India’s two-wheeler industry could see a significant slowdown in domestic sales growth in financial year 2028 (FY28), as the boost from lower Goods and Services Tax (GST) rates fades and purchases brought forward by the tax cut begin to weigh on demand. Brokerage Bernstein expects domestic two-wheeler volumes to grow just 2.1% in FY28, compared with a projected 9.7% in FY27.
The outlook points to a pause after a period of stronger sales momentum. Bernstein expects scooters to remain more resilient than motorcycles, while the next major industry-wide growth boost may arrive in FY29, when wage revisions could support household incomes and vehicle purchases. The projections also put the focus on manufacturers’ ability to gain market share in a slower-growing market.
Key Takeaways
- FY28 growth forecast: Bernstein expects domestic two-wheeler volumes to increase 2.1%, down from 9.7% in FY27.
- GST boost fading: Lower taxes supported affordability and encouraged some consumers to replace vehicles earlier than planned.
- Scooters to outperform: Bernstein forecasts scooter growth of 3.3% in FY28, compared with 1.4% for motorcycles.
- Recovery expected in FY29: The brokerage projects industry growth of 12.4%, with wage revisions expected to provide an income-led demand boost.
- Stocks may diverge: Bernstein rates Bajaj Auto Outperform, while TVS Motor, Hero MotoCorp and Eicher Motors carry Market-Perform ratings, according to Moneycontrol’s report.
Two-Wheeler Growth Forecast Falls Sharply in FY28
Bernstein’s projections suggest that India’s two-wheeler market could move from strong growth to a period of limited expansion over the next two financial years.
Bernstein’s domestic volume growth estimates
| Financial year | Overall two-wheelers | Scooters | Motorcycles |
|---|---|---|---|
| FY27 | 9.7% | 14.4% | 7.2% |
| FY28 | 2.1% | 3.3% | 1.4% |
| FY29 | 12.4% | 15.0% | 11.0% |
Source: Bernstein estimates reported by Moneycontrol. Figures are forecasts, not actual results.
The forecast implies that industry growth could slow by 7.6 percentage points between FY27 and FY28. Motorcycles, which account for a substantial share of India’s two-wheeler market, are expected to experience particularly modest growth.
The projected FY29 rebound would represent a substantial improvement from FY28. However, it remains an outlook rather than a guaranteed recovery. Household income growth, financing conditions, rural demand, vehicle affordability and manufacturers’ pricing decisions will influence the eventual trajectory.
Why the GST Boost Is Losing Momentum
The GST rate reduction introduced in September 2025 improved affordability for a large part of India’s two-wheeler market. The government reduced the GST rate on motorcycles with engine capacities of up to 350cc, including 350cc models, from 28% to 18%. Motorcycles exceeding 350cc fall under a different tax treatment. The government said the reduction was intended to make vehicles more accessible and support demand. (Government of India announcement)
The tax change supported sales through two channels. First, lower prices improved affordability for prospective buyers, including households that had previously found a new vehicle too expensive. Second, existing owners had a stronger incentive to replace older motorcycles and scooters sooner.
That combination helped lift volumes, but it can also shift purchases forward in time. Consumers who replace their vehicles earlier may not need another one in the following year. As a result, a period of unusually strong sales can be followed by slower growth even if the underlying market remains sizeable.
Bernstein’s analysis suggests this replacement effect is an important factor behind the expected FY28 slowdown. The brokerage estimates that replacement purchases account for around 75% of motorcycle demand and 55% of scooter demand. These are estimates cited in Moneycontrol’s report, not official industry-wide measurements.
Price increases could reduce the remaining benefit
The original tax reduction does not necessarily translate into a permanent price advantage of the same size. Manufacturers may raise prices in response to input costs, product changes and other commercial considerations.
According to Bernstein’s estimates reported by Moneycontrol, the remaining effective price advantage from the GST cut is expected to narrow from around 5% in FY27 to approximately 3% in FY28. This could reduce the incentive for new buyers and customers considering an upgrade.
