New Delhi [India], April 23 (ANI): The growth of the two wheelers automobile sector will stay in single digits in the fiscal year 2026 (FY26) at 8 per cent, said Jefferies in its latest report on the sector.

The slowdown in growth is attributed to higher inventories and low enquiries.

The report, however, added that the growth of the sector is expected to increase by up to 3 per cent from FY26, reaching 11 per cent by the Financial Year 2027 and 2028.

The report states that two wheelers dealers are reporting a decline in customer inquiries, resulting in a significant number of unsold vehicles in their inventory. This suggests that the demand for cars is currently low.

'Our interactions with the dealer association (FADA) and channel checks suggest weak inquiries and high inventories,' said the report.

Jefferies has reduced its forecasts for FY26 and FY27 by 6 per cent and 2 per cent, respectively.

The revised prescription suggests that industry will grow by 8 per cent in FY26 and 11 per cent in FY27 and FY28.

While this looks good in the short term (a 10 per cent average growth per year from FY25 to FY28), but when seen at the longer period from FY19 to FY28, the overall growth is just 3 per cent annually.

But the report also shows optimism and highlights that the recent tax cuts announced in this year union budget will give more disposable income in the hands of tax payers, this could encourage more people to buy cars.

Secondly, central government employees are set to get wage hikes in FY27 under eighth pay commission, which means they'll have more money to spend, and some of that may go towards buying cars.

On top of that, the car market typically follows a cycle of ups and downs, and right now, sales volumes are still 6 per cent below what they were back in 2019, meaning there's potential for a recovery.

'On the positive side, we see demand boost ahead from the recent income tax cuts and upcoming wage hikes for PSU staff in FY27, along with a continued cyclical tailwind given FY25 volumes were still 6 per cent below FY19. We cut our industry growth estimates for FY26-27 by 6ppt/2ppt, and now assume 8 per cent/11 per cent/11 per cent growth in FY26/FY27/FY28, which implies a 10 per cent CAGR over FY25-28 but just 3 per cent over FY19-28,' the report said.

The report concludes that even with the recent positive changes, the industry is still not growing as fast as it did before. (ANI)