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What are Factors Responsible for Boom of Gasoline Scooter and Motorcycle Market in India

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Puneet Shah
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The rising income levels in Tier 2 and Tier 3 Indian cities is resulting in increasing sale of scooters and motorcycles, which run on gasoline. Valued at $22.0 billion in 2017 by P&S Intelligence, the Indian gasoline scooter and motorcycle market is set to grow at a CAGR of 8.8% during the forecast period 2018–2025. It is being estimated that by 2025, the market size will increase to $42.4 billion.

The major growth factor of the domain is rising income levels, which has given people more power to buy private vehicles. Among these, gasoline-powered two wheelers are preferred due to easy financing solutions, heavy discounts, fuel-efficient models. Further, many financially-stable people are purchasing a two-wheeler for short commute, despite owing a car, as the former are easier to drive and park on the narrow and congested Indian streets. This is how two-wheelers are becoming the second, and often the preferred, transportation mode, taking the Indian gasoline scooter and motorcycle market forward.

In addition, scooters and motorcycles are witnessing an increased demand from Tier 2 and Tier 3 cities. Such cities are witnessing population growth, owing to the industrial and economic developments here. Land, to set up manufacturing plants, is available at low rates in these cities. This is leading to economic development, which is, in turn, attracting the workforce from rural and semi-rural areas. Therefore, the financial prosperity of people after getting employment in such industries is another factor for the domain’s growth.

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On segmenting by product, the gasoline scooter and motorcycle market in India is categorized simply into motorcycles and scooters. In 2017, motorcycles dominated the market with over 65.0% revenue share, due to increasing motorcycle sales, especially in rural and semi-rural regions that are on the verge of urbanization. Road connectivity to such places has increased significantly, and loans are also available at low interest rates, leading to increasing two-wheeler sales. The fact that there are 108 motorcycles per 1,000 people in the country cements this finding. Motorcycles are cheap to purchase and operate, which is why these are preferred in urban as well as rural areas, with considerably less scooter penetration.

Similarly, the gasoline scooter and motorcycle market in India can also be segmented by engine capacity, wherein 500cc are the several categories. Among these, two wheelers with 100-125cc engine capacity registered the highest sales volume in 2017 (over 70.0%), as these provide the perfect balance between power and price. Further, a shift has been seen in people’s preference from low-powered two wheelers to higher-powered ones.

Along with a growing inclination toward higher-powered two wheelers, a change in preference from low-cost to premium vehicles is also being observed in the Indian gasoline scooter and motorcycle market. With rising income levels, people, especially the youth, are switching over to premium two-wheeler brands, such as Harley-Davidson and Royal Enfield, which produce high-powered models. In a way, the increasing sale of premium two-wheelers is also driving the market growth.

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Hence, it is clear that the improving financial condition of people in rural and semi-rural areas and rapid industrialization in Tier 2 and Tier 3 cities is expected to drive the domain forward.

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