Slow Growth Forecast for Two-Wheeler Sector Amid Inventory Woes

Jefferies predicts single-digit growth for the two-wheeler sector in FY26, attributing it to high inventories and low inquiries. The sector might see a slight improvement by FY27. Potential demand boosts from tax cuts and salary hikes in FY27 may not fully offset the current slowdown.

The two-wheeler automobile sector in India is projected to experience single-digit growth of 8% in the fiscal year 2026, according to a recent report by Jefferies. This deceleration is linked to elevated inventory levels and a noticeable drop in customer inquiries.

On a slightly optimistic note, the report suggests the sector could see growth uptick to 11% in FY27 and FY28. The declining demand has led to a surplus of unsold vehicles, indicating a currently low market demand for automobiles.

Despite the slowdown, potential positive catalysts such as recent income tax cuts and planned salary hikes for government employees in FY27 could offer a reprieve and stimulate purchasing activity within the sector. However, Jefferies has adjusted their growth forecasts downward by 6% for FY26 and 2% for FY27.

(With inputs from agencies.)