Market Trends & Development in India’s two wheeler loan segment

Given the added advantages such as quick transportation, navigation through traffic, parking facilities, ease of maintenance, and lightweight, two-wheelers rank higher than other modes of transportation. Due to the price range offered, two-wheelers are now considered a necessity across all classes of society. The picture has become more interesting since the entrance of electric vehicles in the two-wheeler segment.

How is the two-wheeler market performing in India?

Two wheeler loans are complementary goods for two wheelers. An increase in demand for two-wheelers increases the need for two wheeler loans. Of course, a decrease in two wheeler loan interest rates can increase the demand for two-wheelers. But primarily, loans are dependent on the product.

As per a report by TechSci Research, the expected growth in India’s two-wheeler loan market is projected at $12.30 billion by 2025 compared to $7.2 billion as a previous estimate ending 2020. This reflects a CAGR of 11% and more in the next five years.


One of the primary reasons is the technological change from combustion engine vehicles to electric vehicles coupled with subsidies from the government and lower cost of transportation. Under Macro-Economic studies, technological advancements are reasons for the rightward shift of the Long-Run Aggregate Supply curve (LRAS). The rightward shift of LRAS has implications in an increase in the demand for two-wheelers, stability of prices, increase in demand, and employment in the economy.

The other primary reasons for such growth are the expected increase in disposable income of the earning class, subsidies for electric vehicles, expected reduction in oil prices, and increased comfort on two-wheelers than four-wheelers or public transport. The factors that contribute to the increase in two-wheeler sales also contribute to the loan requirements.

What affects the two-wheeler loan market in India?

1.      Increase in disposable income of individuals

Even if two-wheelers are a part of daily life, people consider buying them only when the disposable income rises. Disposable income refers to that part of personal income left after savings and tax payments. The disposable income has increased significantly in the last 25 years except the year 2020.

2.      Recovery of the Indian economy

India’s economy has drastically recovered since July 2020. Market indices such as the Nifty & BSE Sensex are lead indicators of the economy. Nifty has risen from Rs. 11k level to Rs. 17k per stock in one year starting from September 2020. The economy will quickly rebound with higher highs, increasing individuals’ income levels. Further, a rise in per capita income increases the spending capacity of individuals.

3.      Increase in demand for electric two-wheelers

Ola Electric Vehicles have already received half a million pre-bookings as of September 10, 2021. There has been tremendous growth in the electric two-wheeler segments in the first half of 2021. Hero Electric emerged as the market leader, with 11,432 units sold in the first six months of 2021, recording a growth of 41% year over year.

4.      Support by the government

Subsidies from the government further reduce the price of electric two-wheelers. The decline in prices has increased the scope for demand. However, the FAME II subsidy is currently available for e-scooter with an average speed of 40 Kmph. Further to boost the demands, the government has also provided relief by allowing the interest on loans taken for electric vehicles. The said deduction is available under section 80EEB of the Act.

5.      Other factors

Over the decade, two-wheelers have emerged with increased features such as larger space under the seat, disk brakes, alloy wheels, charging sockets, and easily replaceable parts. The electric vehicle segments have added features such as digital tech, take or disconnect calls while riding, tracking of pollutants avoided, proximity unlocking. Moreover, the availability of two wheeler loans and their quick disbursal has increased the demand for two-wheelers. The monthly cash outflow for EMI can be checked via a two-wheeler loan EMI calculator.


The overall market for two wheelers is bullish, and the same is the case with the two-wheeler loan segment. The forecasted trends for the rise in income levels, increase in demand for two wheelers and reduction in effective prices are encouraging for the industry.