Two-wheeler sales in the country are showing signs of a sustained recovery, led by a pick-up in rural volume and stable demand in the urban market, analysts said.
Product upgrades, 'marriage season' demand, attractive discounts, and finance schemes are also aiding sales in the category, according to research reports by Motilal Oswal, Nomura, and Dolat Capital. However, the market continues to be skewed towards models with engine capacities over 125 cc.
The demand recovery for two-wheelers has remained fickle over the past few years as the affordability of these vehicles has been hit by raw material inflation and stricter emission norms.
Retail sales for the category rose 9% year-on-year in May after falling over 7% in April. In the fiscal ended March 2023, two-wheeler sales rose 18.5% but remained lower than those in FY17 and FY18, data from the Federation of Automobile Dealers' Associations showed.
"The 2W sales were positively influenced by seasonal factors like the marriage season, changes in the FAME subsidies effective from June, and the recovery of rural demand, which hint towards a promising future in the aftermath of the Covid-19 pandemic," FADA had said in the May sales report.
Lowered subsidies for the electric two-wheeler category hit sales as EVs accounted for nearly 3% of the overall sales in the category, as compared with 7% in May, Nomura said.
The story playing out in the passenger vehicle category stands in contrast with two-wheelers.
While the strong demand for SUVs and improvement in deliveries will aid the sales of passenger vehicles in June, the category is showing signs of slowdown in the small car segment, with lower inquiries across dealerships, the brokerages said.
Increased discounts and lower waiting periods for some of the popular models also indicate that high growth momentum may have hit a speed bump, they said.
Major automakers have already projected single-digit volume growth for the industry in the ongoing fiscal, which is much lower than the over 20% growth in the fiscal ended March.
Analysts also cautioned that a weaker monsoon may be a key risk to demand.
The pre-buying in March continued to have an impact on the sales of commercial vehicles in June, but estimates showed lower single-digit growth in dispatches for all major companies.
End customers rescheduled the purchases to March as the implementation of BS VI Phase II emission norms led to higher vehicle prices in April.
Higher demand from educational institutions continues to strengthen bus sales, but sentiment among agricultural buyers seems weaker, analysts said. The underlying demand remains strong due to fleet operator profitability and infrastructure spending by the government.
In the tractor segment, the onset of monsoons is likely to support retail sales, but higher inventory levels may limit wholesale dispatches.
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