Executive Summary

The Indian two-wheeler market, a global leader in volume, is currently navigating a period of significant fluctuation. While calendar year 2024 and early 2025 witnessed robust growth, recent months, particularly Q1 FY26 (April-June 2025) and July 2025, have seen a decline in overall wholesale sales. This downturn is attributed to a confluence of factors including temporary production disruptions, the impact of new regulatory norms (OBD2 Phase B), and a tapering of rural demand for entry-level models. However, a closer examination reveals a more nuanced picture, with retail registrations showing resilience and a clear shift in consumer preferences towards premium internal combustion engine (ICE) segments and electric vehicles (EVs).

The Electric Vehicle (EV) segment continues its strong long-term growth trajectory, driven by supportive government policies and declining battery prices, leading to increasing market penetration. Nevertheless, the segment faces an immediate and critical challenge from a severe rare earth magnet supply crisis, which has led to sharp month-on-month production and sales declines for many EV manufacturers in July 2025.

Amidst these market dynamics, TVS Motor Company and Royal Enfield have demonstrated exceptional performance. TVS has achieved record quarterly sales and profitability, driven by strong domestic and export growth across both ICE and EV portfolios, coupled with proactive supply chain management. Royal Enfield has capitalized on the premiumization trend and robust export demand, showing significant sales surges and outlining ambitious future EV plans. Their success underscores the importance of diversified portfolios, strategic market positioning, and supply chain resilience in a volatile environment. The market outlook for FY26 remains cautiously optimistic, with expectations of moderate overall growth driven by exports, continued EV adoption, and a potential revival in rural sentiment, while the long-term trajectory towards 2030 remains positive, particularly for EVs and premium segments.

1. Overview of the Indian Two-Wheeler Market Dynamics

1.1 Recent Sales Performance: Q1 FY26 and Monthly Trends (April-July 2025)

The Indian two-wheeler market, renowned as the largest in the world by volume, has recently experienced a period of notable sales fluctuations. Following a strong performance in the preceding year, the first quarter of the new financial year (Q1 FY26, April-June 2025) has shown a downturn in wholesale figures. Overall two-wheeler sales in Q1 FY26 registered a decline of 6.2% year-on-year, amounting to 4.67 million units.1 This decline was broad-based, affecting all major sub-segments: scooter sales dipped by 0.2%, motorcycle sales were down by 9.2%, and moped sales experienced a sharper contraction of 10.9%.1

Looking at monthly trends, June 2025 saw total two-wheeler sales fall by 3.4% year-on-year to 1.56 million units.1 Within this, scooter sales decreased by 1.7%, motorcycle sales by 3.7%, and mopeds by a significant 17.4%.1 April 2025 also reflected this sluggishness, with the top 10 two-wheeler models collectively experiencing an 8.07% decrease in sales year-on-year.3 Leading manufacturers like Hero MotoCorp reported a substantial 43% year-on-year drop in dispatches in April 2025, primarily due to a three-day production pause for supply chain alignment and scheduled maintenance.4 Honda Motorcycle & Scooter India (HMSI) also saw an 11% year-on-year decline in total sales for April.4

A crucial distinction emerges when comparing wholesale sales with retail registrations. While wholesale figures, which represent dispatches from manufacturers to dealerships, showed a decline, two-wheeler retail registrations actually increased by 5% in Q1 FY26.2 This increase in retail activity was partly driven by the marriage season and generally positive demand sentiments during the period.2 This differential between wholesale and retail data suggests that the reported decline in wholesale volumes may be partly attributable to manufacturers adjusting inventory levels or facing temporary production constraints, rather than solely a fundamental weakening of consumer demand. The market’s underlying consumer interest, as reflected in retail purchases, appears more robust than the wholesale figures alone might indicate, suggesting a potential for quicker recovery once supply-side issues or inventory adjustments are resolved.

Exports, however, presented a contrasting picture of strength. Cumulative exports for the automotive industry surged by 22.2% year-on-year in Q1 FY26, with two-wheeler exports specifically increasing by 23.2% to 1.14 million units.1 This robust export performance provides a significant counter-balance to the domestic slowdown.

