Two-wheeler sales may close 2-4% up this fiscal

Mumbai: The two-wheeler industry is likely to post a modest 2-4 percent volume growth this year but it is on course to reach 22-23 million units by 2017-18, rating agency ICRA said Thursday.

Stating that scooter volumes will continue to drive the industry growth as recovery still looks far for the bikes segment, Icra projected a modest 2-4 percent volume growth for the industry this fiscal.

However, the report is bullish about the industry in the medium term, saying the industry is expected to report a volume CAGR of 8-9 percent to touch 22-23 million units (domestic sales and exports) by 2017-18.

The report says this optimism is driven by the structural positives associated with the industry such as a favourable demographics, moderate penetration, under-developed public transport system, growing urbanisation, strong replacement demand, moderate share of financed purchases remain intact and the large export opportunity especially to Africa and Latin America.

However, for the current year, overall growth continues to disappoint, hurt by weakness in the bikes segment. So far this fiscal year, domestic sales have been disappointing with a de-growth of 4.1 percent, while despite a slow start, scooters sold 9.9 percent more in H1.

Like bikes, mopeds too failed to sustain the growth momentum witnessed in early part of year and declined 5.2 percent in the first half.

This is surprising given the softening interest rates, lower fuel prices and lower inflation, as the industry's main market--the rural areas--have been impacted by poor monsoons, leading to stressed demand.

Scooter volume growth gathered steam after a modest first quarter which saw massive growth in volume. In Q1, the average growth was only 7.3 percent at the monthly sales of 3,54,413 units, while sales clipped at 12.2 percent in the second quarter at 4,23,120 units per month.

Within scooters, the preference for higher engine capacity scooters is becoming evident with 90-125 cc segment growing while the sub-90cc segment saw a de-growth of 32.3 percent.

Even bikes segment as a whole degrew 4.1 percent while the higher displacement segment such as those in the 150-250-cc bikes saw demand clipping at a robust 61.5 percent, and those over 250 cc grew 54.3 percent in H1. The average monthly sales volumes in the 75-110 cc segment was significantly lower at 8,94,065 units during H1 compared to 9,31,888 a year ago.