Vehicle registration rose 15% in August 2021, but lags 2019 volumes: FADA

Recovery patchy for two-wheelers, dragged down by low entry-level demand

Vehicle registrations across categories rose 15 per cent year-on-year (YoY) in August, but lagged by a similar number when compared with the corresponding month in 2019, the Federation of Automobile Dealers Association (FADA) said on Tuesday.
 
Two-wheeler registrations, especially, remained a cause for concern as they advanced just 6.66 per cent YoY, despite the low base of last year. They were dragged down by the entry-level segment, reflecting the weakness in purchasing power. To put this in context, two-wheeler registrations saw a 22.62 per cent decline when compared with August 2019 numbers. It also dipped month-on-month, falling to 976,051 units in August from 1,132,611 units in July.
 
FADA attributed the poor offtake to the multiple price hikes announced in a segment that is extremely elastic to price changes. Increased fuel costs and closure of educational institutions too has impacted the segment. Customers, especially at the bottom of the pyramid, are shifting their priority to saving instead of spending, FADA said. This will keep demand for two-wheelers in check. With educational institutions slowly opening, “a ray of hope” can be seen for improvement in demand in the two-wheeler category, it said.
 
Entry-level models, which account for about 70 per cent of the motorcycle market, were in the slow lane even before the pandemic and have been hit the hardest, said Vinkesh Gulati, president of FADA.
 
“The buyers of this segment have suffered because of job losses and salary cuts announced during the first wave. While many have got jobs, they either continue to reel under the impact or are wary of spending,” said Gulati. He estimates retails of entry-level bikes (100-125cc) to have fallen 25-30 per cent YoY in August, even as the 150cc and above segment continues to advance at a fast clip.

About 55 per cent of motorcycle sales come from rural India. Hence, the volumes have also been dented because of the spread of Covid-19 to rural areas during the second wave.
 
The retail volumes and market share loss of market leader Hero MotoCorp, which leads the entry-level segment and sells every second motorcycle in rural India, reflects this pain. Its retail sales or registrations during the month dropped to 313,074 units as compared to 332,559 units last year. Its overall market share fell to 32.08 per cent from 36.34 per cent the previous year.
 
“The impact of the second wave is clearly showing on the two-wheeler retails,” said Mitul Shah, head of research at Reliance Securities. High exposure to rural India, which was in the throes of the pandemic, impacted sales. A deficient monsoon has also dented sentiment in several pockets, he said.
 
Meanwhile, passenger vehicle makers are battling supply-side hitches amid strong demand — registrations rose 39 per cent YoY, and 32 per cent compared with 2019.
 
Carmakers are making drastic reductions to production because of the unavailability of semiconductors and ABS chips, shortage of containers, and high metal prices. For the first time customers may not get a vehicle of their choice and lucrative schemes during the festive season. Ultra-frequent price increases are also keeping entry-level buyers at bay, said FADA.
 
Overall, in the near term the apex body expects demand to remain a “mixed bag with PVs witnessing demand-supply mismatch and two-wheelers facing a demand crunch”.