After a slow Q2, two-wheeler sales on recovery path driven by festive demand, rural sales

Representation Image (Credit: Pexels)

The ongoing festive season, which started on the first day of Navratri (October 3 this year) and will conclude for 15 days after Dhanteras (November 1), has brought some buoyancy to the two-wheeler retail market. As per data from Vahan, the national vehicle registry services provider, two-wheelers registrations (excluding electric ones) rose by 10.5 percent this month at 15,35,717 units (28 days so far) versus 13,89,223 units retailed during the entire month of October 2023.

The bump in sales that the festival season provided follows a weak July-September quarter, which saw two-wheeler sales grow 4.69 percent over last year, anaemic compared to a double-digit yearly growth of 12.55 percent seen in the first quarter, according to data from dealers association Federation of Auto Dealers Association (FADA).

The slowdown in the second quarter was largely on account of a sharp fall in sales in September, which saw an annualised decline of 8.5 percent in two-wheeler sales. Seasonal factors like the Shraddh or Pitrapaksha period—considered an inauspicious period—and heavy rains in many parts of the country resulted in delayed purchases and a subdued market environment, according to FADA.

The jump in retail sales of two-wheelers in the first 25 days of the festival season this year can be attributed to various factors such as attractive discounts being offered by two-wheeler manufacturers, customised financing options, the introduction of new models, increasing disposable income, etc., as per industry players.

According to K. N. Radhakrishnan, the CEO and executive director of TVS Motor Company, the domestic two-wheeler industry is likely to grow 7-8 percent during the third quarter (October-December) of 2024-25 owing to the peak festival season, a good monsoon and resultant optimism arising from higher reservoir levels that offer a measure of comfort for post-monsoon farm activity.

"The industry so far grew by 4 percent. During the Navratri season, the industry grew by 10-11 percent. We are looking forward to the upcoming week, including Dhanteras. We expect a good rate of 7-8 percent in the industry," Radhakrishnan told analysts during an earnings call after the company's second-quarter numbers were declared.

However, Bajaj Auto is not too optimistic when it comes to growth rates. According to Rakesh Sharma, the company’s executive director, the “like-for-like comparison” with the same days last year and this year till Dussehra is a bit muted and below expectations.

“We had thought that it (sales growth)would be upwards of 5-6 percent. We got some indication of this—though Pitrapaksha period is low, but it was much lower than our expectations. So, we had entered this period a little bit, sort of watchful,” Sharma told analysts attending a post-earnings call.

Green shoots in entry-level segment

Going by data provided by Society of Indian Automobile Manufacturers (SIAM), the entry-level two-wheeler segment (75-100cc) was the standout segment with a growth of nearly 19 percent to 30,06,303 units during April-September, higher than the overall two wheeler market, highlighting pick up in rural demand.

“The demand in the rural market is picking up, given that monsoon has been good, it will have its impact on two-wheelers, as well as four-wheelers,” SIAM president Shailesh Chandra recently told Moneycontrol, adding, “As far as entry-level segment of two-wheelers is concerned, you would have just seen the trend that there would be an expected revival. The trend suggests that you will see a recovery of the entry segment based on the rural demand.”

As per ICRA, the entry-level two-wheeler segment recorded a healthy growth in volumes during the current fiscal till date (19.7 percent growth in the first half over the corresponding period last year), and outpaced the broader industry growth.

“A recovery in demand from the commuter segment and new product launches have aided the growth prospects of the segment. Even as the demand trends have been healthy over the recent past, the sustenance of the trend remains monitorable, with a material increase in the vehicle cost continuing to be a challenge,” said Rohan Kanwar Gupta, vice president and sector head, corporate ratings, ICRA.

Business outlook

Industry analysts said the overall two-wheeler market (including exports), is projected to grow by 7-9 percent during the 2024-25. The major volume is expected to be derived from the rural market due to a favourable monsoon, good farm output, government schemes and increased MSP (minimum support price) for crops, etc.

“The industry wholesales over the recent past have been supported by improving rural demand on the back of a normal monsoon precipitation; aided by the same industry has recorded a strong ~15 percent growth in H1 FY2025 (YoY basis). Even as dealer inventory remains at a controlled level, a continuation of the growth momentum during the ongoing festive season remains monitorable,” added Kanwar.