Two-wheeler sales faced a setback in FY 2020 - 21 due to the global COVID-19 pandemic, along with the two-wheeler loan market. However, expert forecasts suggest a positive outlook in coming months.
Two-wheelers are one of the most preferred modes of commute in India. Navigating through heavy traffic, parking, traveling short distances, etc., is easier with two-wheelers as opposed to other modes of transport. Moreover, relatively smaller sizes, less bulkiness, and lower costs of two-wheelers make them a hit among all social classes in the country.
Two-wheelers and two-wheeler loans are complementary products. The greater the demand for the former, the greater will be the demand for the latter too. In other words, demand for two-wheeler credit is dependent on two-wheeler sales. There are two types of two-wheeler loans - new and used two-wheeler loans. In India, both banks and NBFCs (Non-Banking Financial Companies) provide two-wheeler financing.
Current trends in the two-wheeler loan market
In the Indian two-wheeler segment, 75% of the purchases are funded by loans. The share of banks and NBFCs in the two-wheeler loan market is 60% and 40%, respectively. As per a Statista report, the Indian two-wheeler loan segment is expected to grow at a compounded rate of 11% or more annually. By 2025, you can expect this segment to be worth $12.3 billion. Thus, the overall two-wheeler loan market outlook seems bullish.
- A rise in demand for E2W (Electric 2-Wheelers)
In the last few years, E2Ws have gained traction in India. While most of the automobile industry registered significant de-growth in 2021 due to the global coronavirus pandemic, the electric mobility segment recorded commendable sales figures. Approximately 30,000 units have been sold since January 2021 to date in the high-speed battery-driven two-wheeler segment. Hero Electric and Okinawa Autotech emerged leaders with sales of 11,432 and 5,903 units, respectively.
As per ICRA, the electric two-wheeler sector is expected to grow by 8-10% per annum. According to SMEV sales data, the fiscal year 2019-2020 has been the best for EV(Electric Vehicles) sales as 1,52,000 E2Ws were sold during this period. As per Amitabh Kant, Niti Aayog Chairperson, India is 100% ready for electric mobility, and E2Ws are likely to constitute 80% of the Indian two-wheeler market by 2030.
- A steady rise in disposable incomes
In the last 25 years, the retail disposable income in India has grown significantly. However, the year 2020 was an exception as incomes across all levels contracted due to the worldwide pandemic. As per Trading Economics data, retail disposable income dipped by approximately 3.41% from Rs 206.75 million in 2019 to Rs 199.69 million in 2020. But, as the Indian economy is gradually breaking itself from the shackles of the COVID-19 second wave, you can expect personal incomes to start rising again. As per industry experts, the Indian economy will rebound to pre-pandemic levels by March 2022.
- Luxury motorbike segment gaining popularity
Growing per capita incomes coupled with a continually increasing penchant for riding among India’s large youth population is pushing up the demand for premium bikes. Many superbike clubs have sprung up in the past few years. They act as a catalyst for growth in luxury bike sales. As per expert projections, by 2023, the luxury bike segment may grow up to $161 million in India.
- Government subsidies
In order to boost EV manufacturing, the Department of Heavy Industry recently increased the subsidies for E2Ws from Rs 10,000 per kWh to Rs 15,000 per kWh - a 50% increase. Consequently, many EV manufacturers have lowered the prices of their respective e-scooters. Thus, as a customer, you may be able to purchase your favorite two-wheeler at a subsidized rate. However, only e-scooters with an average speed of 40 kmph and a range equal to or greater than 80 km qualify for the FAME II EV subsidy scheme.
- Miscellaneous factors
The other factors that have contributed to a positive two-wheeler loan market outlook are the launch of new two-wheelers with advanced or value-added features, high vehicle or automobile parts replacement rate, rising rural demand, and easy availability of two-wheeler loans both online and offline.
Key Statistics
| Industry | Particulars | Statistics |
| Two-wheeler market | Expected growth in E2W sales volume | 8-10% p.a. |
| Government incentives for E2Ws | Up to Rs 15,000 per kWh (Upper limit: 40% of the 2-wheeler purchase price) | |
| Projected E2W market share in the 2-wheeler industry by 2030 | 80% | |
| Expected dip in 2-wheeler sales in FY 2021-22 | 11-13% p.a. | |
| Actual 2-wheeler sales to date in FY 2021-22 | 15.12 million units | |
| Expected long-term returns for OEMs (Original Equipment Manufacturers) | 18-20% p.a. | |
| Forecasted premium bike segment worth in 2023. | $161 million | |
| Two-wheeler loan market | Indian 2-wheeler loan market value 2019 | $6.7 billion |
| Expected CAGR of the 2-wheeler loan market | 11% p.a. | |
| Projected Indian 2-wheeler loan market value 2025 | $12.3 billion |
Features of two-wheeler loans in India
- Loan rates
Two-wheeler loan interest rates are relatively lower as they are asset-backed loans. Usually, the loan rate is within the range of 9% - 26% depending on your credit history and income. Your credit score plays an important role in procuring two-wheeler loans at competitive interest rates. Usually, banks require a CIBIL™ score of 700+ out of 900. However, NBFCs may lend you loans even at CIBIL™ scores of 600+. In general, the higher your credit scores, the lower your loan rates.
- Loan principal
You can get a loan amount equal to 100% of the final purchase price. The final price is inclusive of ex-showroom costs, RTO fees, insurance cover, local taxes, and additional charges, if any.
- Loan tenure
Generally, two-wheeler loans are given for 1 - 4 years. Some financial institutions may provide bike loans for 5 years too.
- Supporting documents
You are required to furnish identity proof, address proof, PAN card, salary slips, 6-month bank statements, canceled cheque as per NACH mandate, declaration of existing financial obligations, and vehicle registration certificate.
- Special benefits
Many lending institutions provide pre-approved loan offers, exclusive discounts, and special EMI schemes to select customers. Most vehicle showrooms have tie-ups with banks or NBFCs. Hence, the loan application and approval process become easier and less time-consuming.
- Additional fees
You have to incur additional charges in the form of loan processing fees, stamp duty, and documentation fees. These charges vary from state to state. Besides, if you repay your loans fully as a single bullet payment ahead of the designated installment period, then you have to incur loan foreclosure charges.
Closing Words
Irrespective of the current dip in two-wheeler sales due to rising petrol costs and the ongoing pandemic, the sales are expected to pick up rapidly in FY 2022-23. Moreover, the forecasted market trends and developments in India’s two-wheeler loan market are encouraging.
Shriram Finance is one of the top NBFCs to avail of two-wheeler loans. It offers loans up to 100% of the on-road price at lucrative interest rates starting from 11.50% p.a. Easy loan application process, minimal paperwork, loan disbursals within 24 hours of approval, 2,875+ branches pan-India, and a nominal foreclosure rate of 4% are striking features of Shriram Finance two-wheeler financing.
Any salaried or self-employed individual aged between 21-59 years can apply for loans at Shriram Finance. You should have a minimum work experience of one year and a minimum income of Rs 12,000 per month.
Visit the Shriram Finance website for more details on two-wheeler loans.
