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Last Updated : Aug 30, 2018 06:01 PM IST | Source: Moneycontrol.com

Insurance premium hike to hit bike demand more than car

Market watchers say that these hikes do not include 18 percent GST, which would further push up prices

Swaraj Baggonkar @swarajsb
 
 
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The impending six-fold hike in insurance premium for third party covers will hit demand for two-wheelers dearly, while the impact on car sales is expected to be marginal.

Budget bikes, or those which come powered by a 100cc engines, will likely be hit the most given their high level of price sensitivity. The segment will see a jump of 356 percent in premium costs to Rs 3,285 from the current Rs 720.

With three in every five motorcycles being a budget bike, the segment has a significant bearing on the industry. Bikes with engine capacity above 150cc and up to Rs 350cc will see a 454 percent jump in premium to Rs 5,453. But the biggest jump will be for those exceeding 350cc, where premium pay has risen by 461 percent to Rs 13,034.

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Market watchers say that these hikes do not include 18 percent GST, which would further push prices higher by nearly Rs 600 on 100cc, Rs 982 on 150-350cc and Rs 2,346 on above 350cc bikes.

YS Guleria, Senior Vice President (Sales and Marketing), Honda Motorcycle & Scooter India, said, “It is our responsibility to pass on the information to policyholders of insurance companies that have still not tabulated the same. The impact is seemingly high in the 100cc segment where the hike is between 4.5-6 percent. Festive demand will soon kick in and this hike may raise questions among price sensitive customers.”

Hero MotoCorp, the country’s biggest two-wheeler manufacturer, will be hit the most as 90 percent of volumes accrue from the budget motorcycle and scooter segment.

"The new IRDA regulations raising the minimum insurance on two-wheelers to five years w.e.f. September 1 will translate into an increase in the on-road price of motorcycles and scooters. This is likely to have an impact on the retail sales of two-wheelers in the short term. However, the demand for two-wheelers in the country remains robust and we expect this to continue in the long term. Our production, dispatch and dealership operations remain as per plan, as we gear up to meet the anticipated market demand leading into the festival season," a Hero MotoCorp spokesperson told Moneycontrol.

Bajaj Auto, the third largest two-wheeler maker in the country, said its showrooms will remain open till 11 pm on Thursday and Friday for consumers to avail benefits from the insurance waive off scheme. The final increase in prices will be anywhere between Rs 4,800 and Rs 8,000 per bike.

No major impact on cars

Cars manufacturers do not expect a huge impact on sales given that the increase in insurance premium is 1-1.5 percent only. While the minimum increase is Rs 5,286 on cars with engines capacity not more than 1,000cc, the maximum increase is Rs 24,305 on those with over 1,500cc capacity.

A Mumbai-based dealer said, “Since we are nearing the festive season, consumers have already decided on what to buy. A net increase of Rs 6,600 on a Rs 6 lakh car won’t influence the buying decision much. We do not expect any impact on demand”.

Swift and Dzire are the best-selling models for Maruti Suzuki. Both are expected to see an additional premium payout of Rs 6,671. The total payout for third party insurance premium will be Rs 9,534.

On Wednesday, Insurance Regulatory and Development Authority of India (IRDAI) made it mandatory for vehicle owners to buy third party cover for three years (four wheelers) and five years (two-wheelers) as against the previous rule of one year. The new rule applies from September 1. Own damage cover, however, can still be bought for one year.

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First Published on Aug 30, 2018 04:45 pm
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