High ownership, fuel costs keep two-wheeler segment in slow lane

Two-wheeler retail sales fell 8.5% month-on-month (m-o-m) to 1,119,096 units in June, data released by the Federation of Automobile Dealers Associations (FADA) on Tuesday showed.

The two-wheeler segment continued its underwhelming show in June with retail sales of motorcycles and scooters declining on a sequential basis due to high ownership and fuel costs, which have severely impacted demand, particularly in rural areas.

Two-wheeler retail sales fell 8.5% month-on-month (m-o-m) to 1,119,096 units in June, data released by the Federation of Automobile Dealers Associations (FADA) on Tuesday showed. Sales in May stood at 1,222,994 units.

“Poor market sentiment, especially in rural India, high cost of ownership, inflationary pressure and June generally being a lean month due to rains kept two-wheeler sales at low speed,” said Vinkesh Gulati, president, FADA.

While cumulative sales of two-wheelers stood at 3,536,610 in the June quarter, industry experts believe that the September quarter could be another dull period as people may postpone their purchases to the festive season owing to the inauspicious Pitru Paksha (Shradh) period.

Although relatively better semiconductor supply and robust demand have given a boost to passenger vehicle (PV) sales of late, there was a marginal dip of 0.9% m-o-m to 260,683 units in June from 263,152 units in May.

Due to the semiconductor shortage, PV production had slipped to merely 198,128 units in September last year. However, with supply improving gradually, production increased by 50% to 296,841 units in May.

“The PV segment continued to see robust growth. An increase in wholesale clearly shows that semiconductor availability is now getting easier. The waiting period, especially in the SUV segment, continued to remain high. New vehicle launches are seeing robust booking thus reflecting a healthy demand pipeline,” Gulati said.

The average inventory for PVs was in the range of 15 to 20 days, while for two-wheelers it was between 20 and 23 days at the end of June, according to FADA.

Three-wheeler sales jumped 10.9% m-o-m to 46,040 units in June on the back of rising demand from e-commerce firms and intra-city logistics players. The commercial vehicle (CV) segment witnessed a rise of 1.6% m-o-m in sales to 67,696 units; further growth is expected amid higher demand from road-freight-intensive sectors and broad-based recovery in the economy. Sales in the tractor segment remained on the growth trajectory, increasing 9.2% m-o-m to 57,340 units.

Retail sales of PVs rose 27%, CVs increased 3.9% and tractors 40% in June when compared with the same month in 2019, a non-pandemic year. In contrast, two-wheeler and three-wheeler sales declined 16.4% and 5.7%, respectively.

The Russia-Ukraine conflict has increased inflationary pressure the world over, Gulati said, adding that in the past few months, prices of almost all essential items have moved northwards, thereby putting pressure on the common man’s household budget and reducing his disposable income.

“Additionally, the high fuel prices have had a spillover effect on transportation and made it expensive. This will have a negative effect on entry-level PV as well as two-wheeler segments, which are generally dominated by first-time buyers,” he said.

Gulati said while the ease in availability of semiconductors will see increased supply, especially in the PV segment, and a reduction in waiting periods, auto retail will enter the festive season on a good note if rural India stabilises.

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