Note ban compressed two-wheeler volume in Nov-Jan: Icra

For 2017, Icra expects the domestic 2-wheeler industry to close the year with a growth of about 7-8%

The central government's recent demonetisation drive has resulted in volume compression of the two-wheeler segment during the November-January period, domestic rating agency Icra said on Friday.

According to the rating agency, the higher denomination note ban led to a liquidity crisis which has resulted in volume compression of 11.3 per cent during November 2016 to January 2017 over the corresponding period of last financial year.

"Our channel checks with dealers indicate the situation is moving back to normal," said Subrata Ray of Icra Ratings.

"We expect that some deferment of purchases during Q3 and Q4 FY2017 to result in improvement in volumes during FY2018, leading to 8-10 per cent growth during the year."

Ray said while the gap in growth rates will narrow, scooters would continue to outpace the motorcycles in volume growth during FY2018.

Besides, Icra stated that starting February 2017, inventory correction has taken place across original equipment manufacturers (OEMs) with BS-IV emission norms coming into effect from April 1, 2017.

"Overall, the domestic two-wheeler industry closed the first ten months of FY2017 with a growth of 8.3 per cent, which although better than the industry growth rates over the past four fiscals, remain a far cry from the double-digit growth reported prior to November 2016," Icra said in statement.

"The impact of demonetisation appears to have moderated; with the industry limping back to normalcy as reflected by smaller volume contraction in January 2017 and expectations of flattish February and March 2017."

For 2017, Icra expects the domestic two-wheeler industry to close the year with a growth of about seven to eight per cent.

"Among the various product segments, mopeds have remained relatively insulated from the negative effects of the note ban, and have continued to maintain their double-digit growth momentum, albeit on a low base, closing January 2017 with YTD growth of 26.8 per cent," the statement said.

"Scooters, while continuing to outpace the industry growth, reported YTD growth of 12.5 per cent, although it was much lower than the 24.7 per cent reported till September 2016."

The ratings agency pointed out that motorcycles, which had been on the path of revival from the de-growth and flat sales reported since 2013, again returned to low growth levels of 5.1 per cent in the aftermath of demonetisation.