India Two-Wheeler Market Outlook 2026

India’s two-wheeler market closed December 2025 with solid year-on-year growth, confirming a sustained recovery rather than a one-off festive spike. For investors, analysts, policymakers and industry professionals, December’s numbers highlight a cyclical upturn, a clear policy-supported demand backdrop, and an accelerating shift towards electric two-wheelers.

This analysis is for equity and credit investors, auto industry executives, strategy teams, policymakers, consultants and advanced retail investors who want to understand whether India’s two-wheeler recovery is durable, how internal combustion engine (ICE) and electric vehicle (EV) business models are evolving, and what this means for 2026 positioning.

Table of Contents

1. India’s two-wheeler recovery in context
2. December 2025 sales snapshot
3. Brand-wise performance and promoter profiles
4. Demand drivers and macro backdrop
5. ICE versus EV business models
6. Implications and 2026 outlook
7. Frequently asked questions

India’s Two-Wheeler Recovery in Context

India’s two-wheeler sector entered 2026 on the back of a broad-based recovery, with total registrations crossing about 2.02 crore units in calendar 2025, around 7 percent higher than 2024. This recovery is particularly relevant for stakeholders tracking pre-COVID normalisation, rural consumption, and the health of the broader automotive value chain.

Key contextual signals for decision-makers include:

• Two-wheeler registrations in 2025 at approximately 2.02 crore units, up about 7 percent year on year, confirming a sustained up-cycle and approaching pre-pandemic volumes.

• Wholesale growth estimates of 6–9 percent for FY26, supported by lower GST, healthier rural incomes and replacement demand, pointing to continued momentum rather than plateauing volumes.

• Electric two-wheelers crossing roughly 1.14–1.2 million units in 2025 (fiscal or calendar, depending on the cut), indicating that EVs are now a meaningful structural driver and not a niche.

Professionals who ask questions such as “Is India’s two-wheeler demand recovery sustainable?”, “What is the outlook for two-wheeler stocks in 2026?”, or “How fast are electric scooters gaining share?” will find actionable clues in the December 2025 pattern and the full-year data.

December 2025 Sales Snapshot

December 2025 delivered strong year-on-year growth but a predictable sequential cooldown after a record festive period. This combination is crucial for distinguishing a genuine demand upturn from a festive-led distortion.

December Volumes and Growth

• Total domestic bike (motorcycle plus scooter) sales in December 2025 came in at around 13,14,414 units, up from roughly 12,00,472 units in December 2024, indicating a clear recovery in underlying demand.

• On a month-on-month basis, volumes dropped sharply from the roughly 25 lakh-plus units sold in November 2025, reflecting post-Diwali inventory normalisation rather than a sudden collapse in consumer sentiment.

This pattern is consistent with the usual Indian automotive seasonality, where:

• OEMs push wholesales during October–November to stock dealerships for festive footfall, leading to a spike in factory dispatches and retail registrations.

• December typically sees a pullback in wholesales as dealers unwind excess inventory and customers defer purchases to the new calendar year for better resale perception.

For analysts building models, December’s year-on-year growth, coupled with sequential normalisation, supports the thesis of a cyclical recovery with seasonal volatility rather than a fragile, festival-dependent bounce.

Brand-Wise Performance and Promoter Profiles

The December 2025 leaderboard was dominated by familiar names, whose promoter backing, product portfolios and capital allocation strategies have a direct bearing on investor risk and return.

December 2025 Brand Snapshot

The table below summarises the positioning of key two-wheeler brands in December 2025 and their promoter profiles.

Leading Brands and Promoters

Here is a more concise, investor-friendly 2-column version, with the second column tightened to essentials only:

In December 2025, Honda led domestic two-wheeler sales, followed by Hero MotoCorp and TVS Motor Company, illustrating the continued dominance of large-scale, multi-product OEMs with strong promoter support and capital access. Bajaj and Royal Enfield maintained their positions in the commuter-plus-premium and pure-premium niches, respectively, while Suzuki reinforced its urban scooter strengths.

For equity investors assessing promoter quality and governance, these players offer:

• Established track records of conservative balance sheets and disciplined capital allocation, especially at TVS, Bajaj and Eicher.

• Long-term investments in R&D, emission compliance and emerging EV technologies, which underpin competitive moats.

Understanding individual OEM performance is easier when viewed within the broader sector context. Review the automobile two and three-wheeler sector data to compare key listed players.