The following table provides a detailed overview of the Indian two-wheeler sales performance for Q1 FY26 and June 2025:

Table 1: Indian Two-Wheeler Sales Overview (Q1 FY26 & June 2025)

MetricQ1 FY26 (April-June 2025)% YoY ChangeJune 2025 (Units)% YoY Change
Total 2W Sales (Wholesale)4,674,562 units-6.2%1,559,851 units-3.4%
Scooter Sales1,661,752 units-0.2%533,875 units-1.7%
Motorcycle Sales2,903,449 units-9.2%992,627 units-3.7%
Moped Sales109,361 units-10.9%33,349 units-17.4%
2W Retail RegistrationN/A+5% (Q1)N/AN/A
2W Exports1,136,942 units+23.2%N/AN/A
Source: SIAM 1

1.2 Annual Performance Review: FY25 and Calendar Year 2024

To fully contextualize the recent fluctuations, it is important to review the market’s performance in the preceding periods, which constituted the “positive start to the year.” Calendar year 2024 was indeed a strong period for the Indian two-wheeler industry, witnessing an estimated growth of 15-17%.5 This growth was broadly supported by both internal combustion engine (ICE) motorcycles and scooters, as well as electric vehicles.5 The market achieved a new all-time record, with total sales reaching an impressive 20.5 million units, marking a 16.6% increase over the previous year.6

The robust performance extended into the financial year 2025 (FY25, April 2024-March 2025). The industry maintained a healthy growth trend, with wholesale volumes increasing by 11%.7 Total two-wheeler sales in FY25 reached 17.97 million units, reflecting a healthy 10.37% growth compared to FY24.8 Rural areas continued to be a significant contributor, accounting for 58.30% of total retail registrations in FY25, a slight increase from FY24.7 This period saw major players like Royal Enfield achieve a significant milestone, surpassing 1 million sales in FY25.6

The positive momentum was particularly evident in early 2025. March 2025, for instance, recorded a substantial 12.27% year-on-year growth for the overall two-wheeler industry, with total sales reaching 1.59 million units.8 Several key manufacturers posted strong year-on-year increases in March: Hero MotoCorp grew by 11.07%, Honda by 12.08%, TVS Motor Company by 14.24%, and Royal Enfield by an impressive 33.32%.8 Month-on-month growth from February to March 2025 also showed significant upward movement, with total domestic sales increasing by 20.41%.8

The strong performance in 2024 and early 2025 established a high base for the subsequent periods. CRISIL Intelligence, for example, projects a more modest 2-4% growth for the two-wheeler industry in 2025, explicitly noting that this is “from a high base of last year”.5 This indicates that the lower growth projections or recent declines are not necessarily a sign of market failure, but rather a normalization after an exceptionally strong growth year. Stakeholders should therefore adjust their expectations for explosive growth in 2025, understanding that even moderate growth on such a high base still represents substantial absolute volume.

Furthermore, the growth during this positive period was not uniform across all segments. A structural shift towards premiumization was evident. Premium motorcycles (with engine capacities of 125cc or higher) and premium scooters experienced significantly faster growth rates, with premium motorcycles growing by 19-21% and executive/premium motorcycles by 12-14% in FY25.5 In contrast, the commuter motorcycle segment grew at a more moderate 7-9%, and the ICE scooter segment, particularly 110cc models, is expected to contract.5 This trend is further supported by April 2025 data, which showed traditional commuter bikes like Hero Splendor and HF Deluxe facing significant drops, while scooters like TVS Jupiter and premium commuters like Honda Shine gained traction.3 This demonstrates that the “positive start” was disproportionately driven by higher-value segments, indicating that the market’s evolution is not just about overall volume but also a significant shift in consumer preference towards more feature-rich and higher-capacity vehicles.

1.3 Key Factors Influencing Market Fluctuations

The recent fluctuations in the Indian two-wheeler market are influenced by a complex interplay of macroeconomic conditions, regulatory changes, and specific supply-side challenges.

The macroeconomic environment has historically played a pivotal role in shaping the market. The robust growth observed in 2024 was significantly bolstered by improved macroeconomic conditions, resilient rural demand, and the availability of affordable financing options.5 Rural demand, in particular, is a critical driver for the mass-market two-wheeler segment, benefiting from factors such as favorable monsoons, increased Minimum Support Prices (MSPs) for crops, and healthy agricultural output.5 Indeed, rural areas constituted a majority (58.30%) of total retail registrations in FY25.7 Looking ahead, easing inflation, increased disposable incomes (partly due to full income tax rebates for certain income brackets), and lower interest rates following the Reserve Bank of India’s (RBI) cumulative 100 basis points rate cut since February 2025 (including a 50 bps cut in June 2025) are expected to enhance affordability and stimulate demand in FY26.7 A favorable monsoon forecast for the current year is also anticipated to further strengthen rural sentiment and support growth prospects.7 However, the market’s sensitivity to rural economic health is also evident in the “tapering rural wave” that has impacted sales for players with rural-heavy portfolios, such as Hero MotoCorp.11 This indicates that while rural demand is foundational, shifts within rural purchasing power or preferences can disproportionately affect specific segments or brands, necessitating a diversified approach from manufacturers.

