Two-wheeler demand may take a year to be back on track: TVS Motor

A series of price increases by two-wheeler companies in recent quarters partly to cover for higher costs from the upcoming Bharat State VI emission norms will push back demand recovery in the segment by at least a year, a top executive of TVS Motor Company said.

Rising fuel prices, increasing raw material costs, enforcement of new vehicle braking laws, and hike in third-party insurance premiums are some other reasons for price hikes in two-wheelers, causing a meltdown in retail demand.

“In the last 8-9 quarters, there were a series of interventions which has added cost such as ABS and CBS (vehicle braking systems), third party insurance. Globally, every country is facing a slowdown and India is facing a slowdown too. Some very positive things have also happened in the past 3-4 weeks such as good monsoon, higher spending on infra and increase in dearness allowance. Going forward, it will take at least four quarters for the recovery of the industry,” KN Radhakrishnan, TVS Motor's President, Chief Executive Officer and Additional Whole-time Director said.

TVS competitors like Hero Motocorp and Bajaj have not given any guidance on demand recovery. “Though recent weeks have been good, we honestly do not know how long it will take for the market to recover. We are not planning for production having a horizon of more than two months,” a senior executive of Bajaj Auto said.

TVS sales during the July to September (Q2) quarter came down by 18.61 percent to 8.85 lakh from 10.88 lakh units sold in the corresponding period last year. One of the reasons for the steep fall is demand from rural areas, where many markets have experienced adverse climatic conditions like floods.

During the April-September period, the two-wheeler industry witnessed an increase of 5 percent in sales to 21.18 million units compared to 20.20 million units sold in the same period last year, as per data shared by the Society of Indian Automobile Manufacturers.

“Bear in mind the two-wheeler penetration and the level of public transport the industry will come back in a big way, we are confident of that,” added Radhakrishnan

Radhakrishnan, however, said he is expecting the Diwali sales to be better than Dussehra sales as the expectations around the reduction in GST has now faded and liquidity in the market has also improved.

The Chennai-based company further said it will incur a capital expenditure of around Rs 600 crore, while investments would be another Rs 100-120 crore, for the financial year.