Two-Wheeler Makers’ Optimism At Odds With Ground Reality
India’s two-wheeler makers are shipping more scooters and motorcycles from their factories than last year, betting on a surge in demand in the festival season. Yet, dealerships are worried about aggressive dumping of inventory as retail sales haven’t picked up as expected.
During October, Hero MotoCorp Ltd. said it dispatched a record 30,000 vehicles on a single day. Honda Motorcycle and Scooter India Ltd., Bajaj Auto Ltd., and TVS Motor Co. also manufactured more than in earlier festival seasons as India reopened the economy after one of the world’s strictest lockdowns.
“Since the supply chain issues are over, it looks like OEMs want to make up for the lost two to three months due to lockdown, and are driving higher wholesale numbers,” Vinkesh Gulati, president of Federation of Automobile Dealerships Association, said. Buoyancy in wholesales is not converting into retail numbers, he said. “Dealers are also bullish, and have increased stock, but Navratri sales were still down compared to last festive sale.”
Even prior to the pandemic, India’s automakers were still emerging from the worst slowdown in two decades as Indians cut down spending, and upfront insurance and stricter emission standards increased costs. The pandemic wiped out the first couple of months of the fiscal, with the preference for personal mobility during Covid-19 offering some hope. The festival season this year is crucial for a recovery in sales.
Yet, retail demand—measured vehicle registration data of the Ministry of Road Transport and Highways—was less than half of factory-gate shipments for most companies.
Dealers across companies that BloombergQuint spoke with weren’t too optimistic about a revival and are unsure whether retail sales will even cross last year’s level.
One of Hero MotoCorp’s largest dealers in the Delhi-National Capital Region said he is sitting on more than 60 days of inventory. Overall retail demand is down 20% in the festive season, and footfalls remain weak, he said on the condition of anonymity out of business concerns.
Customers are looking for entry-level models including Deluxe, and Splendor motorcycles, and Pleasure, Destini and Maestro scooters, financing is down to 30% compared to 50-55% earlier as banks and non-bank lenders are being more selective and consumer sentiment is poor, he said.
Original equipment makers are putting up a brave front with high inventory levels, but there’s some amount of panic creeping in, he said. If the trade channel is overstocked, it will take a while to stabilise.
BloombergQuint’s awaits Hero MotoCorp's response to queries on dealers' concerns.
A Gujarat-based dealership managed 60% of the sales during last year’s Navratri, according to Soyeb Saiyed, sales manager. “There is no inquiry for Diwali yet, we don’t expect great Diwali sales,” Saiyed said, adding that the customers have turned picky.
If the stock remains unsold, it will add to stress, he said.
Saiyed said last Navratri the dealership sold 450 two-wheelers --- that was down to 350 this year. Financing, too, has come down, Saiyed said, and more customers are buying vehicles on cash.
Another TVS dealer, based out of Jaipur, said Navratri sales were 30% lower than the previous year and isn’t optimistic of revival during the Diwali sale. The dealer, who didn’t want to be identified, said he is sitting on 45 days of inventory.
Both dealers said entry-level vehicles are more in demand, with Jupiter being the most-selling scooter, followed by Apache.
TVS Motor has yet to respond to BloombergQuint’s queries.
Raj Bajaj, a Pune-based dealership of the Pulsar maker, is seeing good sales conversion as demand has gone up for 100-125cc bikes with the pandemic underscoring the need for personal mobility, Neel Saroj, sales manager, said over the phone. “We did nearly 10% more sales this Navratri compared to last year.”
But for Rajnath Maurya, a Bajaj dealer in Ahmedabad, demand is yet to cross last year’s level. “Festive sales aren’t going to be great, and it is very unlikely that they are going to cross last year’s levels,” he said. “It was just the pent-up demand that converted in sales, and has been exhausted,” he said, adding that sales have touched half of the previous year’s level.
Consumer sentiment is poor and the customer is more inclined towards buying used bikes as the average price of a new one has already gone up by Rs 10,000-12,000.
“We are the in the middle of the festive season with large geographies in the north yet to get in the festive mode as that happens close to Deepavali. Hence, it is premature and not meaningful to make an assessment at this stage,” Rakesh Sharma, executive director at Bajaj Auto, told BloombergQuint in an emailed response. “At Bajaj Auto, we have planned on the basis of a near normal festive period and the inventory build ups have been in line with that assumption. Any variance from that assumption, upwards or downwards will be consequentially managed in the post-festive period.”
Honda Motorcycle and Scooter India
A Mumbai-based Honda dealer with an inventory of around 45 days has been able to reach last year’s sales level during Navratri. The dealer, who spoke on the condition of anonymity out of business concerns, is optimistic about a good turnout this Diwali, but expects to exhaust 60% of the inventory during the festive sales.
A Kolkata-based dealer with one showroom and four service centers is seeing good demand. Festive demand is already up 10% compared with a year earlier, he said.
Honda Motorcycle has yet to respond to BloombergQuint’s queries.