Regulatory changes also contribute to market dynamics. The implementation of Onboard Diagnostics 2 (OBD2) Phase B norms, effective April 1, 2025, is expected to lead to a modest 1-3% increase in vehicle prices.5 This regulatory shift has already caused a moderation in production and an inventory correction of Phase A vehicles from January to March 2025, which contributed to downward pressure on sales in Q1 FY26.5 While such regulatory mandates can create short-term market disruptions due to price adjustments and inventory management, they also serve as catalysts for long-term technological advancements, driving the industry towards higher safety and emission standards. This ultimately leads to a more sophisticated and competitive product portfolio, where value increasingly outpaces volume due to enhanced content.12

Furthermore, specific supply-side challenges have directly impacted wholesale figures. As noted, Hero MotoCorp’s significant dispatch decline in April 2025 was a direct result of a temporary three-day production pause for maintenance and supply chain alignment.4 Such operational decisions by major manufacturers can significantly skew overall market wholesale data, highlighting that not all reported declines are indicative of a fundamental weakening of consumer demand. Overall consumer sentiments across categories have remained somewhat subdued, with recovery hopes largely resting on the upcoming festival season.1

2. The Accelerating Electrification of the Two-Wheeler Segment

2.1 EV Sales Growth and Market Penetration (Historical and Projections to FY2027)

The electric two-wheeler (E2W) segment in India stands as a robust growth engine, demonstrating a significant upward trajectory despite recent short-term challenges. Historically, the E2W market has shown remarkable expansion, growing at a Compound Annual Growth Rate (CAGR) of 62% from FY2016 to FY2020.14 This impressive growth continued into more recent periods. In FY23, E2W sales reached approximately 0.78 million units, constituting 4.38% of total two-wheeler sales and reflecting a substantial 180% year-on-year growth.7 While the growth rate has decelerated in subsequent years, the absolute volume increase has remained significant, with E2W sales growing by 29% in FY24 and 19% in FY25, culminating in 1.20 million units sold in FY25.7

For FY24-25, high-speed e-2Ws were a dominant force, accounting for 1,209,772 units and registering a 19.1% growth over FY23-24.15 The penetration of EVs within the overall two-wheeler market reached 6.2% in FY24-25, up from 4.9% in 2023.5 Recent monthly data further underscores this growth trend: EV sales increased by 10% year-on-year to 23,605 units in July 2025.16 In the first six months of 2025, total EV sales surpassed 657,484 units, maintaining a strong growth rate of 9.9%.17 TVS Motor Company, a key player, reported a 35% year-on-year increase in its EV sales, reaching 70,000 units in Q1 FY26.18

Looking ahead, projections indicate continued robust growth for the EV segment. JMK Research estimates the overall E2W market to reach 6.71 million vehicles by FY2027.19 More broadly, the share of E2Ws in total two-wheeler sales in India is predicted to rise from 0.6% in FY2020 to approximately 13% by FY2025.14 Long-term government targets are even more ambitious, aiming for 30% of all two- and three-wheelers sold in India to be electric by 2030.20 CRISIL also projects a strong EV sales growth of 28-35% in 2025, with penetration expected to increase to 7-7.5%.5

The observed deceleration in the EV growth rate (from 180% to 19% over three fiscal years) is a noteworthy trend. This shift is directly linked to the progressive reduction in government subsidies, which initially fueled hyper-growth.7 However, this does not signify a weakening of the market; rather, it indicates a transition from a subsidy-driven phase to a more organically growing market. The continued high absolute volume increase demonstrates a strong underlying demand that is becoming less dependent on the highest levels of government support. A key factor mitigating the impact of reduced subsidies is the projected decline in battery prices (an estimated 7-8% year-on-year fall).5 This reduction in battery costs is expected to maintain the competitiveness of EV acquisition costs, thereby continuing to drive adoption and potentially doubling the EV share in total two-wheeler sales.5 This dynamic suggests a more sustainable growth model for EVs, where technological advancements and economies of scale in battery production are increasingly driving adoption, fostering a healthier and more resilient market development.

