compared to the 611,145 units registered during the same period in 2024.¹ The decline was not uniform, with some countries experiencing far steeper drops than the aggregate figure. Germany saw the most significant contraction, with new motorcycle registrations plummeting by 29% to 90,010 units. The UK followed with a 19.8% decrease (47,464 units), while France reported a 14.8% drop (98,499 units) and Italy a 4.2% decline (195,025 units).¹

In parallel, the moped market also faced a severe reduction in demand. Registrations across six monitored European markets reached a total volume of 68,690 units in the first half of 2025, a reduction of 19.2% compared to the previous year.¹ Italy’s moped market saw the most dramatic fall, declining by 32.4%, while France and the Netherlands also experienced significant double-digit drops of 27.7% and 17.4%, respectively.¹

A critical outlier in this trend was Spain, which defied the general market contraction with a 5% increase in new motorcycle registrations, totaling 111,363 units.¹ This performance stands in stark contrast to its European counterparts and suggests that market dynamics are not homogenous across the continent. While the overall numbers appear alarming, a more detailed examination reveals a crucial context often overlooked in initial headlines: the market’s decline is being measured against an artificially “inflated baseline” from 2024.⁶ The European motorcycle industry, anticipating the January 1, 2025, implementation of the stricter Euro 5+ emissions regulations, engaged in a tactical maneuver to clear existing inventories.

Manufacturers and dealers pre-registered a large volume of unsold Euro 4 and older stock at the end of 2024 to sell off non-compliant models. Therefore, the high registration figures in late 2024 did not reflect genuine consumer demand but were a strategic response to a regulatory deadline. Comparing the registration data from the first half of 2025 to this inflated baseline exaggerates the current market’s weakness, presenting a decline that is more of a correction from an unusual market manipulation rather than a complete collapse of consumer interest.³

The following table provides a clear breakdown of the market data to illustrate these trends.

The Core Drivers of Market Contraction

The motorcycle market’s contraction in Europe is the result of a complex interplay between new regulatory requirements and broader economic headwinds. The single most significant factor has been the transition to Euro 5+, a more stringent set of emissions and noise regulations that became mandatory on January 1, 2025.² This new standard is not merely an incremental change but a major technical overhaul, adding stricter durability requirements, mandatory onboard diagnostics (OBD), and post-certification audits for new bikes sold in the EU.⁷

For manufacturers, the shift to Euro 5+ has created immense financial and engineering challenges. The need to re-engineer engines, exhausts, and electronic control units (ECUs) to meet new limits on hydrocarbons, nitrogen oxides, and carbon monoxide has driven up research and development costs.⁷ The regulations have also led to the discontinuation of certain models for which a compliant engine would be too costly or impractical to develop, such as the Triumph Thunderbird.⁷ This is forcing a consolidation in product lineups across the industry. For consumers, the new regulations are manifesting as higher prices for new models, in addition to potential long-term maintenance costs. The onboard ECU-based diagnostics, similar to those found in cars for decades, will now monitor catalytic converter efficiency and can even shut down a bike if a failure is detected.⁷ Since modern exhaust systems are often single, closed units, this may necessitate a costly full system replacement, rather than a simple part swap, an expense that can be more than a 10-year-old bike is worth.⁷

This regulatory-driven cost increase is occurring at a time when the broader European economy is facing significant challenges. Inflation and economic uncertainty, combined with rising interest rates, have reduced consumer confidence and disposable income.³ Since motorcycles are often a discretionary or leisure purchase, they are highly sensitive to these economic conditions. The confluence of these two factors—regulation-driven price hikes and economic-driven demand suppression—is creating a “perfect storm.” The market is facing a situation where the price of entry is rising just as consumers are becoming more cautious and price-sensitive, making it an even harder sell for new bikes.¹⁰

This is not just a temporary dip but a fundamental and systemic shift. The industry is being forced into a “once-in-a-generation correction” ¹⁰ that will result in a leaner market with fewer dealerships, smaller inventories, and a more cautious approach to production and pricing.¹⁰ The future will likely favor manufacturers who can innovate cost-effectively to meet regulatory demands while also adapting their portfolios to consumer needs in this new economic climate.

The European Dealership Crisis

The consequences of these macro trends are most acutely felt at the retail level, where dealerships are facing an inventory glut and mounting financial pressure. Following the late 2024 push to pre-register old stock, a “mountain of unsold inventory” ¹⁰ is now collecting dust on showroom floors across Europe and the United States.⁹ This surplus is a direct result of the tactical pre-registration of vehicles with old emission levels.³

This glut of unsold motorcycles presents a major financial burden for dealerships. Many rely on “floor plan financing,” which are short-term loans for inventory that accrue interest the longer a bike remains unsold.¹⁰ With bikes sitting for months, these financing costs are eroding already thin margins. The oversupply of new models has also had a negative cascading effect on the used bike market. Repossessed bikes are flooding auctions, and dealerships are offering aggressive discounts and zero-down financing deals to move their stagnant inventory.¹⁰ As a result, used motorcycle prices have plummeted, with some models losing thousands of dollars in value in just a couple of years.¹⁰ This not only hurts private sellers but also pressures dealerships, whose traditional margins are now threatened from every side.

