Two-wheeler makers are scaling down their growth projections for the next quarter as lending rates refuse to budge from a five-year high. Companies such as Bajaj Auto Ltd, India’s second-largest two-wheeler maker, and rival TVS Motor Co. Ltd are now expecting flat growth in the festival season that starts later this month.
Two-wheeler sales fell for the fifth straight month as buyers continue to stay away in the absence of easy credit. Bajaj Auto on Saturday reported a 6% decline in August two-wheeler sales to 170,203 units, from 182,013 vehicles a year ago. Hero Honda Motors Ltd, the country’s largest two-wheeler maker, reported a 12% rise in sales after two months of decline even as it admitted to a slowdown in the industry.
“We are expecting to register growth from last year’s corresponding sales figure starting from November,” said S. Sridhar, CEO, two-wheeler business, Bajaj Auto. “We can’t put a percentage to the growth expected from November, but any substantial growth will take place only in the fourth quarter starting January.”
At a recent event to introduce seven new models to boost growth, TVS chairman and managing director Venu Srinivasan said the third quarter to December will be flat.
Pan-Indian festivals such as Diwali and Dussehra typically fall in the third quarter of the year, as does the auspicious period for weddings. Buying new vehicles is common in this period. In 2006, for instance, nearly 700,000 vehicles were sold each month in the quarter compared with 635,000 units a month in the preceding two quarters. Record sales of 2.08 million two-wheelers during October-December 2006 and high interest rates will dampen growth this quarter, analysts said. “Those kind of numbers can’t be matched this year,” said Ashutosh Goel of Edelweiss Securities.
The central bank has also indicated that it is unlikely to soften its tight money stance, which means interest rates are unlikely to come down.
“Nothing is happening,” with interest rates, said N.R. Narayanan, head of auto loans at ICICI Bank Ltd, India’s second largest bank by assets. A majority of car and two-wheeler purchases are financed by banks or financiers. “Even with flat growth in two-wheelers sales, we would be happy.”
Meanwhile, two-wheeler makers are racing to introduce new models to stoke sales. Bajaj will launch a 125cc bike, with a more fuel-efficient engine this month, whereas TVS has just unveiled a range of two- and three-wheelers.
The new models have triggered an intellectual property rights battle between Bajaj and TVS. The former has accused TVS of copying its technology and threatened to take the latter to court. TVS has denied the charges. The technology, called digital twin spark ignition, uses two igniters for the fuel instead of one and enhances fuel efficiency. “We have earlier faced this situation from Chinese manufacturers who tried to copy our technology, but for the first time we are facing it in India,” said Sridhar. “It is not possible that they are not aware that they have violated our patent rights. We wanted to first let the world know that someone is copying our technology and simultaneously we have started legal proceedings,” he added.
On Sunday, TVS issued a release that said it was suing Bajaj for Rs250 crore in damages for slander.