Reviving rural demand for two-wheelers may get boost before elections

FADA revealed that it is witnessing a “steady recovery” of two-wheeler sales since September last year.

An increase in rural spending in the months leading up to the Lok Sabha elections is expected to catalyse demand for scooters and motorcycles, experts predicted, citing past trends.

There has already been an upswing in domestic two-wheeler sales over the past few months and experts said volumes may get a further boost in the run-up to the elections.  The Lok Sabha elections are scheduled to be held in phases from April 19 to June 1.

“We have observed in the past that a few months before the general elections, the rural economy suddenly witnesses a spike in spending and consumption," said Mitul Shah, an automobile analyst at DAM Capital. "This may support two-wheeler sales in the coming months. Moreover, pent-up demand and stable vehicle prices are additional triggers.”

The Federation of Automobile Dealers Associations (FADA) had predicted that robust signals from the rural sector, coupled with increased demand for premium and entry-level segments, are set to bolster the two-wheeler market in March.

“We have seen exceptional growth (in two-wheeler sales) during Vidhan Sabha elections of Rajasthan, Chhattisgarh and Madhya Pradesh," Manish Raj Singhania, president of FADA, told Moneycontrol on the phone. "While all states grew, the poll-bound states outperformed the average performance of the entire nation during that period.”

Numbers do the talking

According to FADA, demand for petrol-run two-wheelers remains steady, fuelled by “continued strength” in the rural market. More than 4.3 million two-wheelers were sold over the past three months (December, January and February), which is an 18.3 percent jump from sales in the corresponding period a year ago.

The association said there has been a “steady recovery” of two-wheeler sales since September. Sales were “robust” during the festive season while in other months, growth was in single digits.

Additionally, FADA foresees increased demand for premium and entry-level segments in the two-wheeler market.

“If you see last few (two-wheeler) launches have been in the Rs 1.5 lakh -1.75 lakh premium motorbike segment, which is moving much faster than the entry-level one. This is because of the rising aspiration levels to own a more qualitative product in both passenger cars and two-wheelers,” added Singhania. “According to the feedback that the dealers (members of FADA) gave us, the entry-level segment also started delivering numbers, apart from the premium segment product."

A good festive season, the wedding season, optimum crop farming, higher minimum support prices for agricultural produce and direct welfare benefit payments have given an impetus to the rural market, he added.

Demand outlook

As per ICRA, while domestic two-wheeler sales volumes are still below pre-pandemic levels, the demand scenario has been “favourable” in recent quarters. This follows a phase of subdued demand during FY20-FY22 amid factors such as a significant rise in vehicle costs, lower disposable income, and supply chain issues. The rating company estimates two-wheeler sales volumes will grow 7-10 percent in FY25.

“Spurred by festive and marriage season demand, domestic retail sales picked up in the last few months and the momentum is expected to continue over the next few months. Sustenance of the recovery in rural demand, stable economic sentiments, new model launches, and rising consumer confidence auger well for two-wheeler demand,” said K Srikumar, senior vice president and co-group head of corporate ratings.

“The growth in the two-wheeler segment was driven by the rural sector, demand for premium models and strong performance of entry-level segments with broader product availability and compelling offers enhancing product acceptance,” added Singhania.