Record Sales in FY2026

India's two-wheeler sector achieved record domestic wholesale sales of about 22 million units in fiscal year 2026, marking a 10.2% increase from the previous year. Retail sales grew even faster, up approximately 13%. The second half of the fiscal year saw a significant acceleration, with sales jumping 20.3% after the implementation of Goods and Services Tax (GST) 2.0 reforms in September 2025. These tax changes made vehicles more affordable, especially for entry-level models. Strong rural demand, supported by favorable economic conditions like lower interest rates and income tax relief, also boosted sales. Manufacturers offered a wider range of products, from basic commuter bikes to premium models. March alone saw nearly 20% wholesale growth and a 28.7% surge in retail sales.

Electric Bikes and Exports Grow

Sales of electric two-wheelers (e2Ws) continued to climb, with retail volumes increasing by 47.4% in March and 21.9% for the full fiscal year. Despite this strong growth, e2W market share remained small at 3.3% for FY2026, showing considerable potential for future expansion. Exports also played a key role, growing 23.3% for the full year. This was helped by a wider selection of Indian-made bikes and increasing global acceptance.

FY2027 Growth Outlook Mixed

Looking ahead to fiscal year 2027, industry forecasts show a notable slowdown. Rating agency ICRA expects growth to moderate to 3–5%, citing the high sales base from FY2026. Concerns about a weak monsoon, potentially due to El Niño, could also reduce rural demand. Crisil Ratings offers a more optimistic view, projecting 7–9% growth and total sales potentially reaching 29 million units, driven by continued domestic demand and strong exports. Other analysts estimate growth between 6-9%.

Challenges Ahead for FY2027

Several factors could hinder growth in FY2027. The record-setting performance in FY2026 creates a tough comparison base. A potential weak monsoon could significantly impact rural incomes and demand. Geopolitical tensions in West Asia may disrupt supply chains and exports, affecting India's overall economic growth. Rising manufacturing costs could force price increases, making vehicles less affordable. Some analysts believe the high stock valuations for certain companies, like TVS Motor, may be too optimistic given these potential challenges and slowing growth projections. Premiumization trends may not fully offset lower sales volumes if economic conditions worsen for consumers.

Key Company Valuations

Major two-wheeler manufacturers show varied market valuations. Hero MotoCorp, a leading domestic player, trades at a Price-to-Earnings (P/E) ratio of 19-21, near its historical average. TVS Motor Company has a much higher P/E ratio, around 57-62, well above its historical average and industry peers. Bajaj Auto, known for long-term performance, trades at a P/E of 27-31, slightly below the average P/E of about 33 for the broader auto industry. While Hero MotoCorp leads in domestic market share, Bajaj Auto has a strong record of value creation over the past decade.