While Hero MotoCorp reported a 20% y-o-y dip in wholesales, HMSI’s volumes fell by a sharp 26%. Bajaj Auto and TVS Motor Company’s sales fell 21% and 20% y-o-y, respectively.
With dealers sitting on high inventory due to poor retail demand, two-wheeler sales slipped by over 23% year-on-year (y-o-y) in August, the tenth consecutive month of decline as discounts notwithstanding, prices continue to remain high.
Manufacturers including Hero MotoCorp, Honda Motorcycle & Scooter India (HMSI) and Bajaj Auto reported high double-digit decline in dispatches last month. Analysts said retail demand deteriorated due to liquidity issues, weak consumer sentiment and the overall slowdown in economy. “Consequently, inventories are at record levels across segments — highest in the two-wheeler at 60-70 days — despite production cuts,” analysts at Motilal Oswal noted.
Last month, Rajiv Bajaj, managing director, Bajaj Auto, said, while it is a difficult time for the sector, it is not a crisis like situation and there could be an improvement in the upcoming festive season. “The focus now was on ensuring that retail sales are as good. We will use the festive season to completely correct stock at the dealership level,” Bajaj had said.
A dull festive demand in 2018 due to increase in insurance premium and costlier finance piled up excess stocks as manufacturers continued to despatch in anticipation of higher demand. Despite production cuts, dealers of top players like Hero MotoCorp and HMSI have an inventory of over 60 days, while factory stockyards are also short of space.
While Hero MotoCorp reported a 20% y-o-y dip in wholesales, HMSI’s volumes fell by a sharp 26%. Bajaj Auto and TVS Motor Company’s sales fell 21% and 20% y-o-y, respectively. The worst hit was Royal Enfield which reported a 24% drop in sales, the sharpest fall in three years. According to Federation of Automobile Dealers Association (FADA), registrations which reflect retail interest, fell 6% y-o-y in July, eighth consecutive month of decline. The August registration data is not out yet.
Demand for two-wheelers was impacted by hike in insurance premium in September 2018 and subsequent price hikes taken by companies on April 1 on account of features provided to comply with the new safety norms. During the April-June quarter, two-wheeler sales volume slipped 12% y-o-y, worst since 15% decline in the third quarter of 2008-09.
Analysts said while high inventory with dealers led to weakness in wholesales volumes, price hikes due to new safety norms from April 1 weakened demand. “We expect the industry to remain weak in the near-term on account of high and rising cost pressure by price hike due to safety norms,” analysts at Nomura wrote earlier.
As attempts to revive sales via discounts and promotional packages failed, auto industry chief executives have been demanding tax cuts and easier access to finance availability, following thousands of job losses of temporary workers in the past six months. Slumping sales have forced automakers to shut down factories and reduce productions shifts, leading to job cuts.