Two-wheeler demand muted amid price hike due to new safety norms, high inventoryhttps://indianexpress.com/article/business/two-wheeler-demand-muted-amid-price-hike-due-to-new-safety-norms-high-inventory-5707749/

Two-wheeler demand muted amid price hike due to new safety norms, high inventory

Analysts said purchase deferrals due to elections and high inventory with dealers led to weakness in wholesales volumes. Besides, price hikes due to new safety norms from April 1 weakened demand.

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April also saw the sharpest decline in PV sales in at least seven years, with the top five carmakers reporting a near 17% dip in volumes

Two-wheeler demand remained lacklustre for the sixth consecutive month in April, dragged down by a steep decline reported by companies, including Hero MotoCorp and Honda Motorcycle. Analysts said purchase deferrals due to elections and high inventory with dealers led to weakness in wholesales volumes. Besides, price hikes due to new safety norms from April 1 weakened demand.

According to analysts at Nomura, price hikes due to new safety norms from April 1 will also weaken demand in the near-term. “We expect the industry to remain weak in the near-term on high inventory which have increased further and rising cost pressure by price hike on ABS/BS VI norms,” they wrote. Manufacturers increased prices in the range of Rs 500-7,000 as they rolled out products with combined braking system and anti-lock braking system features, mandatory for vehicles sold from April 1 this year.

While Hero posted a 17 per cent year-on-year (y-o-y) dip in sales, Honda Motorcycle & Scooter India (HMSI) and Royal Enfield reported 31 per cent and 21 per cent y-o-y decline, respectively, in volumes. Volumes of Bajaj Auto and TVS Motor Company grew at a tepid 3 per cent y-o-y in April.

Y S Guleria, senior vice president-sales & marketing, HMSI, earlier said that higher insurance premiums and liquidity crunch continues to impact demand. “Increased insurance premium in September 2018 dampened the festival sentiments and pre-festival stock build-up was converted into high inventories,” he added.

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Two-wheeler demand slipped to a single-digit growth after September 2018 when the Supreme Court mandated the five-year third-party insurance. Before that, growth rate was at around 20 per cent.

Passenger vehicle (PV) sales, too, witnessed the sharpest decline in at least seven years, with top five carmakers, including MSI and Hyundai, collectively reporting around 17 per cent dip in April volumes. The last time PV volumes declined around 16 per cent was in February 2013.

Maruti Suzuki India (MSI) chairman R C Bhargava last week said it is historically seen that demand weakens during the pre-election months and he does not see a revival in the April-June quarter. “For some reason, customers are postponing their purchases during the election which has hit the retail demand,” he said.

MSI and Hyundai reported 19 per cent and 10 per cent y-o-y dip, respectively, in volumes, while M&M’s sales fell 9 per cent y-o-y. While Tata Motors posted a huge dip of 26 per cent y-o-y, Toyota’s volumes fell 22 per cent y-o-y. —FE