1. 7th Pay Commission, good monsoon to drive double-digit growth in bike sales

7th Pay Commission, good monsoon to drive double-digit growth in bike sales

Motorcycle sales in the domestic market is likely to register double-digit growth during the current financial year, which would be for the first time after FY12.

By: | New Delhi | Updated: October 5, 2016 7:32 AM
In FY16, volumes in the motorcycle segment declined marginally by 0.24% to 10,700,466 units and in the last five years, (FY12 to FY16) the volumes increased by only 5.8%. (Reuters)

In FY16, volumes in the motorcycle segment declined marginally by 0.24% to 10,700,466 units and in the last five years, (FY12 to FY16) the volumes increased by only 5.8%. (Reuters)

Motorcycle sales in the domestic market is likely to register double-digit growth during the current financial year, which would be for the first time after FY12. This will be possible on the back of good monsoon and implementation of the 7th Pay Commission’s recommendations, which have increased the purchasing power of consumers, both in the rural and urban markets.

In FY16, volumes in the motorcycle segment declined marginally by 0.24% to 10,700,466 units and in the last five years, (FY12 to FY16) the volumes increased by only 5.8%.

Pointing towards a recovery in the first five months of the current financial year (April to August), motorcycle sales increased by 11.79% y-o-y to 485,6107 units. According to market experts, a low base and increasing spending power in the rural markets will lead to the substantial increase in volumes in the subsequent months also.

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During the launch of the motorcycle Achiever recently, Pawan Munjal, managing director and chief executive officer of Hero Moto Corp, said that sales during the Onam festival increased by 35% compared to last year.

Industry revival hopes run high led by ‘likely’ rural pick-up, 7th Pay Commission and overall improvement in macro sentiments. Both Hero and HMSI expect robust volumes in the coming months. However, bunching up of festivals this year (in September/October) would mean a cliff in November unless rural demand accelerates due to a good harvest and marriage season,” said analysts at HSBC Global Research.

Most manufacturers like Hero, Bajaj and TVS are expecting the economy and executive segment motorcycles to do well as a result of the demand recovery in the rural market. Hero, which gets 60% of the total sales from rural markets, will be a major beneficiary, while Bajaj with its CT 100 and Platina Electric, and TVS with products like the Victor and Star City, will also look to increase volumes substantially.

Last year, Onam was not a great run for the industry and sales remained flat during the Onam period. This time, sales are about 10% up. Similarly, if you look at the Ganesha festival in Maharashtra, last year it was pretty much flat. However, this time it is about 15% up. Therefore, on the whole, compared to last year and perhaps even the year before, we are definitely seeing some positive growth which is almost in double digit space” said Rajiv Bajaj, managing director , Bajaj Auto, to ratings agency ICRA..

For Hero, the volumes of the Glamour increased by 29.62% y-o-y to 2,96,782 units in the April to July period, while the same for the Splendour increased by 2% and volumes for the Passion increased by 26.73%.

Bajaj Auto also saw its volumes in the motorcycles segment increase by 17% y-o-y to 8,79,923 units in the April to August period of the current financial year.

ICRA expects 10-12% growth for two wheelers for the current fiscal with significant contribution of sales during festive season. Besides pay revisions from implementation of recommendations of 7th Pay Commission and One Rank One Pension, benefits from a favourable monsoon during the current year and expected healthy kharif output supporting rural cash flows are expected to be key factors leading the growth,” said Subrata Ray of ICRA in a note on the sector.

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