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Two-wheeler industry underperforms expectations

HMSI and TVS lead in 2Ws; MM and Toyota outperform in PVs

* Key auto segments continued to face demand weakness over Apr-May’25: PV growth at 3.6% and 2W ICE volumes down 9.8%.

* HMSI emerged as the market leader in the 2W ICE segment during Apr-May’25.

* Within the motorcycles category, all segments except for >250cc posted a YoY decline in the first two months.

* In motorcycles, two key trends to highlight are: 1) HMSI has regained almost its entire share in the 125cc segment, and 2) TVS has, for the first time, emerged as market leader in the 150-250cc segment during the first two months of FY26.

* In PVs, UV contribution increased to 67% in the first two months. MM, Toyota, and Kia outperformed in the PVs segment.

* The FY26 outlook across most auto segments remains in the low- to mid-single digit mark. There is a downside risk to our 2W growth estimates if demand fails to pick up in the coming quarters. Our top picks in auto OEMs are MSIL, MM, and Hyundai.

ICE 2Ws: HMSI now market leader in domestic 2W ICE on YTD basis

* The domestic 2W ICE industry, which had been outperforming other segments until recently, is now witnessing weak demand trends. For the first two months, industry sales declined 10% YoY.

* Within this category, motorcycle sales were down 12% YoY, while scooter sales were down 6% YoY.

* HMSI is now a market leader in the domestic 2W ICE segment, with a 28% share for YTDFY26 – flat YoY. HMCL has seen a sharp decline, with its share falling 430bp YoY to 25.7%.

* TVS, RE, and Suzuki have outperformed the industry so far on a YTD basis.

Segmental trends: Scooter segment outperforms motorcycles on YTD basis

Motorcycle segment:

* As highlighted above, the domestic motorcycle industry declined 12% YoY on a YTD basis.

* In motorcycles, RE, TVS, and HMSI outperformed the industry, while HMCL underperformed.

* Among gainers: HMSI gained 270bp to 21.3%, TVSL gained 180bp to 12.3%, and RE gained 155bp to 7.9%.

* HMCL saw the steepest share loss on a YTD basis: down ~520bp to 38%

100cc segment:

* This segment continues to underperform, recording a 20.6% YoY decline in the first two months of the fiscal.

* While HMSI saw a sharp YoY decline of 48% in this segment, BJAUT posted a 25% YoY decline in the first two months.

* Even HMCL saw a 19% YoY decline.

* Only TVS Motors was able to sustain sales at last year’s level in the first two months.

* HMCL gained an additional 160bp share in this segment, reaching its highestever share at ~81%.

* HMSI lost the most share in this segment, down 250bp to 4.7% in the first two months of FY26.

* Even Splendor sales for HMCL declined 17% YoY, with the steepest drop seen in Passion, which was down 43% in Apr-May’25.

* HMSI appears to have discontinued its Dream series, with no sales recorded in the first two months. Even Livo (-45%) and Shine100 (-32%) saw a sharp decline in volumes during Apr-May’25.

125cc segment:

* While the 125cc segment continued to outperform the motorcycle industry, it posted a 2% YoY decline during Apr-May’25.

* However, HMSI outperformed peers in this segment, posting a strong 20% YoY growth in the first two months.

* HMCL saw the steepest decline in volumes in this segment, down 43% YoY. A major reason for this drop was the sharp 85% decline in Glamor volumes during Apr-May’25, ahead of its anticipated new launch.

* As a result, HMSI gained 900bp share in this segment, reaching 49.5% and recovering back most of its lost market share in the segment over the years.

* Meanwhile, HMCL lost 790bp share, dropping to 10.8%.

* Among other notable products, Raider sales declined 11% YoY, while Pulsar 125 sales saw a 2% YoY drop.

* Sales of BJAUT’s CNG bike, Freedom, have dropped to a monthly run rate of just 1k units.

150-250cc segment:

* This segment underperformed the overall motorcycle segment, posting a 12.6% YoY decline during Apr-May’25.

* Among notable top peers, only TVS outperformed in this segment, delivering a strong 20% YoY growth, while all other peers saw double-digit declines.

* For TVS, Apache grew 13.5% YoY, while Ronin saw over 2.5x growth in the first two months of FY26.

* As a result, TVS has emerged as the market leader in this segment for the first time ever, with a 31.9% share, up 870bp YoY.

