MUMBAI: The two-wheeler industry is expected to grow 7-9% in fiscal 2027, taking volumes past the 29-million-units mark on steady domestic demand contributing almost 80% of the total volume, and the rising exports which contribute 20% of the overall volume.
Domestic market, which remains the industry’s largest base, is likely to hold steady on improved affordability following GST rate cuts, while exports are set to outpace the home market for the third consecutive year, Crisil Ratings said in a report Tuesday.
The proposed India–US trade deal, under which the US companies like Harley Davidson, will be getting duty-free access to highend models, is unlikely to have a material impact, as it focuses on the niche 500 cc-plus segment, the report added.
Meanwhile, revenue is expected to grow at a steady pace, largely volume-led with incremental support from premiumisation, and this should help sustain operating margins as operating leverage is likely to offset elevated commodity costs, said the report, based on an analysis of six original equipment manufacturers (OEMs), which account for nearly 95% of the industry volume.
Domestic sales continue to anchor industry growth, contributing almost 80% of the total volume.
Fiscal 2026 has been a tale of two halves for the industry. In the first half, volume remained flat amid weak sentiment. However, sales accelerated from September following the GST rate cut, which lowered prices by 7-8%.
Rural demand also improved on the back of a healthy kharif crop, while urban demand strengthened after the tax cuts. Soft interest rates and easing inflation have also been demand tailwinds.
According to Anuj Sethi, a senior director with Crisil Ratings, in fiscal 2027, we expect domestic two-wheeler volume to grow 6-8%, broadly in line with the current fiscal. Motorcycles, which account for about 60% of domestic volumes and remain the largest segment, are likely to see mid-single-digit growth.
Incremental growth is expected to come from scooters—early double-digit overall and mid-teens for e-scooters—driven by rising urban usage, increasing female participation, and expanding last-mile mobility needs, thereby gaining share in the overall mix.
Motorcycles have seen strong recovery following GST rate cuts. While entry-level models up to 125cc continue to dominate, with a share of 73%, demand is gradually shifting towards the 150-350cc models. The share of these higher capacity models has risen from 23% in fiscal 2025 to 25% this fiscal, reflecting premiumisation. Beyond this, the premium segment remains a small part of the overall mix.
The trade deal with the US is expected to open incremental opportunities in the above 500cc bikes segment which today accounts for under 1% of total volume, limiting the broader industry impact and leaving domestic OEMs largely insulated, given their strong presence in the entry and economy segments, which drive the bulk of industry sales.
According to Poonam Upadhyay, a director with Crisil Ratings, two-wheeler exports are expected to remain a strong with a volume growth of 21-23% this fiscal and sustain mid-to-high teen growth in fiscal 2027.
Latin America, Africa and South Asia, together account for nearly 90% of export volume, and these markets are expected to anchor this expansion as demand conditions remain stable.
Strong export growth and steady domestic demand, including rising traction for higher-capacity motorcycles, are expected to drive 10-12% revenue growth next fiscal on the back of an expected 15-17% growth this fiscal.
Continued profitability on a growing revenue base should generate healthy internal accruals to meet capital outlay of Rs 6,000 crore for fiscal 2027 while keeping capex intensity below 0.4 times.