Tractors are emerging as another bright spot, with the sector positioned for a cyclical recovery, 12 and 15% growth respectively for 2Ws and tractors are expected in FY25-27. The volume of two-wheelers (2Ws) and tractors will grow at a compounded annual growth rate (CAGR) of 13 to 15%, outpacing passenger vehicles (PVs) and trucks between financial year (FY) 2025-27, stated a report by Jefferies an investment banks and financial services company.
"We expect 2Ws and tractors to grow at strong 13% and 15% CAGR respectively over FY25-27E (FY25E: 12% and 6%)," says the report. The report added that the volume growth of passenger vehicles and trucks segment is expected to grow at a rate ranging from 5 to 8%.
"We expect PVs and trucks to grow at 8% and 5% CAGR over FY25-27E (FY25E: +2% and -4%)," adds the report.
Jefferies highlighted that these, growth forecasts for 2Ws and tractors are a turnaround from recent years, as between FY21 and FY23, the 2W demand lagged behind PVs due to pandemic-related disruptions and increased regulatory costs, which affected affordability in less affluent segments.
However, the volume of 2W wholesales rebounded strongly in FY24, growing by 14% year-on-year (YoY), surpassing the PV growth which remained at 8%.
But despite the recovery in FY24, 2W growth remained at 13% below their FY19 peak, while PV volumes rose 25% above their pre-pandemic levels.
Tractors are emerging as another bright spot, with the sector positioned for a cyclical recovery, 12 and 15% growth respectively for 2Ws and tractors are expected in FY25-27.
Conversely, PVs and trucks are projected to grow more modestly at 8% and 5% CAGR, respectively, during the same period.
The report added that in the PV segment, market shares of traditional leaders Maruti Suzuki and Hyundai fell to 12-year lows in 1HFY25.
Jefferies stated that Mahindra & Mahindra (MM) is capitalising on this shift and is expected to overtake Hyundai as the second-largest original equipment manufacturer (OEM) in PVs by FY27.
The report sheds light on Electric vehicles (EVs), adding that the share of EVs in 2W sales has stagnated in the 4-7% range for the last two years despite launches of lower-priced vehicles by OEMs.
Despite new lower-cost models, widespread adoption has been hindered by concerns over reliability, longevity, and resale value, the report added.
However, it expects EV penetration in 2Ws to rise to 10% by FY27, with Bajaj Auto and TVSL leading the segment.
In PVs, EV adoption remains slower at 2%, with Tata Motors leading the charge amid rising competition, as per the report.
