Two-wheeler sales continue to suffer post demonetisation

 Two-wheeler sales, specially those of motorcycles, have taken a beating in the aftermath of demonetisation as demand from the widely cash-based rural market nosedived.

Major companies, including Hero MotoCorp, Bajaj Auto and TVS Motor Co reported lower sales in December, continuing with the decline witnessed in November, which industry observers say will take at least two to three months to recover.

The country's largest two-wheeler maker Hero MotoCorp Ltd reported 33.91 per cent dip in its total sales in December 2016 at 3,30,202 units as against 4,99,665 units a year ago.

Rival Bajaj Auto also saw its domestic bike sales declining by 11 per cent at 1,06,665 units last month as against 1,20,322 units in the same month a year ago.

Similarly, Chennai-based TVS Motor Co witnessed domestic two-wheeler sales decline by 8.76 per cent to 1,53,413 units in the month under review as against 1,68,160 units in the same period a year ago. Its bike sales fell 18.54 per cent last month at 58,189 units from 71,435 units in December 2015.

TVS' sales of scooters also saw a dip at 55,536 units in December 2016 as against 65,025 units in December 2015, down 14.59 per cent.

Commenting on the situation, Price Waterhouse Partner and auto expert Abdul Majeed told PTI: "The slump is mainly due to demonetisation, customer sentiments in the rural pocket are pretty negative towards vehicle at this point in time."

He said the decline in sales of motorcycles also reflect the trend of demand slump in rural market.

As per industry estimates, nearly 50 per cent of motorcycle sales comes from the rural market, mainly driven by the entry level commenter segment bikes.

According to industry body SIAM, in November two-wheeler sales were at 12,43,251 units as against 13,20,552 in the year-ago month, down 5.85 per cent. Motorcycle sales were also down 10.21 per cent at 7,78,178 as compared with 8,66,696 units in December 2015.

Likewise, scooter sales which are urban-centric were also down 1.85 per cent at 3,88,692 units as against 3,96,024 units in November 2015.

Before demonetisation, two-wheeler sales in October were up 8.72 per cent at 18,00,672 units as compared with 16,56,304 units in the year-ago month. Motorcycle sales were also up 7.37 per cent in October 2016 at 11,44,516 units as compared with 10,65,925 units in October 2015.

Similarly, scooter sales in October 2016 were at 5,68,410 units as compared with 5,25,138 units in the year-ago month, up 8.24 per cent. Overall, companies also had benefited from the festive season sales during the month.

Majeed said the December sales number which many companies have reported are primary numbers that they sell to dealers and the actual sales to customers from showrooms are even worse.

"Post demonetisation, there is an inventory pile up in the rural dealerships which the companies are now trying to correct by reducing production," he added.

Stating that demonetisation has significant short-term impact on rural demand, Majeed said: "I expect this trend will continue two to three months at least."