Demand for two-wheelers is likely to stay subdued in the first half of the fiscal year starting 1 April as consumers are expected to take time to adjust to increased vehicle prices under the upcoming Bharat Stage VI (BS-VI) emission norms, a senior executive at Bajaj Auto Ltd said on Tuesday.
“If nothing (positive) happens in the budget and with the rising prices under BS-VI (norms), the industry will see a big dent in the first six months," said Bajaj Auto executive director Rakesh Sharma. “In our past experience, we have seen that customers take a few quarters to begin digesting the new normal. I would expect marginal recovery only from the festive season time, October - November 2020," Sharma said on the sidelines of the launch of Bajaj’s Chetak electric scooter.
He said retail sales of two-wheelers have been falling about 8% each year.
Automakers have been urging the government for a cut in taxes on vehicles to reduce the purchasing cost of new vehicles and revive the market, which has been experiencing its worst sales slowdown in two decades.
Meanwhile, Bajaj Auto’s managing director Rajiv Bajaj said the industry is currently over-regulated with the implementation of a series of new rules, resulting in an up to 30% spurt in costs.
“This hurts the common man the most as two-wheelers are bought by them," he said. The auto industry has seen a series of new mandates such as an increase in insurance costs, compulsory fitment of safety features under new safety norms followed by BS-VI norms, which will come into effect from 1 April.
Data issued by the Society of Indian Automobile Manufacturers (Siam) last week showed that two-wheeler sales fell 14% year-on-year in 2019. This was against a 13.8% decline in the overall domestic automobile industry last year.
Sharma said demand for two-wheelers was primarily impacted by rising product costs and a credit squeeze. “The liquidity crunch was not just on vehicle financing but also on the unavailability of loans for small and medium enterprises (SMEs), which are big consumers of two-wheelers. This year (FY2020) reflects net reduction in demand and reduction in stocks," Sharma said. Bajaj Auto, which plans to start the production of BS-VI models by end-January, plans to exhaust its BS-IV inventory by the first week of March.
“In some places, we are stocked out completely. For example, in Tamil Nadu, we are seeing good demand on Pongal festivities. We have exhausted our BS-IV stock there. Now, we are in a dilemma on whether we should produce additional BS-IV inventory or not. We plan not to," Sharma said.
Bajaj Auto’s new electric Chetak, which will be offered across two model ranges – urbane and premium, has a starting showroom price of ₹100,000—including government subsidies. The Chetak not only marks the return of the Pune-based company into the scooter segment but is also its debut into the electric vehicle space. The company plans to initially sell the Chetak only in Bengaluru and Pune. It wants to go slow on expanding retail sales of the scooter as it offers home charging service to each customer, wherein the installation of a complimentary vehicle charger is done by a trained technician at the customer’s house.
“We are throwing open the bookings. We will see what the response is. If we push it fast and the charging ecosystem does not respond, product and the category will earn a bad name. So, we don’t want to push too hard also," Sharma said. He declined to provide a sales target for the electric Chetak.