New Delhi [India] January 9 : The volume of two-wheelers (2Ws) and tractors will grow at a compounded annual growth rate (CAGR) of 13 to 15 per cent, 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 per cent and 15 per cent CAGR respectively over FY25-27E (FY25E: 12 per cent and 6 per cent)," 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 per cent.
"We expect PVs and trucks to grow at 8 per cent and 5 per cent CAGR over FY25-27E (FY25E: +2 per cent and -4 per cent)," 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 per cent year-on-year (YoY), surpassing the PV growth which remained at 8 per cent.
But despite the recovery in FY24, 2W growth remained at 13 per cent below their FY19 peak, while PV volumes rose 25 per cent above their pre-pandemic levels.
Tractors are emerging as another bright spot, with the sector positioned for a cyclical recovery, 12 and 15 per cent growth respectively for 2Ws and tractors are expected in FY25-27.
Conversely, PVs and trucks are projected to grow more modestly at 8 per cent and 5 per cent 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 per cent 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 per cent by FY27, with Bajaj Auto and TVSL leading the segment.
In PVs, EV adoption remains slower at 2 per cent, with Tata Motors leading the charge amid rising competition, as per the report.
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