Motorcycle and scooter makers are pinning their hopes on the festival season to revive sales but from initial reports, festivities may pass them by this year.
Almost all two-wheeler makers have been pumping up inventories at dealers' end in the last two months, hoping for a quicker offtake in the festival season which began with Onam in the South and Ganesh Chaturthi in the West. But analysts say their channel checks or checks with dealers reveal no spike in sales till now. If this reading proves to be correct, the two wheeler industry may have a gloomy 2012-13.
KP Singaravelu of Cholamandalam Securities said in a note to clients that "based on retail sales numbers and the prevailing mood, we opine that things are unlikely to change materially during the festival season. Though monsoons picked up towards the end, the spatial and temporal distribution was not healthy with some key states getting poor rainfall and the Kharif crop is estimated to be 10% lower. This is likely to result in lower rural sales especially in areas of deficient rainfall. Our channel checks indicate that the slowdown which manifested in the urban areas initially, has now spread to the rural areas also, across all two wheeler brands. There is no waiting period for any brand, including HMSI's Dream Yuga 110cc motorcycle."
So now, all eyes are trained towards the Navratras and Diwali for sales to pick up. In the last few days, much has been said about market leader Hero MotoCorp reporting a steep decline in dispatches to dealers this September but dealer inventory for even rival Honda Motorcycle & Scooter India (HMSI) is over 30 days. An analysis by Jinesh Gandhi and Chirag Jain of Motilal Oswal suggests that HMSI's retail sales are also under pressure despite dispatches being good. So not only is Hero hurting, its former partner is also not having an easy run in the market.
Gandhi and Jain point out that "While demand in the Kerala market increased marginally year on year during the festive season (Onam in August), it stood below the expectation of dealers/OEMs. Kerala being a relatively high-end/premium segment market, Bajaj benefited with the help of its new launches leading to double digit growth in sales. However, in other markets, Bajaj’s new launches, though received positive response, are cannibalizing sales of existing product range. Also, festive demand during Ganesh Chaturthi in Maharashtra has been weak as customers delay purchases in view of weak income growth and inflationary trend in the economy."
An interesting point to note in the shifting market dynamics of two wheelers is the way Bajaj Auto is claiming leadership at a time when Hero MotorCorp has been witnessing its worst slowdown in recent memory. Yesterday, Bajaj claimed that its Discover brand has become the largest selling bike in the world, surpassing Hero's 'Splendor' brand which has dominated Indian bike market for more than a decade. Discover clocked sales of 1,22,968 units in August while Splendor clocked 1,21,018 units, Bajaj said. Hero does not disclose brand wise numbers so this could not be independently confirmed. Discover has 100cc, 125cc and 150cc variants. And Bajaj has already declared its intention to launch the most expensive and the most advanced 100 cc bike in the market soon, signalling an aggressive posture.
So with market in slowdown mode, are discounts rising?
Analysts are divided, saying some discounts — dealer driven— have begun but these are few and far between. Unless the overall economic situation improves and cost of operating a bike or scooter comes down, the overall situation is unlikely to improve for two wheeler companies.