NewKerala.com

Key Points

Jefferies has downgraded its two-wheeler growth projections for FY26 to just 8%, citing sluggish demand and excess inventory. The report anticipates a rebound to 11% by FY28, supported by tax relief and upcoming wage hikes. Despite short-term optimism, the sector remains below pre-2019 sales volumes, signaling a slow recovery. Government policies and economic cycles could play a key role in reviving demand.

Key Points: Jefferies Cuts 2W Growth Forecasts to 8% in FY26 Before Recovery

  • Jefferies lowers FY26 growth to 8% due to weak demand and high inventories
  • Recovery expected at 11% in FY27-FY28 with tax cuts and pay hikes
  • Industry still lags pre-2019 levels despite cyclical uptick
  • Government stimulus may boost disposable income and demand
3 min read

Jefferies revises 2W growth in FY26 and FY27 downwards, growth to pick up in FY28

Jefferies revises two-wheeler growth down to 8% in FY26, sees rebound to 11% by FY28 amid tax cuts and wage hikes.

"Our interactions with the dealer association (FADA) and channel checks suggest weak inquiries and high inventories. – Jefferies Report"

New Delhi, April 23

The growth of the two wheelers automobile sector will stay in single digits in the fiscal year 2026 (FY26) at 8 per cent, said Jefferies in its latest report on the sector.

The slowdown in growth is attributed to higher inventories and low enquiries.

The report, however, added that the growth of the sector is expected to increase by up to 3 per cent from FY26, reaching 11 per cent by the Financial Year 2027 and 2028.

The report states that two wheelers dealers are reporting a decline in customer inquiries, resulting in a significant number of unsold vehicles in their inventory. This suggests that the demand for cars is currently low.

"Our interactions with the dealer association (FADA) and channel checks suggest weak inquiries and high inventories," said the report.

Jefferies has reduced its forecasts for FY26 and FY27 by 6 per cent and 2 per cent, respectively.

The revised prescription suggests that industry will grow by 8 per cent in FY26 and 11 per cent in FY27 and FY28.

While this looks good in the short term (a 10 per cent average growth per year from FY25 to FY28), but when seen at the longer period from FY19 to FY28, the overall growth is just 3 per cent annually.

But the report also shows optimism and highlights that the recent tax cuts announced in this year union budget will give more disposable income in the hands of tax payers, this could encourage more people to buy cars.

Secondly, central government employees are set to get wage hikes in FY27 under eighth pay commission, which means they'll have more money to spend, and some of that may go towards buying cars.

On top of that, the car market typically follows a cycle of ups and downs, and right now, sales volumes are still 6 per cent below what they were back in 2019, meaning there's potential for a recovery.

"On the positive side, we see demand boost ahead from the recent income tax cuts and upcoming wage hikes for PSU staff in FY27, along with a continued cyclical tailwind given FY25 volumes were still 6 per cent below FY19. We cut our industry growth estimates for FY26-27 by 6ppt/2ppt, and now assume 8 per cent/11 per cent/11 per cent growth in FY26/FY27/FY28, which implies a 10 per cent CAGR over FY25-28 but just 3 per cent over FY19-28," the report said.

The report concludes that even with the recent positive changes, the industry is still not growing as fast as it did before.

- ANI

Share this article:

Reader Comments

R
Rahul K.
Interesting analysis! The 2W sector has been struggling for a while now. Hopefully the tax cuts and wage hikes will give it the boost it needs. 🤞
P
Priya M.
Not surprised by these numbers - electric two-wheelers are taking over and traditional manufacturers need to adapt faster. The inventory pile-up shows they're behind the curve.
A
Amit S.
The report seems optimistic about FY27-28 but I'm not convinced. With fuel prices rising and more EV options coming, traditional 2W sales might not recover as projected.
S
Sanjana P.
Good to see some positive indicators ahead! The wage hikes for government employees could really help boost demand. Maybe manufacturers should focus more on affordable models now.
V
Vikram J.
Respectful criticism: The report mentions car demand multiple times when discussing two-wheelers. This seems like an oversight that could confuse readers about the actual subject matter.
N
Neha T.
The cyclical nature of this industry is fascinating! The fact that we're still below 2019 levels suggests there's pent-up demand. Maybe 2028 will be the turnaround year! �

We welcome thoughtful discussions from our readers. Please keep comments respectful and on-topic.

Leave a Comment

Minimum 50 characters 0/50