Two-wheeler registrations back on growth track; up 11% in December

Snap six-month declining streak on low base, improvement in buyers' sentiments

Snapping a six-month declining streak, two-wheeler registrations rose in December year-on-year (YoY), re-affirming the preference for personal transportation amid the pandemic. The increase is attributable to gradual improvement in buyers’ sentiments and last year’s low base.

Registration of top five two-wheeler makers in December saw 11 per cent jump YoY to 1,412,000 units, shows data captured by the VAHAN portal. It last rose in February by 1.52 per cent, plummeting in the high double-digits thereafter till November. The data may not be precise, given the two-three week lag in registrations versus retails (sales to customers) and because it only captures 86 per cent of industry’s retails, but it is a fair representation of the broader trend.

Two-wheeler sales in India, the world’s largest market, have been under pressure as a majority of educational institutions and offices remain closed because of the pandemic. With gradual resumption of offices and institutions, sales have been picking up month-on-month, albeit on the low base of last year.

Total two-wheeler dispatches to dealers (wholesales) in December is estimated to have increased 12 per cent YoY on account of the aforementioned factors. Ahead of the implementation of Bharat Stage VI (BS-VI) emission norms in April 2020, motorcycle and scooter manufacturers had started curtailing dispatches of BS-IV models. This led to low wholesale numbers in FY20. With manufacturers filling up the inventory in recent months, the wholesales have been growing on last year’s low base. This trend has made manufacturers optimistic of the road ahead. “The December volumes indicate the continuously improving consumer sentiment and the company expects the positive trend to continue in the New Year, despite challenges posed by Covid-19 pandemic,” Hero said this week.

Yadvinder Singh Guleria, director of sales and marketing, Honda Motorcycle & Scooter India, said, “After the positive retail and wholesale traction in December 2020, we enter 2021 with new hope. The third quarter marked the first quarter of positive sales after a long time.” The next two quarters, too, are expected to show some growth due to the low base effect, but real positive growth and market expansion may take some time, he added.

With gradual improvement in the macro environment, Joseph George, analyst at IIFL, forecasts 25 per cent retail growth and wholesale to catch up with it. “The discrepancy in absolute wholesales and retails, which occurred in FY20, would get corrected in FY21. As a result, FY22 volumes and growth rates of wholesales and retails should largely be in sync. For the second half of FY22, we forecast 25 per cent growth in retail volumes on a low base of a 25 per cent decline,” George wrote in a report.

Others are also optimistic of brisk growth next fiscal. “We expect an 11 per cent decline in FY21, followed by 18 per cent YoY growth in FY22,” Kapil Singh and Siddharth Bera, analysts from Nomura, wrote in a recent research report. A sharp increase in commodity prices is set to puncture the nascent recovery said an official at a two-wheeler company. Most firms have hiked prices by Rs 1,000-2,000 in January and caution that buyers have to be prepared for another round of hikes in this quarter if commodity prices don’t cool.