Two--wheeler firms hope Diwali will put the sparkle back in sales

Navratri and Onam saw flat sales, but industry hopes to turn the corner with a cracker of a Diwali.

Sales of two-wheelers in the world's biggest market, India, remained flat in Navratri after a disappointing Onam. Demand in Onam, which marks the onset of the festive season, was affected owing to Kerala floods.

"The Navratri season was flat for us though we saw a recovery towards the tail of the festival. The industry would be probably at similar or lower levels. Reasons have been the uncertainty around insurance aspect, which acted as a dampener. Otherwise, there has been no change at the macroeconomic level," Sanjay Bhan, head (sales and after sales) at country's largest two-wheeler maker Hero MotoCorp told Business Standard.

The confusion related to insurance was that the third-party accident cover of Rs 100,000 was being mandated to go up to Rs 1.5 million for both two-wheelers and cars. Then it was said that it needs to be done for five years at one go, pushing the cost of premium up from Rs 50-Rs 750 per year for every Rs 100,000 cover. And for five years, it became Rs 3,750, making it costlier to purchase a two-wheeler.

Insurance Regulatory and Development Authority (IRDA), however, later clarified that a buyer now needs to spend Rs 750 at a time for one year. "We are still trying to represent to IRDA that you cannot have the same cover for two-wheelers and cars," said Bhan.

Despite a slow start to the festive season, Hero, which sells every second motorcycle in the country, expects to close with a growth of 8-10 per cent by Diwali.

"The shock of increase in insurance cost of two-wheelers is now behind us. In West Bengal, there was some impact due to restrictions on sales to those without a valid driving licence. There has been some reprieve until mid-November in the state. We expect a lot of rural demand to kick in now," said Bhan.

The most important thing now is to watch out how the season goes, he said.

"We have to assess if factors like fuel price is impacting customer psyche. In some ways, two-wheeler is a beneficiary of high fuel price as a customer does not have too much of an option. A four-wheeler is becoming expensive to maintain. In the past, two-wheelers have benefited. But we hope prices come down as it could dampen the overall sentiment," Bhan said.

Hero MotoCorp said the company did not see any concern on financing of two-wheelers after the crisis in the NBFC sector.

"This challenge is more in the housing financing sector. The ticket size is small in two-wheelers," said Bhan. The company said it had tried to keep dealer stock levels at four-six weeks of forward sales and not pushed it.

Recently, Hero launched the Destini 125cc scooter at Rs 54,650 onwards. This is the company's first scooter in the 125-cc segment.

"We are leaders in two-wheelers and we would want to be leaders in every segment where we operate in. We want to take a serious market share in the scooter segment. In the immediate future, we would like to get to a serious number two position which is not the case right now. Once we are there we can start looking at leadership," said Bhan.

Hero stands third in scooter market after Honda and TVS.

On cost-push, Bhan said the company tries to absorb any rise internally as much as it can.

"The cost still remains a challenge though some commodities have started softening. We will do a price hike only if there is a compelling case. Customers see price as a very important sign of trust. If you change it too frequently it does not go well with them," he said.