The following table summarizes the historical and projected sales and penetration of electric two-wheelers in India:

Table 2: Electric Two-Wheeler Sales and Penetration in India (FY2020-FY2027)

Fiscal Year / PeriodE2W Sales (Units)% Share in Total 2W SalesYoY Growth (%)Notes
FY2020152,0000.6%+20%14
FY2023780,0004.38%+180%7
FY2024N/AN/A+29%7
FY251,200,0006.2%+19%7
Calendar Year 2024 (Retail)N/A~6%+33%5
July 202523,605N/A+10%16
July 2025 vs June 2025N/AN/A-21.6% (Volumes)21 (Note: One source reported +21.6%, but strong evidence points to decline due to supply issues)
FY2025 (Projected)~3,450,000~13%+28-35%5
FY2027 (Projected)6,710,000N/AN/A19
Source: Various 5

2.2 Impact of Government Policies: FAME II and EMPS 2024

Government policies have been instrumental in shaping the trajectory of EV adoption in India, providing crucial impetus to both demand and manufacturing. The Faster Adoption and Manufacturing of Electric Vehicles (FAME) scheme, particularly its second phase (FAME II), launched in April 2019 and active until March 31, 2024, was designed to accelerate EV adoption through direct purchase subsidies, promote domestic manufacturing, and establish charging infrastructure.22 Under FAME II, electric two-wheelers initially received subsidies of ₹10,000 per kWh of battery capacity, later revised to ₹15,000 per kWh, capped at 40% of the vehicle’s cost.22 This scheme significantly boosted the market, with over 1.4 million electric two-wheelers sold by December 2024.22 FAME II also played a catalytic role in fostering the growth of EV startups and encouraging the entry of traditional Original Equipment Manufacturers (OEMs) into the electric vehicle segment.22

Upon the conclusion of FAME II in March 2024, the government introduced a new program, the Electric Mobility Promotion Scheme (EMPS) 2024, effective from April 2024.17 EMPS 2024 continues to offer subsidies but at revised and lower rates. For electric two-wheelers, the subsidy is now ₹5,000 per kWh of battery capacity, capped at 15% of the factory price, with an additional cap of ₹10,000 per electric vehicle.17 This represents a halving of the subsidy per kWh compared to FAME II.17 Furthermore, for FY26, the subsidy is slated for another reduction to ₹2,500 per kWh, capped at ₹5,000 per vehicle.7

This progressive reduction in subsidies, while potentially dampening the immediate growth rate of EV sales, reflects a strategic shift in the government’s approach. The objective is to transition from direct purchase incentives to fostering a “self-sustaining EV ecosystem”.7 This new focus emphasizes greater localization in manufacturing and enhanced energy efficiency.22 While the immediate impact of reduced subsidies might be a slowdown in the growth rate, it compels the industry towards greater self-reliance, cost optimization, and domestic manufacturing through initiatives like Production-Linked Incentive (PLI) schemes.22 This structural evolution is crucial for the long-term sustainability of the EV market and for reducing India’s dependence on imports for critical components, even if it necessitates short-term market adjustments for manufacturers.

Beyond central schemes, state-level policies and infrastructure development play an increasingly vital role. The government’s broader aim is to achieve 30% EV penetration across all vehicle segments by 2030.20 To support this, states like Kerala, Maharashtra, and Delhi have formulated their own EV policies, offering additional incentives such as exemptions from road tax and registration fees.23 The Goods and Services Tax (GST) on EVs remains low at 5%.25 The expansion of charging infrastructure is also a key focus, with public charging stations increasing significantly to over 6,586 by March 2023, up from approximately 1,000 in FY21-22.23 The varying adoption rates across states, partly influenced by favorable tax regimes and the prevalence of low-rise housing (which facilitates home charging), underscore that the success of EV adoption is increasingly dependent on localized support systems and infrastructure availability.25 This implies a dynamic, fragmented market where manufacturers must tailor their strategies to regional policy landscapes and charging capabilities.

2.3 Emerging Challenges: The Rare Earth Magnet Supply Crisis

A significant and immediate challenge has emerged for the Indian electric two-wheeler segment: the rare earth magnet (REM) supply crisis. This issue, primarily stemming from China’s curbs on REM exports, is severely impacting EV production in India.21 The EV segment experienced a sharp 21.6% drop in volumes in July 2025 compared to June.21 This decline is critical because rare earth magnets are essential components for high-performance Permanent Magnet Synchronous Motors (PMSMs), which are widely used in EVs for their efficiency and compact design.26

The impact of this shortage is evident across the industry. Even leading legacy players in the EV space, such as TVS Motor and Bajaj Auto, have reported significant month-on-month declines in their EV sales in July, dropping by 31% and 27.4% respectively.21 The severity of the situation is highlighted by Bajaj Auto’s Managing Director, Rajiv Bajaj, who indicated that August could be a “zero month” for its electric scooter Chetak and electric three-wheeler GoGo due to the magnet shortage, marking the first automaker to halt production as a direct result of China’s export restrictions.21

India’s vulnerability to this crisis stems from its heavy reliance on imports for these critical materials. In FY25, India imported 870 tonnes of rare earth magnets, valued at ₹306 crore.26 China holds the largest deposits of rare earth elements globally (44 million tonnes) and dominates the refining capability, leaving India with limited domestic refining capacity.26 This dependence exposes India’s nascent EV industry to significant geopolitical risks, as external policy decisions can directly impede domestic production and sales targets.

