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COVID-19 impact | Rising costs, closed showrooms begin to hurt motorcycle makers

As per data shared by an apex dealer association, only 8.65 lakh two-wheelers were registered in April, far less than the typical average of 1.2 to 1.3 million units clocked in a month.

May 11, 2021 / 04:31 PM IST
 
 
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With showrooms shut and increasing uncertainty over demand coupled with rising cost pressure of raw material, two-wheeler makers are wary of giving any outlook for the current quarter as COVID-19 threatens to hurt buyer sentiments.

The lockdown announced in Maharashtra, Karnataka, Gujarat, Rajasthan, Haryana, West Bengal, Uttar Pradesh, Bihar, Goa, Tamil Nadu and Kerala has crippled retail sales. As per data shared by an apex dealer association only 8.65 lakh two-wheelers were registered in April, far less than the typical average of 1.2 to 1.3 million units clocked in a month.

Soumen Ray, CFO, Bajaj Auto, said, “While there is no issue with production what is however getting impacted is domestic two and three-wheeler sales. Showrooms in Maharashtra, Delhi, Rajasthan, Karnataka are shut. About 20-25 percent of our outlets are closed. We are living by the day. The scenario will definitely have an impact on the Q1 numbers at least with regards to April. We really do not know how much Q1 will be impacted”.

Market leader Hero MotoCorp has kept its factories shut since the start of May and won’t resume production before May 16. The Delhi-based company which has a retail-level market share of 34 percent, is expecting new COVID-19 cases in the country to peak in the middle of May before subsiding later in the month.

Speaking to analysts Niranjan Gupta, CFO, Hero Motocorp, said: “There are predictions of mid-May being the peak and therefore May-end could see cases subsiding and June could bring business back on stream, that is how we see Q1. Therefore, Q2 is the quarter that we see sanity coming back, and beyond that, the outlook remains positive”.

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The Federation of Automobile Dealers Association (FADA) which tracks vehicle registration data in the country, has reported 30-35 inventory days for two-wheelers which have remained unchanged for the past 3 months. This is even as retail volumes of two-wheelers have seen a decline indicating a build-up of inventory forcing companies to make a correction on production.

“The first 9 days of May have seen extremely lean sales due to lockdown announced by the majority of states. Even where dealerships are open the walk-ins have dropped to 30 percent and customers are delaying their purchase decision,” FADA said in a statement.

Besides lack of sales two-wheeler companies have to deal with the increasing cost pressure of raw materials. While prices of steel have already hit a high cost of precious metals like rhodium, platinum and palladium have surged by 100 percent to 200 percent.

Hero MotoCorp raised its product prices by 4 percent during FY21 and has indicated further hikes if input prices keep rising unabated. Bajaj Auto undertook a price hike of 2 percent during Q4 FY21 followed by another increase in April by 1.5-2 percent. TVS Motor Company has also hiked prices by 1.6 percent in April.

KN Radhakrishnan, Director and CEO, TVS Motor Company said, “We are looking for opportunities to pass on the hike to the customer.”
Swaraj Baggonkar
first published: May 11, 2021 04:31 pm

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