Demand Drivers and Macro Backdrop

December 2025 sales were shaped by a mix of policy decisions, rural recovery, replacement cycles and festive seasonality, which together provide a multi-layered explanation for the uptrend.

Policy Tailwinds and GST 2.0

The GST 2.0 restructuring, which reduced tax on motorcycles and scooters up to a certain displacement band from 28 percent to 18 percent, significantly improved affordability during 2025. Ratings agencies such as ICRA explicitly cite this reduction in GST as a core reason for expecting 6–9 percent two-wheeler volume growth in FY26.

For households deciding between postponing or advancing purchases, this tax change translated into:

• Lower on-road prices for most commuter bikes and scooters make upgrades and first-time purchases more attractive.

• Better economics for fleet buyers, gig workers and small businesses using two-wheelers as income-generating assets.

From a policymaker’s angle, the GST cut has functioned as a targeted stimulus for an employment-intensive sector with strong backward linkages into tyres, components and finance.

Rural and Semi-Urban Revival

ICRA and industry reports highlight that healthy rural incomes, supported by a normal monsoon and improved farm cash flows, have been crucial for the two-wheeler recovery. Rural and small-town markets remain the backbone of commuter motorcycle demand for brands such as Hero, Honda and Bajaj, where two-wheelers serve as essential mobility rather than discretionary lifestyle purchases.

In practice, this has meant:

• Replacement demand that was deferred during the pandemic and early post-pandemic period has started to normalise, lifting volumes in the 100–125 cc commuter category.

• Semi-urban and rural consumers using bikes for farm-to-market connectivity, education and employment have resumed upgrades from older, less efficient models.

For lenders and NBFCs, this rural recovery has supported healthier loan disbursement and lower delinquencies in two-wheeler portfolios, reinforcing the sector’s credit attractiveness.

Festive Season and Inventory Dynamics

November 2025 was an exceptional month, with two-wheeler wholesales growing sharply as OEMs stocked dealerships ahead of Diwali and allied festivals. FADA data and analyst commentary indicate that this surge was followed by a natural moderation in December, with dealers focusing on retail sell-through and inventory correction.

The key operational implications for OEMs and dealers are:

• Inventory and credit discipline remain critical, as aggressive festive stocking can quickly become a liability if not matched by retail offtake.

• Analysts must interpret monthly wholesale volatility in light of festival calendars and regulatory milestones instead of extrapolating single-month swings.

ICE vs EV Business Models

December 2025 and the full-year EV data make it clear that India’s two-wheeler industry is now running on a dual-track model: profitable ICE franchises funding measured EV bets, while EV-focused OEMs chase rapid scale and software-driven monetisation.

ICE-Centric OEMs: Resilient Cash Engines

Legacy manufacturers such as Honda, Hero, Bajaj, TVS and Royal Enfield still derive the bulk of their volumes and profits from ICE motorcycles and scooters. Their business models share several common features:

• Revenue mix

  • High-volume commuter motorcycles (typically 100–125 cc) and mass-market scooters form the core revenue and scale driver.

  • Premium and performance sub-brands, such as Royal Enfield’s 350–650 cc range or Bajaj’s Pulsar line, provide higher margins and stronger realisations per unit.

• Profit pools and after-sales ecosystems

  • Profits are anchored in a combination of vehicle margins, spare parts, accessories and high-margin service revenue from dense dealer and workshop networks.

  • These networks extend across rural and urban India, creating powerful barriers to entry for new competitors and supporting higher lifetime value per customer.

• Capital allocation priorities

  • Incremental investments in ICE platforms focus on emissions upgrades, fuel efficiency, and feature additions ahead of tighter norms, such as TREM V.

  • Selective but growing capital deployment into EV platforms, often leveraging shared components, supplier bases and brand equity.

  • Export expansion into Africa, Latin America and Asia to diversify away from domestic cyclicality and to leverage cost-competitive production.

This model gives ICE-centric OEMs robust free cash flow to fund EV experiments, absorb regulatory shocks and keep leverage low.

EV-Focused OEMs: Scale, Software and Direct Distribution

Electric two-wheeler players, including both start-ups and legacy brands’ EV divisions, operate under a different set of constraints and opportunities. The EV segment crossed around 1.14–1.2 million units in FY2025 or CY2025, registering roughly 21 percent year-on-year growth and representing around 58 percent of India’s total EV market by volume.

