Is the turnaround in two-wheeler sales here to stay?, Auto News, ET Auto


 A jump of over 15% in two-wheeler sales — a proxy of an economy’s well-being — at 1,148,696 units in April was most glaring compared to other auto segments.
A jump of over 15% in two-wheeler sales — a proxy of an economy’s well-being — at 1,148,696 units in April was most glaring compared to other auto segments.

New Delhi: The two-wheeler industry— largest in the world — has garnered a lot of attention lately as the sector’s fortunes were choked during the last three summers when economic slowdown and consecutive COVID-19 waves affected sales severely. However, the wholesale dispatches of two-wheelers saw a strong reversal last month after a consecutive lull of 10 months. But does this positive surprise signal a revival in demand for two-wheelers, which was sluggish for most part of the financial year 2021-2022?

A jump of over 15% in two-wheeler sales — a proxy of an economy’s well-being — at 1,148,696 units in April was most glaring compared to other auto segments. Market leader Hero MotoCorp sales rose by 16.3% to 3,98,490 units year-on-year after several months of sluggishness. Even the number two company Honda Motorcycle India and Scooter India clocked a 32.7% jump in its wholesales at 3,18,732 units. Industry data shows that the jump in growth was largely aided by the low base of last year, when sporadic lockdowns had stagnated economic activity.

Reasons such as expectations of a good Rabi harvest, decent monsoon forecast and early arrival of wedding season have contributed to the current surge in demand. Additionally, grain prices are significantly high and it is supposed to augment rural income and increase demand for two-wheelers. But that’s not what has happened in the last few weeks.

Segment April 2022 April 2021 April 2020 April 2019 April 2018 April 2012
Two-Wheelers 1,148,696 995,115 0 1,632,001 1,950,494 1,157,108

An uncertain outlook

According to the industry body Society of Indian Automobile Manufacturers (SIAM), two-wheeler sales are well below the April 2012 level when the industry sold 1,157,108 units, albeit a positive growth. Moreover, this segment is lagging behind the peak of April FY19 by 41% when it clocked a domestic sale of 1,950,494 units.

According to Rajesh Menon, Director, SIAM, as of now the demand outlook looks hazy but its sustainability will depend on how sales fare by the end of this quarter.

“It is too early to comment on the revival signs of two-wheelers. We are seeing that the rabi harvest should be good on all counts that will enhance rural consumption in coming days. But high inflation and commodity prices seem to be hard hitting and we have to watch how these two factors pan out by the end of June quarter,” Menon told ETAuto.

On the retail front, ICICI Securities in a recent report on the automobile industry, said that two-wheeler registrations grew 3.2% sequentially. “With the expectation of normal monsoon, rural markets are expected to rebound on a benign base, post being badly affected by floods and Covid-led slowdown leading to particularly low demand for the entry-level segment,” the brokerage firm noted.

Market experts are broadly sceptical about any improvement in the demand side by the end of this quarter. Issues such as chip crisis and commodity inflation continue to affect the production and create supply side issues for most of the OEMs.

For instance semiconductor issues continue to be an area of concern for TVS Motor, resulting in production slack in its high demand models like Jupiter 125, Raider and Apache. Due to the ongoing chip crunch, the company was not able to produce any Raider in April 2022. If such a situation persists, then it will ultimately veer off the demand curve.

While the industry is already going through crippled supply chain, it is also facing a double blow of cost increase in terms of high metal costs and fuel price. Experts opine that majority of the scooter and motorcycle buyers in the country represents a relatively weaker section of the society has not recovered from the economic hardships and the cost increases on account of inputs and other regulatory requirements continue to retard the demand recovery.

In the past three months all manufacturers hiked the prices of their scooters and bikes in the range of INR 2500-INR 7500. As the demand environment remains fragile, companies like Bajaj Auto, Hero MotoCorp, TVS Motor in their respective analysts’ calls have indicated to go for another round of price hike during May-June as price revision thus far does not cover the expected increase in costs as per metal spot prices.

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SIAM said that the sales of passenger vehicles are still below the April 2017 figures, while two wheelers are even below the April 2012 figures. Three-wheelers are yet to reach normal levels, as sales are still less than 50% of April 2016 figures.