The result is a market facing two overlapping pressures: some replacement purchases have already happened, and the continuing affordability benefit may be smaller than it was immediately after the tax change.
Scooters Expected to Hold Up Better Than Motorcycles
Bernstein expects scooters to provide some support to the wider two-wheeler market during FY28. Its forecast puts scooter growth at 3.3%, compared with 1.4% for motorcycles.
The difference reflects changes in consumer preferences and the mix of products sold in India. Scooters have become an important part of urban and household mobility, while premium motorcycles have attracted buyers seeking higher-powered vehicles and upgraded features.
Even so, the projections suggest that neither segment will be immune to the broader slowdown. Scooter growth is also expected to fall sharply from its projected 14.4% in FY27.
Premiumisation is changing the market
The Indian motorcycle market has gradually shifted away from entry-level models towards more premium categories. Bernstein’s analysis, as reported by Moneycontrol, puts the share of entry motorcycles at approximately 43%, down from around 67% previously.
This transition matters because manufacturers with a strong presence in premium motorcycles, scooters and electric two-wheelers may have more opportunities to grow than companies that rely heavily on entry-level commuter models.
However, premiumisation is not a complete defence against weaker demand. More expensive vehicles still depend on consumers’ willingness and ability to spend. If household budgets come under pressure or financing becomes less attractive, buyers may postpone upgrades or choose less expensive models.
The industry’s challenge is therefore not simply to sell more premium vehicles. Companies must balance pricing, product availability and affordability while responding to different customer needs.
What the Forecast Means for Bajaj Auto, TVS Motor, Hero MotoCorp and Eicher Motors
When an industry is growing rapidly, manufacturers can benefit from rising demand across the market. When overall growth slows, performance is more likely to depend on market-share gains, product mix, exports and the ability to protect profitability.
Bernstein’s stock assessments, as reported by Moneycontrol, reflect these differences.
| Company | Bernstein rating reported by Moneycontrol | Factors highlighted in the report |
|---|---|---|
| Bajaj Auto | Outperform | Domestic and export exposure, commuter and premium products, and electric scooters |
| TVS Motor | Market-Perform | Scooter exposure and market-share gains, with valuation already reflecting some opportunities |
| Hero MotoCorp | Market-Perform | Greater exposure to mass-market motorcycles and replacement-led demand |
| Eicher Motors | Market-Perform | Premium Royal Enfield franchise and a buying cycle different from the commuter market |
These are brokerage ratings reported in the cited article, not investment recommendations.
Bajaj Auto
Bernstein favours Bajaj Auto, pointing to its combination of domestic sales, exports, commuter motorcycles, premium products and electric scooters. A diversified business can offer more ways to grow when demand in one segment weakens.
Export performance can also help offset domestic pressure. However, international markets bring their own currency, regulatory and demand risks, and stronger exports do not automatically guarantee higher earnings.
TVS Motor
TVS Motor is positioned to benefit from the growing importance of scooters and from market-share gains. Yet Bernstein’s Market-Perform rating suggests that a strong business outlook does not necessarily mean a stock offers unlimited upside at its current valuation.
For investors, the distinction between a company’s operating performance and the price paid for its shares remains important.
Hero MotoCorp
Hero MotoCorp has greater exposure to mass-market motorcycles, making its performance more sensitive to entry-level demand and the replacement cycle. If consumers delay purchases or remain cautious about spending, this part of the market could face greater pressure.
A recovery in rural demand, improved affordability and stronger replacement activity could support the company, but the timing and strength of those factors remain uncertain.
Eicher Motors
Eicher Motors, through Royal Enfield, operates in a more premium motorcycle segment. Its customers and product mix differ from those of mass-market commuter manufacturers, meaning its sales may not follow the industry’s overall growth rate exactly.
Premium positioning can offer pricing and brand advantages, but it does not eliminate exposure to consumer confidence, input costs or changing demand.
