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Market Trends & Developments in India's Two Wheeler Loan Market 2020-2025

A Study on India’s Two Wheeler Loan Market

The bike loan market in India is estimated to grow from $ 7.2 million to $ 12.3 billion by 2025. The projected growth in CAGR is more than 11% in the next five years. This growth is forecasted based on factors like growing disposable income and an increase in ownership of bikes.

Technological advancement like a shift from combustion engine vehicles to electric vehicles, subsidies, new product launches, electric two wheelers and high vehicle replacement rate has boosted the two wheeler sales in the country eventually boosting the bike finance market.

Two wheelers are a preferred mode of transportation in India as they are convenient in traffic congestions and also provide easy parking as compared to other vehicles. This has led to the adoption of two wheelers thereby driving the two wheeler loan market. Now banks and NBFCs provide the choice to apply for loan with minimal documentation.

The net banking facility has eliminated the hassles related to long processing time. This has positively influenced the market growth. Moreover the presence of major automobile manufacturers in the country, flexible repayment and tenure, low interest rates is further accelerating the growth of India’s two wheeler loan market.

The two wheeler loan market of India can be divided based on source, type, percentage of amount sanctioned, type of city and tenure and region. The major companies offering two wheeler loans in India are banks and NBFCs.

Moreover, the original equipment manufacturers are also coming up with various credit provisions for attracting new buyers and offering loans for purchasing two wheelers in the country.

Reasons that will boost the demand for two wheelers post lockdown

  1. Social distancing

The best way to reduce the effect of coronavirus is by adhering to social distancing measures. The latest government guidelines also suggest avoiding public transportation as much as possible. This has led to the purchase of bikes, scooters, etc. Hence the two wheeler industry is set to benefit a lot thus boosting the two wheeler loan market. 

  1. Shift towards low budget transport vehicle

Purchasing expensive vehicles definitely comes with huge costs. As the economy slowly recovers, it will be difficult for buyers to pay hefty EMIs for owning big cars. Two wheeler is considered to be the most affordable mode of transport as compared to cars. 

  1. Two wheeler finance will be the key

The automobile industry can never grow if there are no financers in place. This is because the majority of the customer base cannot afford to buy a vehicle. The two wheeler loan market will play a significant role in increasing bike sales as buyers would be happy to save their cash in these times of uncertainty. A bike loan allows them to own their vehicle while gradually repaying the amount borrowed monthly. 

  1. Limited and lower commitments

As people prefer two wheelers as the cheapest and smartest mode of transport especially in tier 1 cities, there are many options available by which one may not have to pay higher EMIs. Individuals can also opt for second-hand two wheelers or pay-to-use kinds of models. 

  1. Technology will play a huge role

App and web-based easy financing methods are more lucrative than the traditional ones. Easy approval methods using technology platforms like e-KYC verifications and utility documentation verification has reduced the cumbersome method of the loan application, processing and approval.

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