Going by the numbers, two-wheeler sales are on an upswing, at least in the first six months of this fiscal. But behind the numbers, the picture is not so rosy. Industry experts feel the year would be more or less flat vis-?-vis last year, as retail finance has virtually dried up.
Thanks to the increasing number of bad loans with banks and the liquidity crunch triggered by the global financial market meltdown, industry players feel sales will take a big knock from November. Most banks, they say, are not willing to pump money into retail finance, especially in the not-so-lucrative two-wheeler finance business. This could halt the 10% plus surge in domestic two-wheeler sales, seen the first six months of this fiscal.
The Society of Indian Automobile Manufacturers says two-wheeler sales went up by 11.49% between April and September this year, at 38,64,013 units, compared to 34,65,789 units in the same period last year. Sales were, in fact, down by 9.4% in the first half of the last financial year.
?The surge in two-wheeler numbers in the first six months of this fiscal is largely owing to the wholesale despatch that has happened till now to cater to festive demand. However, sales at the retail end have been low as more and more financial institutions are putting an end to two-wheeler finance,? says Atul Gupta, vice-president (sales & marketing), Suzuki Motorcycle India.
Gupta say the industry is unlikely to meet its sales target of 10 lakh units in October after major banks like ICICI Bank and others have either completely withdrawn or have become hesitant to finance two-wheelers. ?In fact, the sales would not go beyond seven lakh units and the condition would worsen in the months to come, as unavailability of finance will continue to haunt the two-wheeler industry,? he says.
About four months back, GE Money and Citi Finance had withdrawn from the retail finance business. This didn?t have much impact on the loan market, as these were small players compared to financing giants like HDFC Bank and ICICI Bank.
But, in August, ICICI Bank, which was till then the largest two-wheeler financier with a monthly disbursement of Rs 200 crore, withdrew from financing at the dealers? end to limit the bank?s exposure to two-wheeler loans. This meant a near absence of ICICI Bank from the retail financing of two-wheelers, as most financing happens at the dealer end. This was a big blow to the two-wheeler industry, since ICICI Bank was financing around 50% of the total two-wheeler loans in a month or 10% of the six lakh units sold on an average in a month.
?Our two-wheeler loan volumes have dropped drastically, almost 100%, since we withdrew from the dealer end, and a very negligible amount is happening from the branches now,? says N Ravinarain, auto finance head, ICICI Bank.
Though this paved an opportunity for HDFC Bank and other smaller players like Cholamandalam DBS Finance and Sriram Finance as well as regional rural banks to grab a bigger market share, 5% of loan applications still remain unattended. The ratio would only go up as more banks are tightening their purse strings.
?The double-digit growth in the first six months of this fiscal is also because of the fact that the base was small last year. Since, the normal demand for two-wheelers continue to be there, more people are now going for cash purchase, and this has resulted in some growth,? says NK Rattan, vice-president (sales & marketing), Honda Motorcycle & Scooter India.
According to an industry expert, the 9% dip in the sale of two-wheelers in April-September last year was largely due to the poor performance of Bajaj Auto and TVS Motors. ?Last year, Bajaj Auto, the country?s second largest two-wheeler manufacturer, had made a complete transition from 100cc bikes to 125cc and above. As a result, the entry-level mass segment was badly hit. On the other hand, Chennai-based TVS Motors, which was the third leading player in the industry, was still absent from the 125cc segment. Though the company later on launched Flame in the 125cc segment, its other bikes were not able to make it big in the market. All this together pulled down the overall growth of the two-wheeler industry,? says Rattan.
However, sensing a slowdown in the industry in the days to come, market leader Hero Honda Motors had refreshed its entire product portfolio and expanded its dealer network with a special focus on semi-urban and rural areas. The company had also tied up with regional rural banks to increase the lending of two-wheeler loans. The company has set a target of selling six lakh bikes in October alone.
?Our strategy of creating winning brands across segments, investing in brand building, exploring untapped markets in rural and upcountry areas while consolidating the urban presence and rapidly expanding our network is consistently yielding results. Now with the forthcoming festive season, we are really confident of performing well,? says a spokesperson for Hero Honda Motors.