The two-wheeler industry may be able to rescale the 20-million-per-annum milestone only in about five years with cost challenges, especially for the entry-level segment, leading to a slower-than-expected increase in demand.
At 21.17 million, FY19 proved to be the best year for the two-wheeler sector but since then, the demand has weakened and sales slid to 13.46 million units in FY22 — worst volume performance in 10 years.
While the pandemic wiped out market demand, other factors such as insurance hike, price increase by manufacturers and regulatory changes delivered a severe blow to retail offtake. As per estimates, there has been a 30% increase in two-wheeler prices in the last 3-5 years.
Atsushi Ogata, president, MD & CEO, Honda Motorcycle and Scooter India, said, “There has been some positive momentum, especially after April. Demand is gradually coming back. But it is still not 100% compared to 4-5 years back. Hopefully, within 5 years we should be able to reach 20 million.”
For the two-wheeler segment to hit 20 million, the rural demand will need to step in. However, a major portion of the rural market comprises entry-level 100-110cc motorcycles. About half of India’s two-wheeler market is made of such budget motorcycles. However, their demand has been under pressure since the start of the pandemic.
“The total cost of ownership is increasing drastically compared to three years ago. Income levels, especially those not living in cities, have not seen an increase in their income by the same level due to the pandemic. New products are still struggling,” Ogata added.
Ogata also said that hitting 20 million again will include far higher contributions from electric two-wheelers. From a penetration of under 2%, the segment is expected to hit 80% by 2030, according to estimates prepared by the government. “There will be a significant contribution of electric two-wheelers in the 20-million goal, as seen in China too, where there was rapid electrification and right now the market is 50 million a year,” Ogata added.