Two-wheeler stocks: Can the onset of festive demand offset weak monsoon?

India’s two-wheeler market has entered the second half of FY27 on the back of strong sales growth, with rural demand and the benefits of lower goods and services tax (GST) rates supporting the recovery. However, the sustainability of this momentum remains a key question as the festive season approaches, the monsoon shortfall raises concerns over farm incomes, and price increases by manufacturers add to the cost of vehicle ownership.

 

Sunny Agrawal, Head of Fundamental Research at SBI Securities, said two-wheeler retail sales have grown 21 per cent y-o-y in 1HFY27. The base, however, will become unfavourable starting October as the GST-led demand boost of last year starts appearing in the base. Agrawal also noted that OEMs have hiked prices in the last 6 months to offset the higher raw material costs across steel, aluminium, copper, polymers and electronic components.

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The rural outlook remains a concern following a deficient monsoon with a nationwide rainfall deficit at 13 per cent, with some regions recording 20–30 per cent lower rainfall. On this, Agrawal noted that, post a weaker monsoon, Kharif crop yields across regions are expected to fall. Various climate models suggest that the El Nino is expected to peak somewhere between December and February, which will impact the Rabi season with higher temperatures and lower reservoir and soil moisture.

 

“Rural consumption is expected to get impacted; however, the impact on overall rural cash flows could get mitigated by supportive government measures,” he said.

 

Nitant Darekar, research analyst at Bonanza, similarly highlighted the uneven agricultural outlook, noting that the monsoon ended 12.6 per cent deficient, the weakest since 2015, with east and northeast India about 25.6 per cent short and Karnataka around 35 per cent deficient. “Planting reached about 96 per cent of last year’s acreage, protecting near-term farm cash flows, but reservoirs at about 70 per cent of capacity, a decade low, cloud Rabi income,” he said.

 

Despite these concerns, demand indicators remain encouraging. Darekar said two-wheeler industry growth rates have remained strong so far in 1HFY27 as GST rate cut momentum carried on with rural outperforming urban markets.

 

He noted that TVS Motor is best placed for stronger y-o-y growth. Its September retail grew 42.4 per cent to 3,64,640 units, taking share to 20.37 per cent, while EV dispatches more than doubled to 65,799 units, giving it the most balanced mix across scooters, motorcycles and electric.

 

He added that Hero MotoCorp follows, with retail up 31.4 per cent and domestic dispatches up 14.12 per cent, a direct play on the rural commuter revival. Royal Enfield retains H1FY27 domestic growth of 23 per cent, although its above 350 cc volumes fell 26 per cent in September. Bajaj Auto lags domestically, with domestic two-wheeler dispatches down 12 per cent and growth carried by a 34 per cent rise in exports.

 

Prathamesh Kadival, research analyst at Bonanza, noted that India’s two-wheeler industry is likely to grow between 7 per cent and 9 per cent in FY27, with volumes crossing 29 million units, according to Crisil, while ICRA stays cautious at 3 per cent to 5 per cent on a high base.

 

“Growth will come on the back of GST cuts, premiumisation and rising exports. Among players, TVS Motor looks best placed through market share gains, EV push and export strength, followed by Bajaj Auto on strong exports and Eicher Motors on steady Royal Enfield demand across the premium segment,” he added.

 

Disclaimer: Views and outlook in this report belong to the brokerages and analysts cited. They do not reflect the views of Business Standard. Readers are advised to exercise discretion.