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The two-wheeler market in India is currently dominated by internal combustion engine (ICE) technology, and this vehicle segment is not subject to fuel consumption standards. In this paper, we first assess the technology used in India’s existing two-wheeler fleet. We then estimate the technology potential for improving the fuel efficiency of ICE two-wheelers and the costs associated with doing so and compare the cost-effectiveness of ICE two-wheelers and electric two-wheelers in reducing overall fleet fuel consumption. Our analysis indicates that the ICE vehicles are cost effective till a 23% fuel consumption reduction in 2025. However, if higher fuel consumption reduction is required by 2025, then electric two-wheelers become cost effective. A fleet average of 25 gCO2/km in 2025 can be expected to result in nearly a third of new two-wheelers sold being electric.