As high ownership cost continues to take a toll on two-wheeler demand, it’s the entry-level models — comprising 75% of total retail sales — that are bearing the brunt with rural markets remaining weak. Sales data show that commuter and premium bikes, which are the mainstay of urban and semi-urban markets have fared better.
For instance, the share of budget motorcycles, having engines up to 110cc, fell to 33% in total domestic motorcycle sales during April-August of the current fiscal. The figure was 40% in FY19. The lost share almost entirely moved to motorcycles with bigger engines as their share grew to slightly over 30% by August-end from 24% in FY19, data from the Society of Indian Automobile Manufacturers show.
According to the Federation of Automobile Dealers Association (FADA), states which are significant markets for entry-level two-wheelers, such as Himachal Pradesh, Haryana, Uttarakhand, Uttar Pradesh and Jharkhand, have shown weakness in demand during September.
Also Read: Mercedes puts focus on local assembly of EVs
Manish Raj Singhania, president, FADA, said, “Prior to the BSVI introduction, a 100cc bike used to cost ₹40,000. The same bike now costs ₹60,000. Urban demand has definitely revived after Covid-19, but not the rural market and this is quite visible in the 100cc bikes sales numbers. In contrast, in certain urban markets, there is a waiting period on premium two-wheelers.”
In the past one year, two-wheeler companies have raised prices five times to offset the pressure created by raw material cost jumps. While hikes in the two-wheeler loan rates by banks also acted as a demand diffuser, the price-sensitive rural buyer has largely stayed away from showrooms.
Hero MotoCorp lost its top position in retail sales to former joint venture partner Honda in September sales, mainly due to a fall in demand for budget motorcycles, which is the backbone of Hero. About 80% of the volumes of Delhi-based company — India’s largest two-wheeler maker — depend on budget motorcycles. In comparison, only 5% of Honda’s sales come from the budget bike segment, whereas 37% come from commuter and premium bikes.
A mail sent to Hero MotoCorp seeking comments remained unanswered till the time of going to press.
While Hero has a share of 78% of the budget bike segment, Pune-based Bajaj Auto and Chennai-based TVS Motor Company are second and third with market shares of 11% and 6%, respectively, as of August-end.
The gradual shift in consumer choice to bigger engine capacity two-wheelers is what prompted two other Japanese heavyweights, Suzuki Motorcycle and Yamaha, to exit the budget category segment entirely to focus on the premium segment. This strategy has worked for both, as Suzuki improved its total domestic share to 4.4% (from 3.94% in FY20) and Yamaha to 3.81% (from 3.32% in FY20).
Atsushi Ogata, president, MD and CEO, Honda Motorcycle and Scooter India said, “Post-Covid, while the revival in the urban markets was swift, the growth story of rural areas is at a slower recovery pace. Two-wheeler customers in the urban market are showing more optimism than their rural counterparts which has led to this contrast in demand.”
