Two-wheeler registrations sluggish in January on tepid demand, down 7% YoY

According to a dealer, the decline in registration volumes was mainly on account of market leader Hero MotoCorp, which normally sells a two-wheeler every second in the rural market.

Two-wheeler manufacturers are unlikely to get respite from slowing sales anytime soon. Registration of two-wheelers, an indicator of actual demand on the ground, was down 7 per cent in the first 20 days of January when compared with the same period a year ago.

Besides tepid sentiment in urban markets, the sluggishness in sales, according to dealers, was distress in rural India. Dealers and manufacturers are now hoping for a cut in the goods and services tax (GST) rate on two-wheelers from the current 28 per cent to 18 per cent. Meanwhile, inventory in dealerships is at a two-month high across the country, say analysts and dealers.

According to the Society of Indian Automobile Manufacturers, dispatches of motorcycles and scooters dipped 2.23 per cent to 1,259,026 units in December, compared to the figures over the same month a year ago, after manufacturers curtailed the number of deliveries to correct their inventories.

In terms of percentage, it dropped 23.6 per cent in December 2018 from November — sharper than the 16.1 per cent sequential drop seen in the similar period of 2017. However, owing to its cyclical nature, automobile sales are best understood when the year-on-year sales figures are taken into account.

Meanwhile, registration of two-wheelers in January doesn’t paint a positive picture. It dropped 7 per cent to 698,586 units in the domestic market, compared to the same month a year ago. Also, the inventory remains high. “Unlike passenger vehicle makers, most of whom curtailed dispatches in December to rein in excess inventory in dealerships, one hasn’t seen a similar trend in the two-wheeler segment, and dispatches remained high in December,” said a source. As a result, inventory continues to be in excess of 45 to 60 days, against the norm of 30 to 35 days, he said.

Registration volumes have been dragged down by market leader Hero MotoCorp that sells a two-wheeler in the rural market every second, said a dealer. Spokespersons at Hero MotoCorp and Honda Motorcycle and Scooters India, the country’s two biggest two-wheeler manufacturers, declined to comment.

Analysts bearish on the sector

“We remain extremely cautious of the two-wheeler segment,” said Nitesh Sharma, analyst at Phillip Capital.

Sharma said inventory at Hero MotoCorp and Honda Motorcycle dealerships were likely to be as high as 60 days. “A high pile of the unsold stock has forced some of the Hero dealers to rent warehousing space,” said Sharma.

This is mounting further pressure on their margins and profitability, he said. He expected sales to remain under pressure on all companies as the new safety legislation and emission norms were expected to push up prices by 13 to 15 per cent.

Business Standard