The pressure on dealerships has become a crisis, forcing many to shutter permanently.¹⁰ This is forcing a fundamental shift in the industry’s business model. To survive, dealerships are cutting costs aggressively, embracing online sales, and pivoting towards more profitable areas such as service, parts, or even other product categories like ATVs and electric scooters.¹⁰ This retail-level turmoil is directly influencing manufacturer behavior, with brands like Harley-Davidson, Indian Motorcycle, and Honda scaling back production and slashing U.S. shipments to mitigate the effects of oversupply.¹⁰ The Euro 5+ regulation, while aimed at environmental objectives, has had the unintended consequence of creating a financial domino effect that is now impacting every level of the industry, from the factory floor to the dealership.

Part II: The Indian Motorcycle Industry – Navigating Supply Chain Bottlenecks

The Rare Earth Magnet Crisis

In a stark contrast to the market dynamics in Europe, the primary challenge for the Indian motorcycle industry in 2025 has been a critical supply chain disruption. The crisis stems from China’s imposition of export restrictions on rare earth magnets, a vital component for electric vehicle (EV) motors.¹¹ With China controlling approximately 90% of the world’s rare earth refining capacity, this geopolitical move created a single point of failure that sent ripples throughout the global automotive and electronics sectors.¹²

The impact on India’s two-wheeler industry was immediate and severe. Bajaj Auto, a major player in the electric scooter market with its Chetak model, was particularly affected. The company faced a temporary supply shortage that slowed deliveries and led its managing director to warn of a potential “zero production month” in August 2024 due to depleted inventory and a 50% drop in production.¹¹ Other key manufacturers also felt the strain. Eicher Motors, the parent company of Royal Enfield, confirmed a “brief production disruption”.¹³ Similarly, TVS Motor stated that it was “just able to manage daily production” due to the same supply constraints.¹⁵ Hero MotoCorp also acknowledged the challenge, although it claimed to have secured sufficient supplies for the short term.¹⁴

This rare earth crisis is not merely a regional problem for India; it is a powerful global warning. It underscores the profound fragility of global supply chains that are heavily reliant on a single, dominant source for critical components, especially as the world rapidly transitions to electric mobility.¹³ This experience is forcing a fundamental re-evaluation of sourcing strategies across the industry, compelling companies to actively seek diversification and localization to build greater resilience against future geopolitical risks.

Strategic Resilience and Corporate Responses

In the face of the rare earth crisis, Indian manufacturers have demonstrated remarkable strategic agility, with some employing innovative solutions to mitigate the disruption and build long-term resilience. The crisis, rather than being a setback, has accelerated a necessary technological and operational evolution.

Bajaj Auto’s response provides a compelling case study in proactive adaptation. The company adopted a multi-pronged approach to navigate the challenge. First, its engineering teams pivoted from heavy rare earth (HRE) magnets, which were subject to the export curbs, to light rare earth (LRE) magnets.¹² By optimizing LRE magnets to match the performance of HREs with minimal efficiency loss, Bajaj was able to maintain 50-60% of its planned EV output, successfully averting the “zero production month” that was initially feared.¹² This short-term fix was paired with a long-term strategic play: the company is making significant investments in “magnet-free motor technologies” with the goal of eliminating its dependency on rare earths entirely by March 2026.¹² Operationally, Bajaj also leveraged its product mix, shifting to higher-margin models like the Chetak 35 series to offset revenue losses from the lower production volumes.¹² This operational flexibility, combined with its technological innovation, allowed the company to maintain profitability despite the production hiccups.

Other major players have also employed similar strategies. TVS Motor is actively exploring “alternative countries” for sourcing its rare earth magnets and is working on heavy rare earth element-based solutions to reduce its dependency on China.¹⁶ The company is also relying on its existing inventory to manage daily production in the short term.¹⁷ Eicher Motors also responded swiftly, stating that it had begun exploring alternative materials well in advance of the crisis.¹³ Hero MotoCorp, meanwhile, took the preventative measure of a temporary production halt in April to align its supply chain, and it has also begun exploring long-term alternatives to rare earth magnets.¹⁴

The rare earth magnet crisis has thus acted as a powerful catalyst for a strategic shift towards a more self-reliant Indian automotive industry. The experience has forced manufacturers to move beyond short-term fixes and to invest in fundamental technological changes and supply chain localization to prevent future crises. This demonstrates a proactive move toward a more resilient, innovative, and technologically advanced domestic ecosystem.

The following table provides a comparative summary of the strategic responses from key Indian manufacturers.