* BJAUT slipped to the second position, with its share declining 280bp to 30%.

* Yamaha saw a 500bp loss in share to 15.6%, while HMSI saw a marginal dip to 19.6%.

>250cc segment:

* RE posted a steady 9.5% YoY growth in domestic sales during Apr-May’25. Growth was primarily driven by the Bullet 350, which saw a strong 50% growth in the first two months. On the other hand, the rest of the 350cc portfolio (except for Bullet) grew just 2% YoY.

* RE’s 450cc segment sales declined 17% YoY despite the launch of the Guerilla 450.

* Among peers, Triumph posted a strong ~50% YoY growth, reaching 6.5k units over Apr-May’25. On the other hand, HD X440 is averaging just under 500 units per month, while the Maverick440 has sold only 9 units in the first two months of the fiscal.

* In this segment, HMSI is currently selling around 3.5k units per month

Scooters ICE segment

* As highlighted above, the scooters segment posted a 5.7% YoY decline in FY26.

* Market leader HMSI significantly underperformed, posting an 18% YoY decline.

* On the other hand, both TVS and Suzuki continued to outperform, posting 16.6%/13.5% YoY growth.

* As a result, while TVS gained 520bp in market share, reaching 27.2%, Suzuki gained 345bp to reach 20.4%.

* TVS’s upgraded Jupiter110 continues to experience strong demand, registering 31% YoY growth over Apr-May’25.

* On the other hand, market leader HMSI lost 680bp share, reaching 44.1%. HMCL continued to underperform, with its share declining 120bp to 3.6%

PV update: UV mix now stands at 67%

* The PV industry grew 1.5% YoY over Apr-May’25.

* UVs posted a 9% growth, while cars recorded a 12.6% YoY decline over AprMay’25. As a result, the UV mix in PVs inched up to 67% in FY26 (from 65% in FY25).

* Within PVs, MM (+24.4%), Toyota (+26.8%), and Kia (+16.4%) were the key growth drivers.

* As a result, MM gained 280bp in market share to reach 15.1%; Toyota gained 155bp to reach 7.8%, and Kia gained 85bp to reach 6.6%.

* On the other hand, while MSIL lost 170bp, reaching 39.6%, Hyundai/TTMT lost around 180bp/130bp share.

Car segment:

* As highlighted above, the car segment declined 12.6% YoY in the first two months of FY26, with its contribution declining to 29.3% in PVs.

* Within cars, the mid-sized sedan segment remained the worst hit, experiencing a 42% YoY decline in volumes. Similarly, the mini segment saw a 38% YoY decline during Apr-May’25.

* MSIL further strengthened its position in this segment by gaining about 370bp share to 67.3%.

UV segment:

* As highlighted above, the UV segment posted a 9.1% YoY growth over AprMay’25.

* Toyota (+33.9%), MM (+24.4%), and Kia (+16.4%) outperformed industry growth.

* MM gained 280bp share to 22.6%, while Toyota gained 180bp share to 9.6%

* On the other hand, Hyundai lost 260bp share to 13.1%, while MSIL lost 150bp share to 24.6%

* Key growth drivers for MM over Apr-May were Thar (+77% YoY), led by strong demand for the Roxx variant; XUV 700 (+19% YoY); and its new EVs (sold 7k units in the first two months and 4k units in May’25).

* For MSIL, a key setback during Apr-May’25 was the 29% YoY decline in Grand Vitara volumes to 12.3k units, likely due to anticipation around an upcoming launch in a similar segment. The model is also facing increased competition from Toyota’s Urban Cruiser Hyryder, which recorded almost similar sales during this period.

* Growth for Kia was primarily driven by the new Syros, which sold 7.6k units in the first two months.

* Skoda Kylaq also received a good response, currently averaging ~5k units per month.

Valuation and view

* The outlook for most auto segments remains in the low- to mid-single digit mark for FY26.

* Demand across 2Ws and PVs has remained weak in the first two months of the fiscal, with the 2W industry substantially lagging behind industry growth expectations of 6-7% for FY26E. Hence, there is a downside risk to our 2W growth estimates if demand fails to pick up in the coming quarters.

* MSIL is our top pick, given its continued export momentum and an expected revival in the domestic UV share following its anticipated launch. We like MM for its healthy demand momentum in both SUVs and tractors for FY26. We also like Hyundai as it appears well-aligned to benefit from industry trends toward UVs.

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