Two-wheeler sales are expected to grow 8-10 per cent in 2018-19 amid concerns over the increasing cost of acquisition moderating demand, rating agency Icra has said. Positive factors for the industry include growing per capita income, improved farm sentiment following near-normal monsoon over the last three financial years, higher minimum support price (MSP) and farm loan waiver in select states.
The ratings agency has a stable outlook on the two-wheeler industry. During April-October, the sector reported 11.1 per cent year-on-year volume growth.
The forecast comes despite some one-off adverse events during the period — increase in insurance premium across the country, the floods in Kerala in August and regulatory changes in West Bengal mandating two-wheeler sale to only valid licence holders.
The rating agency pointed out the increase in rural income would support bike demand even as demand for scooters is expected to be led by rapid urbanisation, increased affordability and greater penetration through targeted product launches.
However, on the flip side, Icra said concerns which could moderately disturb the positive demand drivers are increasing cost of acquisition of a two-wheeler because of rising raw material prices and a hike in insurance premiums, rising interest rates and somewhat unevenly distributed monsoon in the current fiscal.
It expects advanced buying in the second-half of 2019-20 prior to the implementation of BS VI norms from April 2020.
For the medium-term, Icra said, “The two-wheeler industry is expected to report a volume CAGR (compound annual growth rate) of 7-8 per cent with positive structural factors such as favourable demographic profile, growing middle class, participation of women in workforce and rapid urbanisation.”
According to a note from Emkay Global Financial Services, factors such as a higher cost of ownership, postponement of purchases during elections and selective financing by non banking finance companies had impacted festive sales. However, the brokerage said dealers are witnessing some improvement in December volumes, led by new products, continuing uptrend in rural sales, a fall in fuel prices and higher discounts.
