India’s two-wheeler market is heading into a clear pause. After a strong GST-driven run, Bernstein now expects domestic volumes to grow only 2.1% in FY28, a sharp deceleration from the 9.7% growth forecast for the current financial year.
The brokerage’s revised numbers show full-year FY27 growth at 9.7%, with the second half already slowing to around 6.2%. Recovery is projected only in FY29, when wage revisions are assumed to lift household incomes and push industry growth back to 12.4%.
How the GST effect is fading
Domestic two-wheeler volumes grew 17% between September and March of FY26 and roughly 14% in the first half of FY27. The GST rate cut brought some new households into the market and also pulled forward replacement purchases by existing owners. That dual boost is now beginning to lose momentum.
Monthly data already show the slowdown. By August, motorcycle growth had turned negative while scooter growth moderated from earlier highs. September’s weak domestic numbers triggered a correction in several two-wheeler stocks that had previously outperformed passenger-vehicle names.
Bernstein’s replacement model is central to the forecast. Around 75% of motorcycle demand and 55% of scooter demand is estimated to be replacement-led. The GST cut raised the probability that owners of older vehicles would replace earlier. Those purchases supported FY27 volumes but leave a thinner pool of potential buyers in FY28. New-buyer demand continues to benefit from lower effective prices, yet the price advantage narrows from about 5% in FY27 to 3% in FY28 as subsequent hikes absorb part of the tax cut.
Scooters remain the stronger segment
Scooters are expected to cushion the industry slowdown. Bernstein forecasts domestic scooter growth of 14.4% in FY27, 3.3% in FY28 and 15% in FY29. Motorcycles are projected to grow 7.2%, 1.4% and 11% over the same three years.
The structural shift towards scooters and higher-engine motorcycles continues. Entry motorcycles, which once accounted for 67% of domestic motorcycle sales, have fallen to around 43%. Sports-premium and super-premium categories have gained share and delivered stronger growth, with super-premium motorcycles posting a 9.5% ten-year CAGR. Even so, the recent monthly moderation is broad-based across entry, commuter and premium segments.
What it means for stocks
In a year of low single-digit industry growth, market-share gains and product mix become more important than overall volume expansion.
Bernstein rates Bajaj Auto Outperform. The company’s balanced domestic and export exposure, plus its presence in both commuter and premium segments as well as EV scooters, should allow it to grow faster than the flat industry headline in FY28. Higher export realisations have also given Bajaj room to keep domestic price hikes relatively restrained.
TVS Motor, Hero MotoCorp and Eicher Motors are rated Market-Perform. TVS benefits from the scooterisation trend and continued share gains, but valuations already appear to embed much of that opportunity. Hero has greater exposure to the mass-market motorcycle segment, where the replacement cycle is more important and recent entry-level demand has been softer. Eicher’s premium franchise follows a different buying cycle from mass-market commuters, so its growth path is less tied to the industry headline.
Bernstein expects stock performance over the next year to hinge on which companies can keep gaining share and convert those gains into earnings, rather than on a broad industry recovery. The next meaningful volume uplift is likely only in FY29, when wage revisions are expected to provide a fresh income-led boost.
