Two-wheeler sales fall despite demand recovery in H2 FY21, Auto News

By Amit Panday

The domestic wholesales of two-wheelers declined 13.19% year-on-year during the Coronavirus pandemic-hit FY21 even as the demand recovery in three out of four quarters last fiscal failed to lift the annual volumes, points out the data released by the Society of Indian Automobile Manufacturers (SIAM) on April 12.

According to the industry data, the two-wheeler domestic volumes were at 15,119,387 units during FY21 against 17,416,432 units a year ago, which suggests that the manufacturers lost cumulative wholesales of more than 2 million units despite clocking YoY growth during the September, December and March quarters last fiscal.

The two-wheeler domestic volumes grew 0.17%, 13.37% and 24.29% YoY during the September, December and March quarters respectively during FY21.

Several market analysts attribute the annual volume loss, in spite of the growth in H2 FY21, to the complete nationwide lockdown imposed for about 2 months last year, along with a series of regional lockdowns that stretched through H1 FY21.

The YoY decline in the two-wheeler wholesales, however, was sharper at 18% in FY20 on the back of liquidity crunch, rising vehicle prices and an overall economic slowdown. Notably, the two-wheeler industry has seen its domestic wholesale volumes slide from a peak of over 21 million units, losing more than 6 million units over the last two financial years alone.

Softening urban demand

Scooters, which contributed more than one-third of the overall two-wheeler sales in India until 2 years ago, recorded a share of less than 30% during FY21, according to the SIAM data. Scooter sales stood at 4.4 million units during the last fiscal, dropping almost 20% YoY.

The three largest scooter manufacturers, Honda Motorcycle & Scooter India (HMSI), TVS Motor Company, and Suzuki Motorcycle India have lost substantial volumes last fiscal.

While HMSI, also India’s largest scooter manufacturer, saw its scooter sales dropping from 3.1 million units in FY20 to 2.3 million units last fiscal, TVS Motor Company, and Suzuki Motorcycle India sold 829,117 units, down from 927,979 units sold in FY20, and 494,157 units, down 24% YoY, respectively.

“Since scooters are largely an urban phenomenon, declining share in the overall two-wheeler market represents a dip in its demand in the urban and semi-urban markets. This can be attributed to two factors – work from home practice that does not require people to commute to work and secondly, negative consumer sentiments among the middle-class buyers who have been holding back their investments amid the Coronavirus scare,” said a senior executive at a leading scooter manufacturing company, requesting anonymity.

Heavy exposure to scooters incurs market share loss for Honda

Owing to heavy exposure to the scooter segment, HMSI has further lost its market share in FY21. The company, which saw scooters contributing about two-thirds of its total sales in FY18, has lost its market share from a peak of almost 29% in FY18 to 27% in FY20 and 25.58% in FY21.

Triggered by a sharp fall of 26% in scooter sales alone, Honda sold a total of 3.86 million units (including bikes) in FY21, down 18% YoY. On the other hand, the decline in the company’s motorcycle sales was limited at 1.26% YoY. It sold slightly more than 1.5 million bikes in India last fiscal.

Honda is now working to widen its area of focus to cater to the demand for mid-capacity motorcycles, a product category that not only offers relatively better margins per product sold but also does not require deep retail penetration across India.

Calling the last fiscal a year of unprecedented uncertainties, YS Guleria, director – sales and marketing HMSI, said, “Honda resiliently overcame challenges from the lockdowns to the unlocks while continuing to create many new firsts. India became the epicentre of Honda’s 2 global unveilings – CB 350 and CB350 RS. This was followed with the debut of CB500X and CB 650R.”

It continues to expand its premium bike outlets, Honda BigWingstores as the exclusive footprint, now stands at over 50 showrooms to support sales and aftersales services.

Meanwhile, riding on portfolio expansion and widening the reach of its scooter lineup along with new product interventions, Hero MotoCorp has gained market share by more than a percentage point to 37% in FY21.

Although Hero MotoCorp sold about 5.59 million units and witnessed a 10% YoY decline in FY21, the Pawan Munjal-led company has specifically gained ground in the scooter segment by increasing its market share from 7% in FY20 to 10% last fiscal. The company’s scooter sales were at 443,458 units, up 10% YoY for the last fiscal.

“FY21 has been a period of sharp revival for us despite the backdrop of a significant downturn in the automotive market. We currently are offering the broadest range of scooters and motorcycles. Hero MotoCorp will be launching a host of new products over the next 5 years,” said Naveen Chauhan, head – sales and aftersales, Hero MotoCorp.

Mass-market motorcycles continue to face headwinds, premium bikes sustain

Mass market or entry-level motorcycle segment continues to face headwinds as the 100-110cc bike category, the biggest in terms of volumes in the overall two-wheeler segment has yet again recorded a decline of over 15% YoY in annual volumes. According to the SIAM data, 75cc-110cc motorcycle sales were at 5.38 million units in FY21 against 6.37 million unit sales in FY20 and 8.43 million units in FY19.

While Hero MotoCorp saw a YoY decline of 11% at 4.1 million units, Bajaj Auto, the second largest manufacturer in this sub-segment, recorded a sharp fall of 32% at 734,712 units in FY21, which marked the second year in a row for the two companies to lose large volumes.

“When the demand for entry-level motorcycles falls, it signifies tremendous lack of economic stability in the market. Small businesses, as well as the jobs across the rural, semi-urban and urban markets, have been hit over the past 2 years. While the fear of job losses continues, shortage of COVID-19 vaccines and the fast-spreading second wave is adding further uncertainty to the consumer sentiments,” said a senior industry executive quoted above.

However, the demand for 150cc-200cc premium commuter motorcycles has registered a surge of 27% YoY with wholesales in this product category improving to 969,384 units last fiscal, SIAM data shows.

While Honda and Hero have driven growth in this sub-segment with new product launches, Honda’s sales jumped from 67,410 units to 289,609 units last fiscal, thanks to the launch of the new 184cc Hornet model.

New product launches including the XPulse and Xtreme variants in this category have enabled Hero MotoCorp to grow its sales from 30,175 units in FY20 to 65,618 units in FY21.

Annual Volumes and Market Share