Rural India revving up 2-wheeler demand; industry sees double-digit sales growth in FY24

Several senior industry executives ET spoke to expect sales to grow in double digits this fiscal year, largely driven by pent-up demand in rural areas that account for about 55% of two-wheeler sales in the country. Better agricultural output, availability of water for irrigation because of healthy reservoir levels, an increase in minimum support price (MSP) of kharif crop announced last week, and government spending on rural development all will help increase disposable income and further improve consumer sentiment in rural India, they said.

“We saw good momentum this marriage season and feel the festive period will be better,” said Ranjivjit Singh, chief growth officer of Hero MotoCorp, the country’s largest two-wheeler maker.

Rakesh Sharma, executive director at Bajaj Auto, too, said the firm has started seeing a turnaround. “On the back of an improvement in the economic situation, consumer confidence is returning,” he said in a recent interaction. “There is more certainty of maintaining regular incomes (among customers), purchasing power is on the rise. This, coupled with availability of retail finance, is driving penetration.”

In the first two months of this fiscal year, sales of two-wheelers in the local market increased 16% year-on-year to 2,810,138 units, as per data available with industry body Society of Indian Automobile Manufacturers (SIAM).

Experts expect the industry to sell around 18 million two-wheelers this fiscal, up 13.5% from 15.86 million units in FY23. “Unlike in other countries, all economic indicators are looking positive in India. The pandemic is now behind us,” Singh of Hero MotoCorp told ET. “Consumers have deferred purchases for too long. They are now not willing to wait anymore.”Hero’s former partner Honda Motorcycle & Scooter India (HMSI), too, said a recovery has set in and the industry should be able to recoup lost volumes in coming months.”The potential (for growth in two-wheeler sales) in future is very high,” said HMSI’s former president Atsushi Ogata in his last interview before moving on from India earlier this quarter. “We will get back to sales of 20-21 million annually, surely.”

New Models
HMSI will drive in about half a dozen models, including two electric vehicles, this fiscal to expand volumes locally.

Ogata said the last three years were tough globally. “Consumers in rural areas were particularly affected.”

Hero MotoCorp will launch nearly a dozen models across segments this fiscal to shore up volumes and improve market share. “What we have done is defined our role – grow the core, get more customers in the commuter segment where we are the market leader and keep winning in growing segments,” Singh said. “For this, we have lined up new launches, which includes a new motorcycle on the commuter side in the 125cc segment.”

Two-wheeler makers are betting on retail financing solutions to make two-wheelers affordable to more customers amid inflationary pressures.

“Retail finance will play a big role to break down costs into equated monthly instalments,” Singh said. “We are also looking at digital payments options and direct cash collection, which allow buyers to pay as they earn to enhance customer convenience.”

Premium Play
Demand at the premium end of the market continues to outpace the overall two-wheeler market as young, aspirational buyers seek the whole experience of motorcycling that includes rides, community, merchandise, accessories and connected technologies.

Siddharth Lal, managing director of Eicher Motors that builds Royal Enfield bikes, said the market for mid-weight motorcycles is growing so fast that the country now accounts for half of the two million midsize motorcycles sold annually world over. “If you look at the mid-weight category, 250 to 750cc category globally, half of it is India, half of it is the rest of the world,” he told ET. The demand outlook remains healthy, he added.

Hero MotoCorp, too, is eying the premium category (above 150cc) where it has limited presence at the moment. Singh said the company would build two brands – Xtreme and XPulse – to scale up its play in this space. “We will bring more and more products under these brands, which will change the game significantly,” he said. He wouldn’t comment on the market share the company is eyeing in this segment in the mid term. Hero MotoCorp sold 5.33 million two-wheelers in FY23, an increase of 8% over 4.94 million units reported the year before. In the first two months of FY24, wholesales have grown 3.4% year-on-year.