After three years of consecutive decline, two-wheeler manufacturers in FY23 are likely to see a growth of 6-6.5% in sales volume, riding on the back of rural and personal mobility demand. The recovery in demand could have been higher, but supply-chain disruptions and high inflation — wholesale price increase of over 20% — hurt the consumer sentiment, a CareEdge report said.
CareEdge expects an increase of 1.12 lakh units in FY23, including exports, driven by improved mobility, pent-up demand and improving consumer sentiments. The improvement in the rural demand, supported by a normal monsoon and the softening in input costs, is likely to drive healthy volume growth for domestic two-wheeler companies in FY23, as visible from Q1FY23. Despite volume growth, the margins are expected to remain under cost pressure due to the high commodity prices.
Two-wheelers sales fell by a compounded annual growth rate (CAGR) of 10% from FY19 to FY22 as lower rural demand amid Covid-19 induced economic slowdown, restricted mobility, and higher vehicle and fuel costs hurt. The transition to BS-VI in FY21, which led to a consequent price hike, also dampened demand sentiment.
According to the report, although electric vehicle (EV) two-wheeler sales recorded a sharp growth of 61% in FY22, they accounted for only 1.3% of the total two-wheeler sales during the period.
The recent surge in the demand for electric two-wheelers will support the overall sales of two-wheelers in FY23. In the short run, low fuel and ownership costs, low maintenance, along with the improving charging infrastructure, are likely to ensure a speedy transition towards EVs, along with extended subsidies maintaining the price band, the report added.