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Home  » Business » Two-wheeler sales hit speed-break

Two-wheeler sales hit speed-break

By Shally Seth Mohile
January 24, 2019 23:37 IST
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Dealers attribute the sluggishness in sales to distress in rural India as well as tepid sentiment in urban markets.

Two-wheeler makers are unlikely to get any respite from slowing sales anytime soon.

The registration of two-wheelers, an indicator of actual demand, was down 7 per cent in the first 20 days of January compared to the same period a year ago.

 

Dealers attribute the sluggishness in sales to distress in rural India as well as tepid sentiment in urban markets.

Manufacturers and dealers are now holding out hopes for a cut in the Goods and Services Tax (GST) rate from the current 28 per cent to 18 per cent.

Meanwhile, inventories at the dealerships remain elevated across the country, say analysts and dealers.

Dispatches of motorcycles and scooters dipped 2.23 per cent year-on-year (y-o-y) to 1.26 million units in December 2018 as manufacturers curtailed delivery to correct inventory, according to the Society of Indian Automobile Manufacturers (SIAM).

On a month-on-month basis, sales were down 23.6 per cent in December, significantly sharper than the 16.1 per cent fall in the same period of 2017.

However, owing to their cyclical nature, automobile sales are best understood in terms of y-o-y numbers.

The registration of two-wheelers in the current month doesn’t paint a positive picture. It dropped 7 per cent to 698,586 units in the domestic market compared to the same month a year ago.

“Unlike passenger vehicle makers, most of whom curtailed dispatches in December to rein in excess inventories at dealerships, one hasn’t seen a similar trend in two-wheelers.

"Even as two-wheeler makers curtailed dispatches, they failed to align with demand,” said a source. As a result, inventories continue to be in excess of 45 to 60 days against the norm of 30 to 35 days, he added.

The overall registration volumes have been dragged down by the market leader Hero MotoCorp, which sells every second two-wheeler in the rural market, according to dealers.

Spokespersons at Hero MotoCorp and Honda Motorcycle & Scooter India, India’s two biggest two-wheeler makers, declined to comment.

Analysts are also bearish on the sector. “We remain extremely cautious of the two-wheeler segment,” said Nitesh Sharma, analyst at Phillip Capital.

He said his channel check suggested that inventories at Hero and Honda dealerships were as high as 60 days.

“A high pile of unsold stock has forced some of the Hero dealers to rent warehousing space,” Sharma said, adding this was mounting further pressure on their margins and profitability.

He expected sales to remain under pressure on all companies as the new safety legislation and emission standards were expected to push up prices by 13 to 15 per cent.

Low volumes are an indicator of poor rural sentiments, wrote Soumya Kanti Ghosh, group chief economic adviser at State Bank of India's Ecowrap 21 January.

"There is a significant decline in sales and registration of two-wheelers, which further suggests rural sentiments are quite low in the past several months due to falling rural demand led by low farm income," said Ghosh.

The overall registration of automobiles, including passenger vehicles, heavy and light goods vehicles and two-wheelers, dropped 21.8 per cent in December compared to the previous month.

Photograph: Amit Dave/Reuters

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Shally Seth Mohile in Mumbai
Source: source
 

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