Posted On : 23 Nov, 2021
Indian rating Agency ICRA estimates two-wheeler sales volume to drop off by 1-4% for the year ending March 2022, after the sector’s weak performance during this festive season.
Data collected by ICRA released on Monday presented that sales for the seven months of the current financial year up to October were at 8.05 million units almost remain unchanged from the same period last year.
The increase in two-wheeler prices and record-high fuel rates during the year have kept consumers at a bay.
“The entry segment (75-110cc), which dominates 2W (two-wheeler) sales in India, has remained subdued this year, reflecting the extensive (and extended) impact of the second wave of the pandemic,” said Rohan Kanwar Gupta, vice president, and sector head for corporate ratings at ICRA. “The lacklustre festive season performance also highlighted continued wariness among the low-income population regarding big-ticket purchases,” he added.
ICRA also highlighted that sales growth in the rural areas of India has lagged as compared to Urban ones, due to the affected farm economy caused by untimely monsoons and delayed harvesting across regions.
In the urban regions, deferral in reopening of education institutions, weak income sentiment due to job losses, delay in increment, salary deductions aftermath of the pandemic, and extending work-from-home policies by companies, caused a decline in two-wheeler sales.
Vehicle-mortgage lenders have also contributed to low sales as they are wary of providing finance after seeing higher delinquency levels since March 2020.
The demand in the premium two-wheeler segment has fared better even manufacturers were affected by the supply constraints due to a shortage of semiconductor chips. ICRA doesn’t anticipate any major growth in wholesale supplies for the remaining months of the year. Even the existing inventory period at dealerships stays at a high of 40-45 days. The inventory period refers to how long a product is kept as inventory before it is sold.
“Given the muted sales, the inventory at dealerships is also relatively high, which could mean only a marginal, if any, traction in wholesale volumes in remaining FY2022,” ICRA’ Gupta said.
However, the recent minor cut in fuel prices, the upcoming wedding season in India, and the opening up of labor-intensive industries including travel, tourism, and hospitality are looking favorable for increasing demand in the further months. It is also said that positive growth can be seen only in the next fiscal, according to studies.