After two years of heady growth, two-wheeler sales are finally confronting a slowdown. In the April-November period this year, the top three two-wheeler manufacturers —Hero MotoCorp Ltd, Bajaj Auto Ltd and TVS Motor Co. Ltd—reported a 16.9% increase in sales. In the same period last year, the three firms posted average cumulative sales growth of 26.7%.

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According to analysts at Credit Suisse AG, Kotak Securities Ltd and Elara Capital (India) Pvt. Ltd, inventory replenishment after the festive season helped Hero MotoCorp report strong volume in November. “A part of the volume growth during the month is a function of the company rebuilding inventories, which given the high retails in October, had declined to levels of 10 days," Jatin Chawla and Akshay Saxena of Credit Suisse wrote in a research note.

Meanwhile, 34% of Bajaj Auto’s November sales came from exports. In the same period last year, exports contributed less than one-third, or 30%, to its sales. The contribution of exports to TVS Motor’s overall sales rose from 10% in November last year to around 14% last month.

Robust exports are a good sign. But contribution of exports to overall revenue is still low. Despite exports making up around 31% of volumes, Bajaj Auto derived only 27% of its last fiscal’s revenue from overseas shipments. For TVS, exports contributed around 13% to last year’s revenue.

Realizations from exports are also lower compared with domestic sales. Bajaj Auto mostly sells low-cost models overseas. But thanks to the sharp fall in the rupee, export margins are likely to get a fillip in the current quarter.

Nevertheless, the gains can be limited as the domestic market still contributes a majority to the sales. With the rural economy slowing and high base coming into effect, two-wheeler sales are expected to hit a soft patch in the coming months.

Managements of two-wheeler firms are already sounding cautious. “As a result of lower overall economic growth, high inflation, increased fuel prices and interest rates, we expect some moderation in the growth of two-wheelers over the next three to six months," TVS Motor said while releasing November sales numbers. Due to a weak outlook, the company did not increase trade stocks after the festive season.

In interviews to CNBC-TV18 and NDTV Profit, Rajiv Bajaj, managing director of Bajaj Auto, expressed displeasure about the quality of sales. According to him, the company had to push hard through sales promotions to achieve the 25% growth last month.

With the festive season behind them, it will be hard for two-wheeler firms to sustain the kind of growth numbers they have registered until now. According to Kotak Securities, Hero MotoCorp’s wholesale volume growth could fall to single digits if rural discretionary spending starts slowing. Credit Suisse expects the company’s volume growth to decline to 10-12% in the coming months.

Nirmal Bang Securities Pvt. Ltd, in a recent note to clients, estimated the volume growth for two-wheeler makers to ease to lower double digits of 10.8-12.2% in the next fiscal.