2 min read.Updated: 15 Jan 2022, 12:00 PM ISTVivek Kaul
It is interesting to see that two-wheeler sales have fallen in each of the years since peaking in 2018.
Domestic sales of motorcycles, scooters and mopeds, that is two-wheelers, continued to remain subdued. Data released by the Society of Indian Automobile Manufacturers (SIAM) said that a million two-wheelers were sold in December. This means that the total number of two-wheelers sold between April and December 2021 stood at 10.12 million units.
Take a look at the following chart which plots the total number of two-wheelers sold from April to December, over a period of the last eleven years, staring with 2011.
The two wheeler sales from April to December 2021 were lower than that during the same period in 2020, when they had stood at 10.77 million units. This despite zero sales in April 2020 and a very limited number being sold in May 2020.
In fact, the two-wheeler sales from April to December 2021 have been lower than each of the years from 2012 to 2021. Hence, they have been the lowest in a decade. They are marginally higher than the sales from April to December 2011, when they had stood at 9.97 million units.
What does this tell us?
1) Two-wheeler sales are low despite interest rates being at very low-levels. For loans of lower amounts, as is the case with two-wheelers, the fall in EMI when interest rates go down, is minimal. Hence, people take on loans when they have the enough confidence in their economic future to be able to repay the EMI. They don’t take on loans just because the EMI has fallen by a hundred rupees. This tells us that the monetary policy of the Reserve Bank of India has its limitations.
2) It is interesting to see that two-wheeler sales have fallen in each of the years since peaking in 2018. What that tells us is that the economy has been suffering on the back of first demonetisation and the botched up introduction of the goods and services tax, followed by three waves of the covid pandemic and the negative economic impact of all this on the informal sector.
3) Further, a two-wheeler is the first major expenditure of many people looking to move up the economic hierarchy and possibly become a part of the so-called middle class. Falling domestic-two wheeler sales tells us that all is not well with this segment. The middle class is not growing and that can’t augur well for the future. The pity is we are not talking enough about this phenomenon.
4) What it also tells us is that the impact of covid has been different on different segments. Passenger car sales haven’t been impacted like two-wheeler sales have been. The demand for expensive real estate has picked up post covid. Credit card spending remains strong.
To conclude, there is nothing that suggests that this phenomenon will reverse any time in the near future. And that should be a reason to worry.