Entry-level bike sales continue in the slowlane: Are price hikes, fuel rates the party pooper?

In fact, a deep dive into the numbers shows that while there is maturity in terms of demand for the higher displacement segment, the 75-100cc segment which historically had a share of more than 50 percent of wholesales is seeing its share depleting.

Entry-level motorcycles
The entry-level motorcycle segment in India is considered between 100cc to 125cc.

India is home to the world’s largest two-wheeler market, but the pace of sales has been relatively tepid compared to the FY19 peaks. A closer look at motorcycle sales trends reveals that more than 70 percent of the demand comes from the commuter segment in the 75-125cc space. This segment has always been price sensitive and has seen maximum contraction. While one may argue that consumers are moving towards higher-displacement motorcycles is a sign of the industry seeing maturity, the lack of new launches in the entry-level segment could be also an indication of waning interest.

Rohan Kanwar Gupta, VP & Sector Head – Corporate Ratings, ICRA shared with  Financial Express Online that, “A bulk of the demand for the two-wheeler industry emanates from the domestic market, which contributes nearly 75-80 percent of the total volume offtake. Despite marginal cyclicality, the industry volumes grew almost threefold between FY2009-FY2019 to 21.3 million, at a CAGR of 11 percent.”

SegmentFY 2022FY 2023Change (in volume %)2022 Market share (in %)2023 Market share (in %)
75-110cc4,968,0595,235,7885%55.351.2
110-125cc2,202,3752,686,56122%24.526.3
125-150cc372,291404,5529%4.14
150-200cc787,2261,049,11433%8.810.3
200-250cc76,87160,298-22%0.90.6
250-350cc509,681717,36241%5.77
350-500cc48,28253,52511%0.50.5
500-800cc16,71220,99126%0.20.2
Total8,981,49710,228,19114%100100
Motorcycle sales in India.

He however points out the cascading impact of regulatory changes (Insurance norms), safety standards, emission norms (BS VI transition), Covid-19, and the “relentless increase” in the cost of vehicle ownership that led to a contraction in domestic two-wheeler volumes between FY2020-FY2022.

Motorcycle sales in the 75-110cc segment.

“With sales of 13.4 million units, the industry volumes were almost pushed back by a decade to FY2012 levels in FY2022.”

In fact, a deep dive into the numbers shows that while there is maturity in terms of demand for the higher displacement segment, the 75-100cc segment which historically had a share of more than 50 percent of wholesales is seeing its share depleting.

Entry-level motorcycles under stress

In FY2018, the share of the entry-level motorcycle (75-110cc) was 59 percent and grew to 62 percent in FY2019. In FY2022, it reached 55.3 percent, FY2023 51.2 percent, and for Q1 FY2024 it has for the first time come down below the 50 percent mark, reaching 49.1 percent market share.

Motorcycle sales in the 110-125cc segment.

A look at the two-wheeler manufacturers’ financial performance also seems to indicate that there is a strong recovery in the market. But one can look at the performance is because of higher margins on the back demand for higher displacement models. 

Clearly, entry-level motorcycles have been priced the most aggressively throughout history. The consumers here are looking for a robust product that can meet their mobility needs and hence want lower maintenance, high mileage at the most affordable price.

Gupta says, “A persistent increase in the two-wheeler ownership cost has been the root cause of muted demand for the past 3 years. Between Sep 2018 (change in insurance norms) till date, the cumulative increase in on-road prices of entry-segment two-wheelers has been over 35 percent. Petrol prices also remained elevated during this period, adding to the running costs and a material rise in the cost of ownership.”

Outlook remains cautious

For any industry, new product launches indicate the potential demand outlook. Looking at the entry-level motorcycle segment one hardly sees any major launches or new models being introduced targeting at the affordable segment. A bulk of the launches have been either in the medium or premium segment. This is because mass-market players are looking to derisk themselves from the slowdown in entry-level demand, by focusing on products where they are able to get higher margins.

In fact, retail loans and petrol prices have had a fair share of impact on the muted demand for entry-level two-wheelers. As more then just the acquisition cost, the operating monthly costs have gone up significantly and is not in sync with the earning level of the customers in the entry-level segment.  

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This article was first uploaded on July twenty-eight, twenty twenty-three, at zero minutes past nine in the morning.
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