The two-wheeler market has been facing a slowdown for the last one year on the back of weak rural demand.
Whatever growth (8.1%) the sector witnessed during FY15 was on the back of robust growth of 25.1% in scooter sales because of the urban demand. Motorcycle sales, by contrast, grew by a mere 2.5%, which was due to the strong growth in the first half of the fiscal. In fact, in the March quarter motorcycle sales fell by 6.4%.
The trend in the first five months of 2015 shows scooter sales started slowing down. For instance, in January, scooter sales grew 25% y-o-y, which came down to 2.6% y-o-y in May. Analysts say the slowdown in scooter sales is because the urban demand started slackening, but this could be a temporary blip. “Slowdown in demand, both rural and urban, is the single biggest reason for this fall in growth. This could be a temporary slump and the demand will eventually go up,” Abdul Majeed, partner at Price Waterhouse, said.
Market share of scooters in the overall two-wheeler segment is around 27% and is dominated by Honda Motorcycle and Scooter India. They have a share of close to 60% in the domestic scooter market, followed by TVS Motor and Hero MotoCorp. A Hero MotoCorp spokesperson said factors like unseasonal rains, curtailment of MNERGA spends and moderating rural wages have adversely affected the sentiment. “All these factors have caught up with the scooter segment where growth has slowed down over the past few months,” the spokesperson said.
Price Waterhouse’s Majeed says the low demand could continue in the current financial too. “The outlook for the segment is cautious. Oil prices have started firming up and rates have not really come down. We should be thankful if the entire automotive market sees a growth of 6-7% in the year,” he said, adding two-wheelers may see a flat growth in FY16 and growth should be back on track in 2016-17.
“With early indication of a good monsoon and improvement in the sentiment towards the festive season, scooter sales are also expected to pick up in coming months,” the Hero MotoCorp spokesperson said.
The share of Hero MotoCorp in the scooter market has fallen from 18.2% in February to 13% in May.
Mumbai-based analyst said Hero MotoCorp may going slow and clearing inventories before it launches two scooters this year.