Industry Growth and Stock Performance May Diverge
The slowdown forecast does not mean every two-wheeler manufacturer will experience the same level of weakness. Companies can outperform a slow-growing market by launching successful models, improving distribution, expanding exports or winning customers from competitors.
Conversely, a manufacturer can report sales growth and still disappoint investors if its results fall short of expectations or its valuation already assumes strong performance.
This distinction will be important in FY28. Investors will need to assess individual companies’ sales volumes, average selling prices, operating margins, inventory levels, export performance and electric-vehicle strategies rather than relying solely on the industry-wide forecast.
Bernstein’s ratings provide one brokerage’s assessment of the companies, but they should be considered alongside financial results, valuations, risk tolerance and other research. Forecasts can change as new monthly sales data and company guidance become available.
What Could Change the Outlook?
Several factors could influence whether the industry follows Bernstein’s projected slowdown and recovery pattern.
Household income and rural demand: Stronger income growth could encourage consumers to buy or replace vehicles. Weaker rural earnings or uncertainty over agricultural income could delay purchases, particularly in commuter-focused segments.
Vehicle prices and financing: Further price increases could offset some of the GST-related affordability gains. Loan interest rates, down-payment requirements and access to vehicle financing will also affect purchasing decisions.
Festive demand and replacement purchases: Strong festive-season sales could support near-term volumes, but one strong period would not necessarily disprove a slowdown forecast for the following financial year.
Exports and electric vehicles: Manufacturers with growing export markets or competitive electric two-wheelers may find additional sources of growth. The contribution will depend on demand, competition, costs and the profitability of those businesses.
The next several quarters of retail and wholesale sales data will help show whether the post-GST surge is giving way to a sustained slowdown or whether demand remains stronger than expected.
The Bigger Picture
The two-wheeler outlook illustrates the difference between a policy-driven demand boost and sustained underlying growth. A tax cut can lower purchase costs and encourage consumers to act sooner, but it cannot by itself guarantee that sales will continue accelerating every year. When some buyers bring forward their purchases, the resulting comparison period can become more challenging.
For India’s manufacturers, the projected FY28 slowdown could increase the importance of product strategy, exports, premiumisation and operational efficiency. For consumers, the market may offer a more measured sales environment, although actual prices will depend on manufacturers’ decisions, input costs, discounts and financing terms. For investors, the central question is likely to be which companies can maintain earnings growth when the overall market expands only modestly.
What Happens Next?
Investors and industry observers will be watching monthly two-wheeler sales, festive-season demand, manufacturer price announcements and signs of a change in household spending. Company updates from Bajaj Auto, TVS Motor, Hero MotoCorp and Eicher Motors should provide further clues about the strength of their order books, domestic demand, exports and product mix.
Bernstein expects a more meaningful industry-wide growth revival in FY29, partly on the assumption that wage revisions will support consumer incomes. That recovery remains conditional on the wider economic environment and the timing of purchases. Until then, market-share gains and company-specific execution could matter more than the headline growth rate for the industry.
Frequently Asked Questions
1. How much is India’s two-wheeler market expected to grow in FY28?
Bernstein forecasts domestic two-wheeler volume growth of 2.1% in FY28, down from its 9.7% projection for FY27.
2. Why is two-wheeler growth expected to slow?
The GST reduction improved affordability and encouraged some consumers to replace vehicles earlier. As that initial boost fades and some purchases have already been brought forward, demand growth could moderate.
3. Will scooters perform better than motorcycles?
Bernstein forecasts scooter growth of 3.3% in FY28, compared with 1.4% for motorcycles. Both estimates indicate slower growth than in FY27.
4. Which two-wheeler stocks does Bernstein prefer?
Moneycontrol reports that Bernstein rates Bajaj Auto Outperform, while TVS Motor, Hero MotoCorp and Eicher Motors are rated Market-Perform. These are brokerage assessments, not guarantees of future stock returns.
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