Domestic two-wheeler volume to dip 1-4% YoY this fiscal due to price rise: ICRA

Two-wheeler volume in the domestic market is expected to shrink by 1-4 per cent year-on-year in the current fiscal amid increase in vehicle prices as well as record high cost of petrol, among others, as per credit ratings agency ICRA. The weak festive season this year also highlights the continued wariness among the low-income group regarding big-ticket purchases.

The rating agency noted that the sales of 8.05 million two-wheelers in the domestic market in April-October period of FY2022 are flattish on a YoY basis despite a severely contracted base. “The entry-segment (75-110cc), which dominates two-wheeler sales in India, has remained subdued this year, reflecting extensive (and extended) impact of the second wave of the pandemic," Rohan Kanwar Gupta, Vice President and Sector Head for Corporate Ratings at ICRA, said, PTI reported.

Gupta stated that due to income uncertainties amid pandemic as well as medical expenses (actual or anticipated) combined with increasing cost of two-wheeler ownership, have led to purchase deferrals this festive season.

Demand for the premium two-wheelers, which comprise around 15 per cent of the overall domestic volumes, has been relatively better. However, the OEMs have been facing supply constraints due to the ongoing global shortage of semiconductor chips, ICRA stated, adding that given the existing inventory at dealerships post-festive season, it is unlikely to see a high growth in wholesale dispatches in the remaining part of the fiscal.

ICRA report also stated that the rural offtake has lagged urban, possibly due to moderated agri-sentiments caused by uneven monsoons and delayed harvesting across regions. While in the urban markets, delay in reopening of schools and colleges, income uncertainties and extended work-from-home policies have impacted sales.

However, recent cut in petrol prices and upcoming wedding season may lead to increase in two-wheeler purchase in rural markets. Opening up of labour-intensive industries like travel, tourism, and hospitality are favourable for demand recovery in the coming months, the ratings agency said. It expects a ‘meaningful’ growth in the next fiscal.

(with inputs from PTI)

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