Rough Road: Rising ownership cost hits sales of two-wheelers

Though the wholesales of two-wheelers had clocked a low double-digit growth of 10.20% in February, the Society of Indian Automobile Manufacturers (Siam) said it is still lower than the sales recorded in February 2018.

Upward price revision in January coupled with rising fuel prices has further dented two-wheeler sales, especially of entry-level models, which are quite price-sensitive. Crisil Ratings in a note said over the past 12 months, the cost of ownership of two-wheelers has risen 8-10% following a 15-17% surge in fuel prices, price hikes by original equipment manufacturers (OEMs) to cover BS-VI costs, and costlier raw material.

Vinkesh Gulati, president, Federation of Automobile Dealers’ Associations (Fada), said: “Two-wheelers continued to see sluggish demand as the new wave of Covid in certain states kept customers away.

Inquiry levels also narrowed as many educational institutions were still reluctant to open. Fuel prices are at a historic high and have dampened sentiments. All this has pressed the brake on sale of entry-level price-sensitive variants.”

Two-wheeler retail sales recorded a decline of 16% in February, according to FADA data. Fuel consumption, which had almost recovered from the lows of the pandemic, is once again witnessing headwinds due to historic price hikes. This will have a negative impact on two-wheeler sales, the dealers’ body said.

Commenting on the retail sales, CARE Ratings said the factors that affected sales during February were rising fuel prices which led to deferment of consumers’ decision to purchase a vehicle, shortage of semi-conductors and high container charges, which deterred the production levels of OEMs, the imposition of new lockdowns in some cities affecting the sales of price-sensitive entry-level categories.

The automotive sector also faces the headwind of a consistent rise in commodity prices, which is affecting margins of OEMs, it said.

Motilal Oswal in its research note said the demand for entry-level two-wheeler models remained subdued, whereas the premium segment saw some recovery. The month of February had just one auspicious day for weddings against 10 days during the same month last year. The pain will continue till mid-April, it said.

Nomura said the retails were lower than wholesales for two-wheelers while the inventory levels would have remained at 5-6 weeks. In addition, the jump in fuel prices over the past few months, coupled with vehicle price increases earlier, impacted the cost of ownership, it said.

Though the wholesales of two-wheelers had clocked a low double-digit growth of 10.20% in February, the Society of Indian Automobile Manufacturers (Siam) said it is still lower than the sales recorded in February 2018.

The two-wheeler wholesales had declined 17.69% in April- February 2021, compared to April-February 2020 period.

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