Two-wheeler wholesales improve in July, but retail demand still not buoyant

The two-wheeler dealers FE spoke to said they have an inventory of nearly five weeks. Ideally, it should be somewhere around three weeks.

Two-wheeler wholesales improve in July, but retail demand still not buoyant

The two-wheeler segment showed signs of improvement ahead of the festive season with six major original equipment manufacturers (OEMs) — Hero MotoCorp, Honda Motorcycle and Scooter India, TVS Motor Company, Bajaj Auto, Suzuki Motorcycle India and Royal Enfield — posting growth in their wholesale despatches in July over the same month last year. However, retail demand still seems to be far from buoyant even as inventory at dealerships remained over the ideal level.

Hero’s domestic two-wheeler volumes increased 0.34% y-o-y in July, while those of Honda rose 18.29% y-o-y. TVS and Bajaj witnessed a jump of 15.28% y-o-y and 5.22% y-o-y, respectively. Suzuki’s wholesale despatches improved 0.5% y-o-y and Royal Enfield clocked a rise of 18.42% y-o-y.

However, retail sales of two-wheelers declined 7.96% y-o-y to 1.04 million units in July 2022 as against 1.13 million units in July 2021, according to Icra.

The two-wheeler dealers FE spoke to said they have an inventory of nearly five weeks. Ideally, it should be somewhere around three weeks.

“Only the despatches to dealers are in the green as OEMs are pushing vehicles in the expectation that during the coming festive season, the situation will improve. But as of now, from the ground reality, the sense is not that buoyant or positive,” Vinkesh Gulati, president, Federation of Automobile Dealers Associations (FADA), told FE.

A dealer, who did not wish to be named, said although inventory build-up for the festive season normally starts from August-end, it began as early as June this time.

Festive season sales are usually 30% higher than any normal month, according to sector experts. However, the dealers do not expect to reach pre-Covid levels now. This is mainly due to headwinds in the entry-level segment, which contributes 70-75% of the total two-wheeler retails.

The rise in input costs, transition from BS4 emission norms to BS6 and regulatory changes pertaining to the braking system and other safety features have resulted in the prices of two-wheelers increasing by almost 30-35% since 2019. Besides, petrol prices have gone by nearly 40% during the same period.

Former FADA president Nikunj Sanghi, who also owns Hero MotoCorp dealerships, said: “The entry-level two-wheeler customers are very price sensitive and they now feel that those models have gone out of their reach. Both enquiries and footfalls have reduced at dealerships.”

To enhance sales, the dealers have pinned their hopes on OEMs, expecting them to come out with better schemes to attract more customers. Since the dealer margins are limited, they said they need backing from manufacturers.

“The dealers will also tie up with financers for providing better finance schemes as well as exchange schemes to customers,” Gulati said.

Rohan Kanwar Gupta, vice president and sector head, corporate ratings, Icra, said the fall in retail sales can be attributed to the continuing impact of elevated two-wheeler prices and inflationary headwinds on consumer sentiments, especially those at the lower end of the demand pyramid.

“Despite the same, the industry remains cautiously optimistic about recovery in the upcoming festive period, backed by the timely arrival of the monsoons, minimum support price (MSP) hikes for kharif crop, line-up of new products, easing supply chain constraints and gradual cooling-off in commodity prices,” Gupta said.

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