Two-wheeler manufacturers, however, say the long-term outlook is grim
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NEW DELHI :
Two-wheeler (2W) makers are betting on the forecast of a normal monsoon season and the ongoing wedding season for a revival in demand for vehicles, companies said.
On Tuesday, Hero MotoCorp, the country’s largest two-wheeler maker, reported a nearly 30% decline in profit for the quarter ended March to ₹627 crore owing to subdued demand.
The two-wheeler maker said it expects retail demand for motorcycles and scooters to rebound in the coming months, with the economy picking up. A normal monsoon, as forecast, is likely to aid a good harvest, which is expected to improve cash flows in rural areas, Niranjan Gupta, chief financial officer of Hero MotoCorp, told analysts in a conference call on Wednesday.
“We expect the May-June marriage season demand to be very robust. Festive season pickup was quite decent during Akshaya Tritiya, Gudi Padwa and Ugadi," Gupta said, and added the company expects the two-wheeler industry to report double-digit growth in FY23.
In FY22, two-wheeler dispatches fell 11%, hitting their lowest level in a decade. Total sales declined to just over 13 million units, significantly below the record 21 million sold in 2019, according to data compiled by the Society for Indian Automobile Manufacturers (Siam).
While Hero MotoCorp expects two-wheeler growth to revive, rival Bajaj Auto was more cautious about the demand outlook. “The current demand in two-wheelers is driven by the marriage season in north India, but demand in the second quarter of FY23 will determine the sustainability of demand in the industry at large," Bajaj Auto management told analysts at a conference call last week.
“We see some recovery in two-wheeler sales in April, but total industry volume is still significantly below pre-covid levels, and full-blown recovery has still not happened. However, improving tractor demand and farmer incomes give hopes of a recovery coming sooner rather than later. We still maintain our two-wheeler industry growth for FY23 at 12%," said Jay Kale, an analyst at Elara Capital.
Bajaj Auto said uneven economic recovery remains a risk to revival in demand. “Economic recovery is not evenly spread across the lower-income groups, which constitute most of our customers. 70% of our customers earn less than ₹40,000 a month, and almost 60-65% do not have income proof. That is the type of customer we are talking about. And the continued underperformance of the two-wheeler segment demonstrates that this class of customers has been significantly weakened after covid-19. Actually, the signs were there even before covid. So this is a 10-year low for the industry," said Rakesh Sharma, executive director, Bajaj Auto. He added that galloping inflation is likely to dampen demand further, though the next couple of months will see good retail because of festive season demand.