Part III: Global Market Synthesis and Forward-Looking Outlook

Reconciling Regional Discrepancies and the Global Market Split

The challenges in Europe and India, while significant, do not represent a uniform global crisis. In fact, a global analysis reveals a bifurcated market with a sharp contrast between mature, regulatory-sensitive markets and high-growth, utility-driven emerging markets. While Europe’s motorcycle market contracts, other regions are experiencing robust growth. New motorcycle registrations in Latin America are “skyrocketing” ⁴, with Peru reporting a 21.2% increase and Guatemala a 20% rise in the first half of 2025.¹⁹ The ASEAN region is also seeing a confirmation of its growth trend.⁴ Even in the United States, which saw a 9.2% decline in the first half of 2025, the market is described as one of the most stable in the world, with annual volumes holding steady for over a decade.⁹

This fundamental divergence is tied to the primary function of a motorcycle in different markets. In Europe and the U.S., a motorcycle is often a discretionary leisure item, a “toy” or a symbol of status and adventure.⁹ Sales are therefore highly sensitive to economic downturns, rising interest rates, and regulatory changes that increase costs. In contrast, in the high-growth markets of Asia-Pacific and Latin America, a two-wheeler is an essential commuter and utilitarian vehicle, a “tool” for mobility and commerce.²¹ Demand is not driven by disposable income for leisure but by a rising middle class, rapid urbanization, and a need for efficient, cost-effective transportation.²² This core difference means that a single-strategy approach will no longer suffice for global manufacturers. Companies must adapt their portfolios and business models to cater to these two distinct paradigms: a focus on premium, high-tech, and niche segments for mature markets and a focus on affordability, volume, and robust local supply chains for emerging markets.

The Dual Challenge and Path Forward

The challenges of 2025—the regulatory shock in Europe and the supply chain shock in India—are not isolated events. They are symptoms of a systemic vulnerability within the global motorcycle industry. Both issues highlight a fundamental need for the industry to de-risk, innovate, and localize. The Euro 5+ rules are compelling manufacturers to invest in cleaner, more efficient internal combustion engines and electric powertrains.⁸ Concurrently, the rare earth crisis is compelling manufacturers to invest in alternative materials and to diversify their supply chains away from single-source reliance.¹²

The strategic response to these dual challenges is a move towards greater technological self-sufficiency. As a direct response to geopolitical risk, companies are actively diversifying their supply chains and even “reshoring” some operations to North American suppliers.²⁴ This is supported by an increased investment in cutting-edge technologies. The industry is focusing research and development on electric and hybrid vehicles, magnet-free motor designs, and advanced manufacturing techniques like AI, 3D printing, and robotics to improve efficiency and reduce dependence on external factors.¹² The challenges of 2025, far from signaling the collapse of the industry, are acting as a crucible, forcing a necessary evolution towards a more resilient, technologically advanced, and geographically diversified global ecosystem.

Outlook and Recommendations

Looking ahead, the outlook for the global motorcycle industry is one of cautious optimism. In the short term, the European market is likely to see a slow recovery in the second half of 2025 as the post-Euro 5+ inventory is gradually absorbed. Any seasonal sales boosts will likely be tempered by lingering economic caution. In India, the immediate rare earth magnet supply issues are expected to ease as strategic pivots and diplomatic talks take effect ¹⁴, but the industry will remain focused on building long-term resilience.

In the long term, the global motorcycle market is projected to grow at a healthy compound annual growth rate (CAGR) of 4.1% to 6.7% from 2025 to 2032, driven primarily by emerging markets in Asia-Pacific and Latin America.²¹ The electric vehicle segment is expected to gain significant traction, fueled by government incentives and growing environmental awareness.²² However, challenges related to charging infrastructure and range anxiety will remain. The high-end and premium segments, particularly in mature markets, will continue to be a key driver of growth, propelled by rising disposable incomes and a strong demand for personalization, advanced technology, and a premium riding experience.²⁰

Based on this analysis, the following recommendations are put forth for key stakeholders:

• For Manufacturers: The crises of 2025 necessitate a fundamental re-evaluation of business models. Manufacturers should prioritize the diversification of their supply chains and accelerate investments in both EV and hybrid technologies. A focus on building regional resilience and adapting product portfolios to align with the unique demands of each market—whether leisure-driven or utility-driven—is crucial for long-term success.
• For Dealers: To navigate the inventory glut and declining new bike sales, dealerships should prioritize high-margin revenue streams such as service, parts, and accessories. Embracing online sales channels and carefully managing inventory by focusing on top-selling models will be critical for survival and profitability.
• For Investors: The current market volatility should not be viewed as a signal to divest but rather as an opportunity to identify future leaders. Investment should be directed toward companies that have demonstrated supply chain agility and a clear, forward-looking strategy for electric mobility and technological innovation. The ability to successfully navigate the dual challenges of regulatory change and supply chain disruption will be the ultimate determinant of a company’s long-term value.

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