Synopsis
HSBC's recent report predicts high-single digit growth for India's two-wheeler industry in FY26, despite recent slowdowns. The report highlights key players like TVS, OLA, and Bajaj, with varying market performances and future outlooks.Key Takeaways
- Two-wheeler industry anticipated to grow in high-single digits in FY26.
- TVS upgraded to Buy; OLA downgraded to Hold.
- Bajaj maintains Buy rating despite lowered target price.
- ICE scooter market share stable since FY21.
- Export markets recovering for key manufacturers.
New Delhi, Jan 29 (NationPress) Despite a recent slowdown in India's two-wheeler market growth, a report from HSBC Global Research reveals expectations of high-single digit growth for FY26. The industry has shown a 10-year CAGR (compound annual growth rate) of under 3 percent, lagging behind many other automotive sectors. Furthermore, the pace of electrification has been sluggish, even with substantial governmental incentives.
“On a positive note, the rural market is making a comeback and exports are on the rise. Considering these dynamics, we have upgraded TVS to Buy from Hold while downgrading OLA to Hold from Buy. We continue to hold our Buy rating on Bajaj. Current valuations appear relatively low after recent corrections, and we foresee limited earnings downside after adjustments in 3Q,” the report stated.
TVS is recognized for having a robust R&D capability among two-wheeler manufacturers. The company has sustained its domestic market share and made notable progress in the EV sector as well. This sets a positive tone for TVS in the medium term. Additionally, TVS is expanding its presence in export markets. The stock has seen a 25 percent decline from its peak and is currently valued at 34x FY26e EPS. While losses from subsidiaries like Norton are concerning, standalone margins show strong visibility due to PLI accruals starting from 4Q, according to the report.
“At the industry level, the market share of ICE scooters has remained stable at 31 percent since FY21, while EV scooters have largely captured market share from economy motorcycles (75-110cc), particularly in urban areas. This mitigates the risks of ICE scooter cannibalization for TVS. We upgrade our recommendation to Buy with a target price of Rs 2,800.
The report also points out that OLA has struggled with volume performance since its IPO, primarily due to quality and service challenges. Although the company has improved service quality and is set to launch an EV motorcycle soon, competition remains fierce. OLA's market share has dropped to 23 percent from its peak of 49 percent in 1QFY25. “Given the declining confidence in medium to long-term projections, we downgrade OLA to Hold from Buy. Our target price is now INR 70 (previously INR 100).
HSBC has maintained its Buy rating on Bajaj due to its diversified earnings and reasonable valuations after recent stock corrections. However, the target price has been lowered from Rs 11,500 to Rs 10,500 as the forecasted long-term growth rate has decreased. Export volumes are gradually improving, and the upcoming launch of an e-rickshaw could serve as a positive catalyst. The company has lost market share in motorcycles recently, particularly in the 125cc segment, due to competition. “We anticipate Bajaj's motorcycle market share will stabilize in 2025, although further losses could pose a downside risk,” the report concluded.
