The 9% rainfall deficit so far this monsoon season could play a negative on the decision-making process of two-wheeler buyers but festive cheer may pull up sentiments in later weeks, said manufacturers and dealers.
At least six of the country’s 36 states and union territories have had deficit rainfall between June 1 and September 15, as per data shared by the Indian Meteorological Department. States like Uttar Pradesh, Madhya Pradesh, Karnataka and Maharashtra, which are large two-wheelers markets, have seen a deficit of 9-19%.
“Lack of rains has created an issue but since the reservoir levels are still good, we are hoping for a positive uptick. Yes, the stock levels are higher than normal but this is what is expected during the build-up to the festive season,” said Ranjivjit Singh, chief business officer, Hero MotorCorp, speaking to FE.
Two-wheeler inventory days with the dealerships has hit a seven-month high to 23-25 days. They are however half when compared to September 2022 inventory of 45-50 days, according to a Federation of Automobile Dealers Association (FADA) note.
Scooters, which are predominantly sold in the urban markets, grew in August while motorcycles, especially the entry-level segment, reported a fall in the same month. The entry-level models are popular in the rural markets.
According to wholesale volume data shared by the Society of Indian Automobile Manufacturers (SIAM), the two-wheeler segment in August, grew by less than 1% year-on-year (y-o-y) to 1.56 million units.
The festive season typically generates 25% of the total volumes of the year. Buying sentiments in rural areas improves markedly during auspicious days. The rural market controls half of the two-wheeler market.
“While a broader range of models is now available, subdued rural demand due to insufficient rainfall could temper sales growth. Despite positive growth, consumer sentiment remained ambivalent, impacting conversion rates and intensifying competition among key players,” said FADA.
Two-wheeler volumes during the April-August period rose by little under 5% y-o-y to 6.98 million. During FY23 the same industry stood at 15.68 million units, still a far cry from the all-time high of 21.17 million units recorded during FY19.
A 30-40% increase in product prices over the last couple of years due to changes in regulations and also due to a steep run up in commodity costs, has deflated consumer demand for two-wheelers.
“We have not seen the kind of festive booking pull for two-wheelers as yet, like we have seen for passenger vehicles, but we do expect improvement. Government actions like reducing gas cylinder prices and potential reduction of fuel prices could offer support to the bottom of the pyramid,” said a note from Nomura.