Key characteristics of EV business models include:

• Dependence on rapid scale and cost curves

  • Early growth was supported by subsidies, but future competitiveness depends on reducing battery costs, improving localisation and scaling manufacturing to dilute fixed costs.

  • Unit economics increasingly hinge on higher utilisation of platforms and shared architectures across models.

• New revenue avenues

  • Over-the-air updates, connected services, subscription features and data-driven services are emerging as additional revenue streams beyond the initial vehicle sale.

  • Fleet and B2B applications, such as last-mile delivery and rentals, create opportunities for recurring or service-linked revenue.

• Distribution and brand-building

  • Many EV brands favour direct-to-consumer or asset-light showroom formats, with strong digital acquisition and experience-led flagship stores.

  • High-visibility online marketing and experiential campaigns compensate for relatively smaller legacy dealer footprints compared with ICE incumbents.

Within this landscape, TVS and Bajaj have emerged as standout legacy OEMs in EVs, with TVS often leading monthly e-scooter charts while Ola Electric’s share has shown volatility. For investors searching “Which two-wheeler stock is best placed for EV transition?”, TVS, Bajaj and increasingly Hero often feature due to their dual strength in ICE cash flows and rising EV volumes.

Hybrid Strategy: Bridging ICE and EV

Most incumbent OEMs are now executing a hybrid strategy that seeks to:

• Protect profitable ICE niches, especially in rural commuter and premium lifestyle segments where EV adoption may be slower due to infrastructure, price and range perceptions.

• Ramp up EV offerings in urban and peri-urban markets, where charging access is better, and total cost of ownership advantages are more compelling for high-usage riders.

• Share ecosystems, such as vendor networks, financing partnerships and servicing infrastructure, across ICE and EV platforms to keep capital intensity manageable.

For strategy teams and consultants, this hybrid approach is a central organising principle for product roadmaps, capacity planning and capital budgeting through the remainder of the decade.

Implications and 2026 Outlook

December 2025 data and full-year trends provide a relatively clear line-of-sight into 2026, particularly around growth expectations, competitive dynamics and risk factors.

Industry Health and Value Chain Impact

The combination of mid-teens year-on-year growth in December 2025 and more than 2 crore two-wheeler registrations for the year suggests the industry is firmly out of its post-pandemic trough. This has several downstream implications:

• Tyre manufacturers, component suppliers and auto financiers see better volume visibility and improved operating leverage as two-wheeler OEM schedules normalise and grow.

• Rising two-wheeler penetration and replacement demand reinforce the vehicle’s role as essential mobility for work, education and daily life in India, rather than as a purely discretionary purchase.

For macro analysts tracking consumption and employment trends, the health of the two-wheeler sector is a useful high-frequency proxy for mass-market demand.

Competitive Dynamics and Consolidation

The competitive landscape entering 2026 is marked by consolidation in favour of scale players with clear brand architectures and strong R&D capability. Honda’s leadership, Hero’s entrenched commuter dominance, TVS’s dual success in ICE and EV, and Bajaj’s export plus premium strengths highlight the advantages of diversification and execution depth.

Likely medium-term trends include:

• Increased margin pressure on mid-tier ICE brands and smaller EV start-ups as customers place greater emphasis on reliability, network reach and resale value.

• Potential partnerships, consolidation or exits among weaker EV-only brands that struggle to sustain high cash burn and keep pace with product and technology upgrades.

For equity and venture investors, portfolio quality will increasingly depend on alignment with brands that combine scale, capital discipline and credible EV strategies.

For investors assessing EV exposure beyond traditional auto OEMs, this index provides a market-level view of listed new-age electric mobility players. View the live performance and constituents of the NSE EV New-Age Index.

2026 Growth Expectations and Risk Factors

Forecasts from ICRA and other agencies suggest that domestic two-wheeler volumes are likely to grow about 6–9 percent year on year in FY26. The key drivers and risks behind these projections include:

• Supportive drivers

  • GST rate cuts that permanently improve affordability across key displacement bands.

  • Continued rural recovery, assuming a broadly normal monsoon and stable agricultural prices.

  • Replacement demand as owners of older BS3/BS4 vehicles upgrade ahead of stricter emission norms, such as TREM V.