The industry is responding to this challenge, albeit with difficulty. Companies like TVS Motor are actively exploring alternative sourcing options beyond China and are currently relying on existing inventory to sustain daily EV production.28 However, developing alternative supply chains or redesigning components is neither quick nor inexpensive, often requiring hardware and software redesign, along with new regulatory approvals.27 The crisis serves as a stark reminder of the strategic imperative for India to develop a robust domestic supply chain for critical EV components, including rare earth refining capabilities.26

Without this, India’s ambitious EV penetration targets for 2030 could be severely hampered by external geopolitical factors, potentially leading to production delays, sales shortfalls, and even price increases. This situation also highlights a differentiated impact on EV players: pure-play EV manufacturers like Ola Electric and Ather Energy are noted as potentially most affected 26, while established OEMs with diversified portfolios and stronger inventory management, like TVS, are managing to navigate the immediate crisis more effectively.29 This could lead to a consolidation within the EV market, favoring players with greater supply chain resilience.

3. Performance Spotlight: TVS Motor Company and Royal Enfield

Amidst the broader market fluctuations and emerging supply chain challenges, TVS Motor Company and Royal Enfield have demonstrated remarkable resilience and growth, standing out as strong performers in the Indian two-wheeler landscape.

3.1 TVS Motor Company: Financial and Sales Performance, EV Strategy, and Supply Chain Management

TVS Motor Company has delivered a robust performance, showcasing strong financial results and sales growth across its portfolio. In Q1 FY26, the company reported its highest-ever quarterly sales.30 Consolidated net profit for the quarter jumped by 32% year-on-year to ₹610 crore, while revenue from operations increased by 18% to ₹12,210 crore.30 On a standalone basis, profit after tax (PAT) grew by 35% to ₹779 crore, and revenue saw a 20% year-on-year increase to ₹10,081 crore.30 The company’s operating EBITDA margin also improved to 12.5%.30

In terms of sales volume, TVS registered a 17% growth in overall two-wheeler and three-wheeler sales (including exports) in Q1 FY26, reaching 12.77 lakh units.18 This growth was driven by a 21% increase in motorcycle sales (6.21 lakh units) and a 19% rise in scooter sales (4.99 lakh units).30 Domestic sales also showed a 7% growth in April 2025 4, and TVS’s total two-wheeler sales climbed 20% in June 2025 compared to the previous year, with domestic sales up 10%.31

TVS has also made significant strides in the Electric Vehicle (EV) segment. Its EV sales increased by a substantial 35% year-on-year to 70,000 units in Q1 FY26.18 The TVS iQube is recognized as one of the best-selling EV models in the market.32 However, the company is not immune to the broader industry challenges; its EV sales dropped to 14,400 units in June 2025 from 15,859 units a year ago 31, and experienced a 31% month-on-month decline in July due to the rare earth magnet crunch.21

A key factor contributing to TVS’s resilience is its strong export performance. The company recorded its highest-ever quarterly exports at 3.52 lakh units in Q1 FY26, largely driven by a robust rebound in the African market.29 Exports also grew by 22.15% in March 2025.8 This strong international presence provides a significant buffer against domestic market softness.

Strategically, TVS is actively addressing the rare earth magnet crisis. While some competitors face production halts, TVS has managed to sustain daily EV production by leveraging existing inventory and actively exploring alternative sourcing options beyond China.28 This proactive and effective supply chain management has been a critical differentiator, allowing them to maintain momentum where others falter. The company also plans to launch electric motorcycles and bicycles this year 28 and has earmarked ₹2,000 crore for FY26 investments, primarily for the Norton brand, EV development, digital initiatives, and global expansion.18 This balanced portfolio, strong export presence, and operational agility in managing supply chain disruptions are key to TVS’s outperformance.

3.2 Royal Enfield: Sales Growth (Domestic & Exports), Premium Segment Focus, and Future EV Plans

Royal Enfield has consistently demonstrated strong growth, particularly by leveraging its focus on the premium segment and expanding its global footprint. The brand reported exceptional sales figures in July 2025, with total sales surging by 31% year-on-year to 88,045 motorcycles.33 This growth was fueled by a 25% increase in domestic sales, reaching 76,254 units, and an almost doubling of exports, which surged by 95% to 11,791 units.33 Royal Enfield also recorded the highest growth among major players in March 2025, with a massive 33.32% increase in sales 8, and a 6% year-on-year increase in April 2025.4

For the year-to-date (April-July) in FY26, Royal Enfield’s sales stood at 353,573 units, representing a 20% increase over the same period last fiscal year.33 Domestic sales during this period grew by 15%, while exports jumped by an impressive 72%.33 This sustained momentum is largely attributed to the positive reception of its new range of motorcycles built on the Sherpa 450 platform and the refreshed Hunter 350 model.33 Royal Enfield’s strategic focus on the premium motorcycle segment (125cc or higher) aligns perfectly with the broader market trend of premiumization, which is a key growth driver in the Indian two-wheeler market.5 This segment’s inherent demand resilience allows Royal Enfield to thrive even when the overall market faces headwinds.

