Outlook 2026: What’s next for the 2-wheeler industry?

2025 was a roller coaster year for the auto industry. The first half saw a supply chain crunch, as China curbed rare earth materials, which significantly hit the electric vehicle market. This pushed the electric two-wheeler makers on the back foot, forcing them to ideate new models that would not be rare-earth metal dependent.

Adding fuel to their woes, the electric two-wheeler makers were losing their momentum as the gap between ICE two-wheelers and EVs reduced. Before the new GST norms, ICE two-wheelers attracted 28% and EVs attracted only 5%. But with the latest norms effective since September, taxes on ICE scooters and motorcycles with smaller displacement came down to 18%.

Furthermore, the government has already announced it will not extend the existing subsidies, such as the FAME and PM E-Drive programmes for electric two-wheelers and three-wheelers, beyond the current fiscal year.

Demand trends and market slowdown

The country, which is a massive market for scooters and entry-level motorcycles, continues to see growth in sales, crossing the 20 million-mark in terms of sales, yet saw a single-digit growth in comparison to 2024, which was a blockbuster year, rising 14.5% on a YoY basis.

Slowing down the overall sales numbers of two-wheelers was GST 2.0. In the second half, Prime Minister Narendra Modi, in his Independence Day speech, announced GST reforms that brought cheer to the 4-wheeler automakers, as there were massive price cuts for models in the sub-4 metre segment.

But the two-wheeler industry, especially motorcycle manufacturers that offer 350 cc models, did not echo a similar sentiment to the news. This was because the GST on premium bikes rose from 28% to 40%, making them more expensive and less attractive to buyers.

Outlook for 2026: 

Kranthi Bathini of WealthMills believes the Indian two-wheeler industry is entering 2026 at a decisive inflexion point, marked by consolidation rather than acceleration. “The two-wheeler sector is at an inflexion point right now,” he says, pointing to a market split between legacy ICE players such as Hero, TVS and Bajaj, and the electric two-wheeler ecosystem. 

While entry-level ICE motorcycles continue to hold ground, Bathini notes that the EV segment is grappling with multiple headwinds. “There is a pricing challenge, and also still the EV infrastructure is at a very, very nascent stage,” he says, adding that buyer confidence remains uneven.

As the industry moves into 2026, Bathini expects GST 2.0 to continue reshaping consumer behaviour. With entry-level cars becoming more affordable, the traditional value proposition of two-wheelers is under strain. “When a person is affording an electric two-wheeler at ₹1.5 lakh, if he stretches his budget, he will get an entry-level car,” he explains. Even the used-car market is emerging as a substitute.

Premium motorcycles face a different challenge. While demand for models above 350 cc remains driven by aspiration, higher GST has raised entry barriers. Bathini argues that volumes are likely to soften, even if buyers remain relatively price-insensitive. “If a person wants to go for premium, they have already made up their mind—GST doesn’t matter much,” he says, describing demand in this segment as largely inelastic.