Mumbai: The Indian two-wheeler industry is expected to grow up to 73% to 21-23 million units by 2015/16 from 13.3 million units in 2010/11, driven by steady economic growth, urbanisation and rural demand, according to credit rating firm Icra.
“While the trend in rising commodity prices, hardening interest rates and increasing fuel costs may lead to some moderation in industry growth over the short term, the growth over the medium to long term is expected to remain in double digits,” Icra said in a report on Thursday.
Two-wheeler sales jumped 26% to 11.8 million units in FY11. However, rising commodity prices, vehicle costs and fuel prices are crimping demand.
But the two-wheeler industry is set to expand as several new players are keen to enter the Indian market and existing players plan to strengthen their reach into rural and semi-urban markets, it said, adding the industry should grow at 10-12% in volume terms over the next five years.
“Most players currently have plans to expand production capacity which would entail large capital expenditure both by Original Equipment Manufacturers (OEMs) as well as suppliers,” the study said.
While this may hit short term profitability, the expected volume growth will help the industry tide over short term pressures and emerge with a bigger scale and stronger credit profile, Icra said.