Entry level two-wheeler segment will bounce back in the coming quarters: Hero MotoCorp CEO

Niranjan Gupta, CEO Hero MotoCorp

Even though the entry-level motorcycle market is yet to reach pre-Covid levels, the world’s largest two-wheeler manufacturer’s commuter segment products will continue to remain its growth pillars. A senior official of Hero MotoCorp has  affirmed that he is already seeing some “ green shoots” in the entry-level motorcycle segment, which will witness sales resurgence in the “coming quarters”.

“As far as the entry level segment is concerned, Hero (MotoCorp) has been the market leader with (products such as) HF Deluxe, Splendor, etc. We know that India is still not fully penetrated in that segment. There are many households where people want it,” said Niranjan Gupta, CEO Hero MotoCorp, in a round table interaction with reporters.

Gupta asserted that the company will remain upbeat on commuter bikes, despite expanding aggressively in the high-margin premium bike segment (250cc and above) with products such as Karizma XMR, Xpulse and now Mavrick 440.

“What we see now from the data is that consumer confidence is moving up very rapidly from that (commuter) segment. As we move forward, we do see over the next coming quarters that this segment will be bouncing back and there are green shoots already in the festive season, where the percentage of people participating from the rural segment has been higher as compared to the previous months in the run up to Covid,” he said.

As per auto industry body, Society of Indian Automobile Manufacturers (SIAM), entry level motorcycle category (75cc-110cc) sales also dipped to 5.23 million units from 8.49 million units in FY 2018-19.

Gupta attributed the sales deceleration of entry-level two-wheelers since 2020 to factors such as inflationary pressures, rising input costs due to BS-VI emission norms, loss of incomes and jobs due to Covid-induced slowdown.

“Health insurance penetration is very low in those areas. Suddenly, they saw health costs going up. So the confidence to spend went down as they started conserving money,” he noted.

Gupta said the government’s infrastructure projects will have a ripple effect on the economy in the long run. As he puts it, “The scale of the government’s capital expenditure programme will generate employment and income over a longer period of time. The hospitality industry, for example, has gone up like anything. So, the informal sector employment is also going up".

Interest rates and other disruptions

Interestingly, Gupta believes that rising interest rates on two-wheeler loans will have a minimal impact on two-wheeler sales in the rural markets.

“Interest rates in rural India were always higher than in urban parts because of the delinquencies and write-offs that happen there,” revealed Gupta, adding, “If you look at the weighted average interest rates, it is close to around 20 percent  which NBFCs overall calculate and do.  So a one percent increase doesn’t make any difference (in rural markets).”

Conversely, Gupta anticipates a perceptible drop in interest rates on two-wheeler loans offered by non-banking financial companies (NBFCs) in rural markets.

“In the next two to three years, we should be seeing the interest rates charged in the rural segments on the two-wheelers coming down dramatically due to fintech and digital inclusion. So, that’s an opportunity to actually grow as finance and insurance costs come down,” noted  Gupta.

He also said, “As entry-level bikes get more connected, you can freeze the bikes from anywhere you want. We should see that in the next three to four years. That will change the paradigm, it’ll create additional demand."

Meanwhile, Hero MotoCorp launched the Xtreme 125R and unveiled the Mavrick 440 at its R&D’s centre in Jaipur.