Auto Industry Worries Mount As FY26 Kicks Off With Weak 2W Sales

India's automobile industry saw a slow start to FY26, with demand across key segments such as two-wheelers and passenger vehicles remaining weak during the first two months of the fiscal year.

While growth projections for most auto segments remain in the low- to mid-single digit range, the two-wheeler segment is falling significantly short of expectations.

Source : Freepik

Industry estimates had projected a 6-7 per cent growth for 2Ws in FY26, but if demand does not recover in the coming quarters, there is a downside risk to these forecasts, signaling cautious sentiment across the sector, according to a report by Motilal Oswal.

India's automobile industry has had a slow start to FY26, with demand across key segments such as two-wheelers (2Ws) and passenger vehicles (PVs) remaining weak during the first two months of the fiscal year.

While growth projections for most auto segments remain in the low- to mid-single digit range, the two-wheeler segment is falling significantly short of expectations.

The two-wheeler (2W) segment is falling short of growth expectations, while sports utility vehicles (SUVs) continue to boost the passenger vehicle (PV) category.

The two-wheeler industry, which includes motorcycles and scooters powered by internal combustion engines (ICE), saw a 9.8 per cent year-on-year (YoY) drop in sales during April and May 2025.

Within this category, motorcycle sales were especially hard hit, falling by 12 per cent YoY. The 100cc segment, which includes basic commuter bikes, declined by a steep 20.6 per cent, continuing its trend of underperformance. Even the 125cc segment, which has been relatively stronger in recent years, recorded a 2 per cent drop in sales. The 150-250cc segment, popular among younger buyers and performance enthusiasts, fell by 12.6 per cent YoY. On the other hand, scooters performed slightly better but still saw a 5.7 per cent decline in sales during the same period.

The continued weakness in demand has introduced a downside risk to growth estimates for the 2W segment. If the trend does not reverse in the upcoming quarters, industry projections for FY26 may have to be lowered further.

While the two-wheeler market has been struggling, the passenger vehicle (PV) segment has shown mild growth, increasing by 1.5 per cent YoY in April and May 2025. However, the segment's performance has been uneven across categories.

In contrast, the car segment, which includes hatchbacks and sedans, has struggled. It recorded a 12.6 per cent YoY decline during April-May 2025. Within this, the mid-sized sedan segment was hit the hardest, seeing a massive 42 per cent drop in volumes. The mini car segment also performed poorly, with a 38 per cent decline over the same period. As a result, the contribution of cars to total PV sales fell to 29.3 per cent.

Despite some positive signs in the UV segment, the overall outlook for FY26 across all major auto segments remains muted, with expectations of low-to-mid-single-digit growth. The weak start, especially in the two-wheeler market, has raised concerns about sustained consumer demand amid economic uncertainty and high fuel prices. 

(This report has been published as part of the auto-generated syndicate wire feed. Apart from the headline, no editing has been done in the copy by ABP Live.)