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  1. Demonetisation applies brakes on speeding scooter sales for first time in decades

Demonetisation applies brakes on speeding scooter sales for first time in decades

Demonetisation has not only led to a record decline in passenger car sales in years, it has also pulled down volumes in the automatic scooter segment for the first time in decades.

By: | Published: January 15, 2017 6:23 AM
During December, on account of demonetisation, the overall two-wheeler sales declined by 22.04%, the biggest since 1997. (Reuters) During December, on account of demonetisation, the overall two-wheeler sales declined by 22.04%, the biggest since 1997. (Reuters)

Demonetisation has not only led to a record decline in passenger car sales in years, it has also pulled down volumes in the automatic scooter segment for the first time in decades. Wholesale volumes of scooters declined by 1.85% y-o-y in November and a sharp 26.38% in December, with Honda, Hero and TVS – the top three scooter manufacturers — registering decline in volumes. In fact, the December 2016 decline in volumes for scooters was the biggest since 2001, as per Siam data.

During December, on account of demonetisation, the overall two-wheeler sales declined by 22.04%, the biggest since 1997.

In December, Honda two-wheelers (HMSI) registered an approximately 20% y-o-y fall in volumes. Generally, two-thirds of the total volumes of the company constitutes of scooters. TVS Motors during the same time registered a 14.7% y-o-y decrease in scooter volumes.

Hero MotoCorp also followed the same trend, with its total volumes, including scooters and motorcycles, falling by 33.91% y-o-y in December.

“Demonetisation continued to negatively impact customer sentiments for the second consecutive month and the domestic two-wheeler industry closed at an 80-month low of 9.09 lakh units in the traditionally lean month of December,” said YS Guleria, senior vice-president of sales and marketing, Honda Motorcycle and Scooter India.

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Though both HMSI and Hero MotoCorp did not give out segment-wise volume figures for December, dealers of both companies told FE that inventories are quite high, and sales in November came to a grinding halt. Things did not improve in December as well.

Scooters have been doing well continuously since the last decade in urban markets and the consecutive two-month decline is quite unprecedented. Sector experts feel things will improve in the medium term, but in the short term volumes might continue to remain under pressure.

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“The scooter segment, being largely an urban phenomenon, is expected to recover from the effects of demonetisation much faster compared to the motorcycles segment. The impact on the segment is likely to ease in the next couple of months as liquidity improves,” said Subrata Ray, senior group vice-president, ICRA.

Barring the last two months of 2016, the automatic scooter segment performed exceedingly well during the year. The market leader, HMSI, touched the 5 lakh sales mark for the first time in the domestic market. In fact, Honda also unveiled a scooter-only manufacturing capacity during the year to keep supply in sync with the demand for scooters.

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