The company also achieved a significant milestone in FY25, celebrating over 1 million sales for the fiscal year.6 This consistent growth, especially in exports, provides a substantial buffer against any domestic market softness and highlights the success of their global outreach efforts.

Looking to the future, Royal Enfield is making a strategic and ambitious entry into the electric motorcycle space. The brand is developing its first performance-oriented electric model, potentially an electric Himalayan ADV, which is slated to be its most powerful bike ever.35 This upcoming EV will feature a substantial 14 kWh battery and a powerful ~75 kW (over 100 hp) motor, developed in collaboration with Stark Future, a high-performance electric dirt bike company in which Royal Enfield’s parent company, Eicher Motors, holds a stake.35 This new platform is expected to serve as the base for multiple upcoming electric models from the company.35 While a smaller, urban-focused “Flying Flea” EV is likely to launch first, the focus on high-performance electric adventure bikes signals Royal Enfield’s commitment to extending its premiumization strategy into the electric segment, positioning it strongly for future leadership in the premium EV two-wheeler space.35

3.3 Comparative Analysis with Other Major Players

The strong performance of TVS Motor Company and Royal Enfield stands in contrast to the mixed results observed among other major players in the Indian two-wheeler market, highlighting divergent strategies and varying sensitivities to current market dynamics.

Hero MotoCorp, traditionally the market leader, maintained its lead in March 2025 with an 11.07% year-on-year growth 8 and a 10% increase in June 2025 sales.31 However, the company faced significant dispatch declines in April 2025, dropping 43% year-on-year due to a production pause.4 Its rural-heavy portfolio, particularly in the <=110cc segment, has been impacted by a “tapering rural wave” in July 2025.11 Despite these challenges, Hero’s EV arm, VIDA, continues to show steady growth.31

Honda Motorcycle & Scooter India (HMSI) experienced a significant decline in domestic sales in June 2025, down 19.43% year-on-year 31, and an 11% year-on-year drop in April 2025 4, despite a strong March 2025 performance (+12.08% YoY).8 Honda’s strength in scooters and 125cc motorcycles, bolstered by new models like the Shine 100 and Hornet 125, has helped it gain traction, even briefly allowing it to overtake Hero in July based on Vahan registration data.11

Bajaj Auto reported substantial declines in domestic two-wheeler sales, falling 16% year-on-year in June 2025 31 and 13% in April 2025.4 Its overall two-wheeler sales dropped 7% year-on-year in April.4 Bajaj’s EV sales were also severely impacted by the rare earth magnet crunch, experiencing a sharp 27.4% month-on-month decline in July.21 The company’s managing director even indicated a potential “zero month” for its electric scooter Chetak in August due to the shortage.21 Despite domestic challenges, Bajaj Auto continues to dominate two-wheeler exports from India.8

Within the EV-specific segment, Ola Electric was the leading high-speed e-2W OEM in FY24-25, with 359,502 units sold and a 29.7% market share.15 However, its market share significantly slipped to 17.2% by July 27, down from 19.9% in June, with sales plummeting 53.2% in the first half of 2025.17 Ather Energy is closely narrowing the gap, holding a 16.5% market share in July with 13,187 units sold 21, and reporting an 80% increase in sales in the first half of 2025.6 Both Ola and Ather are noted as being significantly affected by the rare earth magnet shortage.26

Suzuki Motorcycle India recorded positive growth in June 2025 (+8% YoY) 31 and March 2025 (+22.71% YoY) 8, largely driven by increased exports.31

The performance of these major players illustrates that the Indian two-wheeler market is becoming increasingly segmented, with different manufacturers exhibiting varying sensitivities to market dynamics. Companies with a strong presence in the premium and export segments, such as TVS and Royal Enfield, are proving more resilient to overall domestic slowdowns and shifts in mass-market preferences. Their success highlights the importance of strategic portfolio diversification and targeted market approaches. Conversely, the significant struggles of players like Bajaj Auto and Ola Electric in the EV segment due to supply chain shocks underscore the vulnerability of companies heavily invested in or solely focused on EVs, particularly those with less diversified supply chains or insufficient inventory. This situation emphasizes the critical need for robust supply chain resilience and potentially backward integration for critical components in a rapidly evolving, technologically dependent market.

