FY27 two-wheeler growth may slow amid monsoon, inflation risks: ICRA

The two-wheeler industry posted strong wholesale growth of 29.2 per cent year-on-year in April 2026, with volumes reaching 1.9 million units, aided by GST 2.0 reforms, improving affordability and sustained rural demand, according to a report by ICRA. The rating agency, however, expects growth to moderate to 3–5 per cent in FY27 amid a high base, weather-related risks and rising vehicle prices.

According to the report, the sharp rise in wholesale volumes was driven by lower effective taxation under GST reforms, which improved affordability in a segment highly sensitive to price movements and fuel costs. Retail sales grew at a relatively slower pace of 13 per cent year-on-year in April, supported by strong rural purchasing power, limited price hikes by manufacturers and an extended wedding season that boosted discretionary spending.

ICRA noted that manufacturers also benefited from a wider product portfolio catering to both entry-level buyers and customers seeking premium, feature-rich motorcycles and scooters. The gap between wholesale and retail growth suggests some inventory build-up at the dealer level.

Electric two-wheelers continued to gain traction during the month, with retail sales rising 68.1 per cent year-on-year to 154,337 units. EV penetration in the overall two-wheeler market increased to 8.1 per cent in April, reflecting gradual improvement in consumer acceptance of electric mobility.

For FY26, electric two-wheeler volumes grew 21.9 per cent year-on-year, supported by expanding charging infrastructure, competitive pricing and government incentives. However, the report said EVs still account for a relatively small share of total industry volumes.

India’s two-wheeler exports also maintained strong momentum, with April volumes rising 38.3 per cent year-on-year. Export volumes for FY26 grew 23.3 per cent, aided by growing demand for Indian products across Africa, Latin America and Southeast Asia.

Despite the strong start to FY27, ICRA expects growth momentum to moderate due to multiple headwinds, including a possible weak monsoon linked to El Niño conditions, which could impact rural incomes and entry-level motorcycle demand.

The agency also flagged rising fuel prices, input cost inflation and geopolitical tensions in West Asia as key risks for the industry, particularly for exports and commodity prices. ICRA said affordability gains from GST rationalisation and replacement demand from ageing vehicles are expected to partially offset these pressures, supporting moderate industry growth in FY27.