• Risks and sensitivities

  • Volume lumpiness around festivals, elections and regulatory milestones, which could affect quarterly numbers and dealer inventory metrics even in a structurally positive year.

  • Policy shifts or subsidy changes in the EV segment that may temporarily disrupt demand patterns and favour better-capitalised players.

For investors wondering “Is 2026 a good time to enter Indian two-wheeler stocks?”, the data suggests a structurally improving demand environment with selective stock-picking opportunities around OEMs best placed for ICE–EV transition, export growth and margin defence.

In-Focus for 2026: What Will Differentiate Winners?

Across OEMs, suppliers and financiers, the most important differentiators in 2026 are likely to be:

• Product innovation in both ICE (features, fuel efficiency, compliance) and EV (range, charging speed, software) categories.

• Network strength, including deep rural touchpoints, urban premium showrooms, and integrated digital journeys for discovery, finance and after-sales.

• Financial discipline, as promoters and management teams pursue hybrid ICE–EV strategies without overstretching balance sheets or compromising returns on capital.

Stakeholders who align with these themes in investments, partnerships or policy design are better placed to benefit from India’s evolving two-wheeler landscape.

If you want a quick, visual recap of December’s EV performance alongside broader two-wheeler trends, this breakdown adds helpful context beyond raw data. View the December 2025 EV two-wheeler sales summary video.

FAQs

How strong was India’s two-wheeler market in 2025?
India registered roughly 2.02 crore two-wheelers in calendar 2025, around 7 percent higher than 2024, confirming a sustained recovery phase. December 2025 alone saw about 13.14 lakh units sold, up year on year despite a sequential drop after the festive peak.

Why did December 2025 sales fall compared with November?
November 2025 benefited from heavy festive-season stocking and high retail footfall, which pushed wholesales sharply higher. December reflected normalisation as dealers focused on clearing inventory, so the month-on-month decline is seasonal rather than a sign of weakening demand.

How fast are electric two-wheelers growing in India?
Electric two-wheelers reached roughly 1.14–1.2 million units in FY2025 or CY2025, growing around 20–21 percent year on year and accounting for nearly 58 percent of India’s EV market volumes. Established OEMs such as TVS and Bajaj, along with EV-focused players, are driving this expansion.

Which two-wheeler brands are best positioned for the EV transition?
TVS and Bajaj are among the strongest legacy OEMs in EVs, combining solid ICE franchises with growing electric scooter portfolios. Hero and Honda are also investing in EVs while leveraging deep networks and brand strength, positioning them to benefit as adoption broadens.

What is the two-wheeler growth outlook for FY26?
ICRA and other agencies project domestic two-wheeler volume growth of about 6–9 percent in FY26, supported by GST cuts, stable rural incomes, urban demand recovery and replacement purchases. Volumes may remain choppy around festivals and regulatory deadlines, but the underlying trajectory appears positive.

Are two-wheelers still essential in India as car ownership rises?
Yes, two-wheelers remain essential mobility tools for large segments of India’s population, especially in rural and semi-urban regions where road conditions, incomes and parking constraints favour two-wheelers. They are used for commuting, small business operations, deliveries and family transport, underpinning durable baseline demand.

How important is GST 2.0 for two-wheeler affordability?
GST 2.0 reduced the tax rate on most mass-market motorcycles and scooters from 28 percent to 18 percent, translating into noticeably lower on-road prices. This structural cut has improved affordability, supported replacement purchases and underpinned growth expectations for FY26.

What risks should two-wheeler investors watch in 2026?
Key risks include uneven monsoons affecting rural demand, policy uncertainty around EV incentives, and potential oversupply or inventory build-up if OEMs misjudge festive or regulatory demand. Competitive intensity in EVs could also pressure margins for weaker or sub-scale players.

Do two-wheeler exports matter for Indian OEMs?
Exports are an important pillar of diversification for OEMs such as Bajaj, TVS, and Hero, providing access to foreign-currency earnings and hedging against domestic cycles. Growth in Africa, Latin America and parts of Asia supports capacity utilisation and strengthens the case for continued investment in product and platform development.

How do dealers fit into the two-wheeler value chain now that EVs are rising?
Traditional dealers remain central to ICE sales, financing, and servicing, especially outside metros, and they sustain a significant share of OEM profits. EV brands are experimenting with hybrid and direct-to-consumer models, but service, spares and local trust still make physical networks