A recent report by Jefferies, a leading investment banking and financial services company, has outlined the strong growth prospects for two-wheelers (2Ws) and tractors in the coming years. The report predicts that both sectors will experience robust compounded annual growth rates (CAGR) of 13-15% between 2025 and 2027, significantly outpacing passenger vehicles (PVs) and trucks, which are expected to see slower growth rates.

According to the projections, two-wheelers are anticipated to grow at a CAGR of 13%, while tractors will have an even stronger growth trajectory with a 15% CAGR over the forecast period. In FY25, the expected growth rates for these segments are 12% for two-wheelers and 6% for tractors, which is a positive outlook for these industries.

In contrast, passenger vehicles are expected to experience more modest growth, with CAGRs ranging between 5-8%. Specifically, passenger vehicles are projected to grow at 8%, while trucks are forecast to grow at 5% during the same period. This shows a clear trend that two-wheelers and tractors are leading the charge in volume growth over the next few years.

The report also highlights the recovery of the two-wheeler and tractor markets following the pandemic-induced disruptions and regulatory challenges that had hindered demand between 2021 and 2023. Despite these challenges, the wholesale volume of two-wheelers in FY24 rebounded strongly, growing by 14% YoY, surpassing the 8% growth in the passenger vehicle sector. However, even with the recovery, two-wheeler volumes are still 13% below their FY19 peak, while passenger vehicle volumes have risen 25% above pre-pandemic levels.

The tractor sector, in particular, is positioned for a cyclical recovery, with strong growth expected in the coming years. This growth can be attributed to factors such as increased agricultural activity, favorable weather conditions, and a rebound in demand post-pandemic.

Additionally, the report notes several shifts in the passenger vehicle market. Maruti Suzuki and Hyundai, long-standing leaders in the market, are losing market share to competitors. Mahindra & Mahindra is expected to overtake Hyundai as the second-largest original equipment manufacturer (OEM) in the passenger vehicle market by 2027. This shift in market dynamics signals that Mahindra's strong performance, especially in the SUV segment, could position it as a key player in the evolving landscape of the Indian automotive market.

While the growth in the two-wheeler market is notable, the adoption of electric vehicles (EVs) remains sluggish. The share of electric two-wheelers has stagnated at 4-7% in recent years, but the report suggests that this could increase to around 10% by 2027, as the push for cleaner energy alternatives gains momentum and EV infrastructure continues to expand.

In conclusion, the Jefferies report underscores the impressive growth potential of two-wheelers and tractors over the next few years. With two-wheelers set to recover fully and tractors poised for a cyclical recovery, these sectors are expected to outperform traditional vehicle categories like passenger vehicles and trucks. Additionally, Mahindra & Mahindra’s ascension in the passenger vehicle market and the increasing adoption of electric vehicles in the two-wheeler segment could reshape the dynamics of the Indian automobile industry in the coming years.

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