Sales of scooters slip for first time in 13 years, car growth hits 5-year low

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New Delhi, Apr 9: Pressure on the jobs front and the growing pain in rural and semi-urban India has started to tell on the auto industry. Sales of scooters have slipped into the red for the first time in 13 years and the passenger vehicles segment —that includes cars and SUVs — has grown at the slowest pace in the last five years.
Scooters, that account for nearly one-third of total two-wheelers sold in the country, recorded sales of 67 lakh units in 2018-19, down 0.27% from 67.2 lakh units in the previous year. The last time that the category — which has been credited with single-handedly adding weight and buoyancy to the two-wheeler segment over the past few years — had fallen was in fiscal 2005-06 where it de-grew by 1.5%.
And while the motorcycle segment was able to duck the trend with a sales growth of nearly 8% for the full fiscal, the pain is visible here too.
‘Job scenario impacting PV sales’
Sales of motorcycles have been struggling over the last few months and have been in the negative territory since January this year. Companies such as Hero Moto, Honda Motorcycle and Scooter India (HMSI), and TVS have cut production and also dealer dispatches as they fall in line with the new reality.
Industry body Society of Indian Automobile Manufacturers (Siam) came out with a conservative, rather grim, outlook for the new fiscal. On a 2.7% growth in passenger vehicles in 2018-19, it predicted a growth between 3% and 5% for 2019-20. Two-wheelers too saw a forecast of 5-7% growth, nearly same as the 5% growth realised in 2018-19.
“The situation on the jobs front is among some of the sentiments that have affected the growth in the passenger vehicles industry,” Siam president Rajan Wadhera said.
Wadhera, who is also the president of the automotive business of Mahindra & Mahindra, said that pre-election jitters and rising cost of insurance and fuel also kept buyers away from the market.
His view was backed by industry analyst VG Ramakrishnan, MD of consultancy firm Avanteum Advisors. “The impact on the jobs front is highly under-estimated so far. After GST, quite a bit of unorganised sector folded up and the number of companies reduced. The slowdown in the IT sector and bloodbath in telecom not only saw a reduction in total employment, but also created an uncertainty in the minds of those who are still employed. You tend to postpone new purchases, even though you may have the money.”
The nervousness in the metro and semi-urban markets hit the demand for scooters badly with market leader HMSI (Honda) forced to cut production as sales fell. A top official with one of the leading two-wheeler companies said that the going remains tough even in rural markets. “When it comes to motorcycles, rural markets are nearly 50% of total sales. There is simply no traction in rural, and we are struggling to get numbers,” the official, who requested anonymity, said.