The following table provides a comparative overview of key two-wheeler OEM sales performance in recent months:

Table 3: Key Two-Wheeler OEM Sales Performance (June-July 2025)

CompanyJune 2025 Total Sales (Units)% YoY Change (June)% MoM Change (June vs May)July 2025 Total Sales (Units)% YoY Change (July)% MoM Change (July vs June)Key Notes / EV Sales
TVS Motor Company385,698+20%-9.14%N/AN/AN/AQ1 FY26 EV Sales: 70k (+35% YoY).18 July EV sales -31% MoM.21
Royal Enfield89,540+22%+1.50%88,045+31%N/AStrong domestic & exports.33
Hero MotoCorp553,963+10%+7.39%N/AN/AN/ADomestic sales 525,136.31 Affected by rural wave.11
Honda HMSI429,147-19.43%-6.82%N/AN/AN/ADomestic sales 388,812.31
Bajaj Auto298,484-15.74%-21.99%N/AN/AN/AJuly EV sales -27.4% MoM.21 Potential “zero month” for Chetak in Aug.27
Ola Electric (EV)13,712N/AN/A13,712-67.2% (YoY from July 2024)N/AJuly 27 market share 17.2%.21 H1 2025 sales -53.2%.17
Ather Energy (EV)13,187N/AN/A13,187N/AN/AJuly 27 market share 16.5%.21 H1 2025 sales +75.7%.17
Suzuki95,244+8%N/AN/AN/AN/AStrong exports.31
Source: Various 11

4. Market Outlook and Strategic Considerations

4.1 Short-Term Forecast (2025) and Long-Term Projections (2030)

The Indian two-wheeler market is poised for a period of moderate yet consistent growth in the short term, with a significant long-term shift towards electrification. For calendar year 2025, CRISIL Intelligence projects a modest 2-4% growth for the overall two-wheeler industry.5 This projection is made against the backdrop of a high base from the exceptional growth witnessed in 2024. CareEdge Ratings offers a more optimistic outlook for FY26, anticipating an 8-9% volume growth for the industry.7 This expected growth is underpinned by several supportive factors, including easing inflation, an increase in disposable incomes (partly due to income tax rebates), and the positive impact of lower interest rates following the RBI’s cumulative 100 basis points rate cut since February 2025.7 A favorable monsoon forecast is also expected to bolster rural sentiment, which is crucial for overall market health.7 Exports are projected to accelerate at 12-14%, while domestic sales are expected to maintain a steady 6-8% rise in FY26.7

Looking further ahead to 2030, the market’s trajectory remains positive. The India Two-Wheeler Tire Market, often serving as a proxy for the broader two-wheeler industry’s growth, is projected to reach USD 6.12 billion by 2030, growing at a Compound Annual Growth Rate (CAGR) of 10.35% from 2025-2030.37 Globally, the two-wheeler market is expected to reach USD 165.38 billion by 2030, with a CAGR of 5.94%.38

The Electric Vehicle (EV) segment is a key driver of this long-term growth. The E2W market is projected to reach 6.71 million vehicles by FY2027.19 By 2030, a significant transformation is anticipated, with 30% of all two- and three-wheelers sold in India expected to be electric.20 Globally, the stock of two- and three-wheeler EVs is projected to double to 170 million by 2030.20

A critical observation for the future is the growing divergence between overall market growth and segmental performance. While the overall market forecasts for 2025 and FY26 suggest moderate to healthy growth, the underlying dynamics indicate a strong shift. Premium ICE segments and EVs are projected to experience robust growth 5, whereas commuter ICE segments and 110cc scooters are expected to face continued pressure or even contraction.5 This implies that future growth will be increasingly driven by higher-value segments and electrification. Manufacturers must strategically realign their product portfolios and marketing efforts towards these burgeoning areas. A failure to adapt to these evolving consumer preferences could lead to market share erosion, even within a growing overall market.

Furthermore, the market’s increasing maturity, particularly in the EV sector, is evident in the government’s evolving policy approach. The shift from direct subsidies (under FAME II) to fostering a self-sustaining EV ecosystem (under EMPS 2024) 7 indicates a move towards more organic, market-driven growth. While this transition may introduce short-term adjustments, it encourages greater localization and cost efficiency within the industry. This structural evolution is crucial for building a resilient and competitive domestic EV manufacturing base, reducing reliance on external factors, and ensuring the long-term viability of the electrification trend. The market’s ability to navigate supply chain vulnerabilities, particularly concerning rare earth magnets, will be paramount in realizing these ambitious growth projections.

