ChainMap
Draft map. Not yet reviewed by a human, so treat placements and figures as provisional.

Automobiles

Two-Wheelers

India's two-wheeler chain runs from metals and polymers, through a broad base of listed component makers, into a few large OEMs led by Hero MotoCorp and Honda, and out through dealer networks where lenders offer loans at the point of sale. Retail sales reached a record 21.4 million units in FY26. Electric models were about 6.5% of sales that year, and they add cells, motors and controllers to the bill of materials.

India manufacturingConsumptionEnergy transitionSupply chains & geopoliticsOne-page brief
L0

Why now

Two-wheeler retail sales came in at 21.42 million units in FY26, passing the pre-COVID peak, after a GST cut on models up to 350cc improved affordability from September. Electric models were about 6.5% of sales that year, and the government has extended its electric two-wheeler subsidy to March 31, 2028. The electric shift also brings dependence on lithium-ion cells and rare earth magnets that India has largely imported.

L1

How it works

An OEM designs the vehicle, builds the engine and assembles it from parts bought from many suppliers, such as aluminium castings, suspensions, transmissions and brakes. An electric scooter replaces the petrol engine with a battery pack built from lithium-ion cells and a permanent magnet motor, which depends on rare earth magnets. Buyers usually pick a dealer showroom and often finance the purchase, with some lenders offering up to 100% financing of the on-road price. After the sale, owners keep buying replacement tyres and other parts for years.

L2

What drives it

  • structuralGST on two-wheelers up to 350cc was cut from 28 per cent to 18 per cent, while bikes above 350cc moved to a 40 percent slab
  • structuralElectric adoption supported by PM E-Drive incentives of Rs 2,500 per kilowatt-hour, capped at Rs 5,000 per vehicle, now extended to March 31, 2028
  • structuralSafety and emission rules that add cost: ICRA links insurance norms, ABS/CBS and BS-VI, with raw material inflation, to an almost 45-50% rise in vehicle cost over 5-6 years
  • cyclicalRural cash flows and festival-season demand, which lifted sales in the second half of FY26
  • cyclicalCommodity input costs, which surged across all commodities amid the West Asia war

Non-obvious insights

  • The electric shift has not handed the market to new entrants: in FY26 traditional ICE OEMs held more than half of the electric two-wheeler market, TVS Motor led it, and Ola Electric, the earlier leader, fell to fifth place.
  • For a tyre maker such as CEAT, the larger pool is after the sale: replacement accounts for 60% of its sales against 27% from OEMs, which ties much of its demand to vehicles already on the road.
  • Electrification adds an upstream dependency: the permanent magnet motors used in EVs need rare earth magnets, India sourced almost 80 per cent of its 540 tonne magnet imports from China in 2024-25, and Chinese export curbs led Bajaj Auto, Ather Energy and TVS Motor to plan EV production cuts in July 2025.

L3 to L5The value chain

Raw MaterialsComponentsElectricalsOEM Design & AssemblyDealers & Retail FinanceAftermarket & Service

Click any part to open that stage. Arrow keys move between stages.

Signals that would change this chain

  • Monthly dispatch and registration data from SIAM and VAHAN
  • Changes to EV purchase incentives
  • Domestic lithium-ion cell plants reaching production
  • Rare earth magnet supply from China
  • Rural income and monsoon trends

The debate

How people disagree about where this industry is heading. This is about the industry, not about any company's shares.

Proponents argue
  • Sales passed the pre-COVID peak in FY26 on improved affordability, better rural cash flows and a wider product range, and rating agencies and brokerages forecast mid-to-high single-digit growth.
  • Electric penetration rose to about 6.5% of sales in FY26 from 5.8%, established OEMs are bringing dealer networks and service reach to electric models, and the subsidy now runs to March 2028.
Critics argue
  • ICRA says vehicle prices have risen faster than household incomes, and estimates that ABS on models under 125 cc, which were 77% of FY2025 sales, would raise their prices by 3-5%.
  • Electric growth moderated in FY26, the subsidy is fund-limited and can close early if money runs out, and magnet supply from China has already forced production cuts.
  • One investment bank expects domestic volumes to moderate structurally over the long term as electrification reshapes the industry mix.

Core assumption

That household incomes, especially in rural markets, keep pace with vehicle prices as safety rules and electrification add cost.

What would change the view

  • A final decision on the June 2025 draft rule requiring ABS on all new two-wheelers, including those under 125 cc, and entry-level registrations after it
  • Electric two-wheeler registrations on VAHAN once the PM E-Drive allocation is used up or the scheme ends
  • Whether domestic magnet production or non-China sources ease the magnet constraint on EV output

Read next

  1. 1
    India Two-Wheeler Sales Hit Record 21.4 Million Units in FY26, Crosses Pre-COVID Peak
    Autocar Professional

    Full-year view of FY26 retail sales, OEM rankings and the electric market

  2. 2
    Indian two-wheeler industry: Mandatory ABS fitment to weigh on entry-level segment demand, June 2025
    ICRA

    ICRA's case on affordability, regulatory cost and the ABS proposal for small two-wheelers

  3. 3
    Govt Extends PM E-Drive Subsidy For e2Ws Till FY28, Increases Allocation
    Autocar Professional

    Terms, allocation and limits of the extended electric two-wheeler subsidy

  4. 4
    Bajaj to Halve EV Output, Ather and TVS Cut Back Production as China Magnet Curbs Bite
    Outlook Business

    How Chinese magnet export curbs hit electric two-wheeler production

  5. 5
    Varroc's record orders portend strong growth
    Autocar Professional

    Shows how a component supplier's business can concentrate on one OEM

The full chain at a glance

  1. 1 Raw Materials

    Steel, aluminium, rubber and engineering plastics.

    Tata Steel, JSW Steel, Hindalco Industries

  2. 2 Components & Sub-assemblies

    Castings, suspension, brakes, fasteners, tyres.

    Endurance Technologies, Sundram Fasteners, Gabriel India, MRF, CEAT

  3. 3 Electricals, Electronics & EV Powertrain

    Batteries, lighting, sensors, controllers, motors.

    Bosch Ltd, Uno Minda, Varroc Engineering, Exide Industries, Amara Raja Energy & Mobility

  4. 4 OEM Design & Assembly

    Brand, design, engine, final assembly.

    Hero MotoCorp, Honda Motorcycle & Scooter India, Bajaj Auto, TVS Motor Company, Eicher Motors, Ola Electric Mobility, Ather Energy

  5. 5 Dealers & Retail Finance

    Showrooms, registration, insurance and loans.

    Bajaj Finance, L&T Finance, Hero FinCorp, TVS Credit Services

  6. 6 Aftermarket & Service

    Spares, tyres, oil, batteries over the vehicle's life.

    Castrol India, Gulf Oil Lubricants India, CEAT, MRF, Exide Industries, Uno Minda

Sources