4.2 Strategic Implications for Manufacturers

The evolving landscape of the Indian two-wheeler market presents several strategic imperatives for manufacturers aiming to sustain and grow their market presence.

Firstly, portfolio premiumization and diversification are no longer optional but essential. The data consistently points to a shift in consumer preference away from entry-level commuter bikes and 110cc scooters towards premium motorcycles (125cc and above) and feature-rich scooters.3 Manufacturers heavily reliant on the shrinking mass-market segments, such as Hero MotoCorp’s rural-heavy portfolio 11, will need to accelerate their transition to higher-capacity and premium offerings. Companies like Royal Enfield, with their strong focus on mid-size and premium motorcycles, are already demonstrating the success of this strategy.33 Diversifying into multiple segments, including both ICE and EV, as exemplified by TVS Motor Company’s balanced growth across categories 18, provides resilience against segment-specific downturns.

Secondly, robust EV strategy and supply chain resilience are critical. While the long-term growth of the EV segment is undeniable 14, the recent rare earth magnet crisis has exposed a significant vulnerability in the supply chain, particularly for players heavily dependent on imports from China.21 Manufacturers must prioritize developing diversified sourcing strategies for critical components and explore opportunities for domestic manufacturing or backward integration to mitigate geopolitical risks.26 Companies like TVS, which are actively exploring alternative sources and managing inventory to sustain production 29, are better positioned to navigate these disruptions compared to those facing production halts, such as Bajaj Auto.27 Furthermore, EV product development should align with the premiumization trend, focusing on high-performance and feature-rich electric models, as Royal Enfield is planning with its powerful electric adventure bike.35

Thirdly, adapting to evolving government policies and leveraging digital transformation in financing will be crucial. The transition from high FAME II subsidies to the more modest EMPS 2024, coupled with declining battery prices, indicates a market moving towards greater self-sustainability.5 Manufacturers should focus on cost optimization and innovation to reduce reliance on subsidies for competitiveness. Concurrently, the increasing role of digital lending platforms and fintech innovations in facilitating two-wheeler loans presents a significant opportunity.39 By partnering with digital lenders and streamlining the financing process, manufacturers can enhance accessibility for a wider consumer base, including those in rural areas and first-time buyers, thereby driving market penetration.40

Finally, strong export market development remains a vital strategy. The consistent growth in two-wheeler exports, even amidst domestic fluctuations 1, provides a crucial revenue stream and diversifies market risk. Companies like TVS and Royal Enfield have significantly benefited from their strong export performance, particularly in regions like Africa, Sri Lanka, and Nepal.29 India’s established expertise in conventional two-wheeler exports also positions it well to become a leading exporter of electric two-wheelers in the future.9 Manufacturers should continue to invest in expanding their global footprint and adapting products to international market demands.

Conclusion

The Indian two-wheeler market is in a dynamic phase of transformation, characterized by a complex interplay of short-term fluctuations and strong underlying growth trends. While recent wholesale sales figures for Q1 FY26 and July 2025 indicate a decline, this must be understood within the context of a record-breaking 2024 and early 2025, which established a high base. The observed downturn is influenced by temporary production adjustments, regulatory price increases, and a tapering of rural demand for entry-level segments. Crucially, retail registrations have shown greater resilience, suggesting that fundamental consumer demand remains robust.

The electrification of the two-wheeler segment is an irreversible and accelerating trend, driven by supportive government policies and the decreasing cost of batteries. Despite a deceleration in the growth rate of EV sales due to reduced subsidies, the absolute volumes continue to expand significantly, indicating a maturing market less reliant on heavy incentives. However, the immediate future of EV production faces a severe threat from the rare earth magnet supply crisis, highlighting India’s import dependence and the urgent need for domestic supply chain development.

In this evolving landscape, companies like TVS Motor Company and Royal Enfield have demonstrated exemplary performance. Their success is rooted in a strategic focus on premium segments, robust export growth, and, in TVS’s case, proactive supply chain management for EV components. Their ability to navigate market shifts and supply challenges positions them as leaders in the current environment. Conversely, players heavily invested in traditional commuter segments or those with less resilient EV supply chains face significant headwinds.

For manufacturers, the path forward necessitates a multi-pronged strategy: a continued shift towards premium and higher-capacity ICE models, aggressive investment in a performance-oriented EV portfolio, and a concerted effort to build resilient, localized supply chains for critical components. Leveraging digital advancements in financing to enhance accessibility and further expanding into diverse export markets will also be paramount. The Indian two-wheeler market, while experiencing short-term volatility, is on a long-term trajectory of growth and transformation, with electrification and premiumization as its defining characteristics towards 2030.

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