Demonetisation Effect: Degrowth In Two-Wheeler Sector Continues

The cash dependent two-wheeler market of the country continues to feel the heat of demonetisation. For the second straight month, major two-wheeler manufacturers posted a big decline in their sales number.

India’s largest two-wheeler manufacturer Hero MotoCorp posted a negative growth of 33.9 per cent in December 2016. The company could sell only 3,30,202 units in December 2016 as against 4,99,665 units in the corresponding month of the previous year.

The drop-in sales was on account of temporary shutdown of manufacturing facilities at Gurgaon, Neemrana and Haridwar in the last week of December 2016, as also due to the aftereffects of demonetisation.

However the company posted a record growth in sales for the calendar year(CY) 2016. Hero sold 67,62,980 units of two-wheelers during CY2016, reporting a growth of 4.3 per cent over CY2015 (64,86,103 units).

Pune-based Bajaj Auto sold 225,529 vehicles last month, a drop of 22 per cent over the corresponding month a year ago when it had sold 289,003 units. Sales in domestic market for Bajaj Auto declined by 11 per cent at 106,665 units, while exports witnessed a steep 24 per cent drop at 96,647 units.

Chennai-based TVS Motor also witnessed domestic two-wheeler sales decline by 8.76 per cent to 1,53,413 units in the month under review as against 1,68,160 units in the same period a year ago. Its bike sales fell 18.54 per cent last month at 58,189 units from 71,435 units in December 2015.

TVS’ sales of scooters also saw a dip at 55,536 units in December 2016 as against 65,025 units in December 2015, down 14.59 per cent.

PwC analyst Abdul Majeed said that the degrowth trend will continue until the whole exercise of remonetisation is complete. Majeed said, “I expect this trend will continue two to three months at least.”

According to industry estimates, 50 per cent of the motorcycle sales comes from the rural market. The entry-level models are in high demand and it is a cash-driven segment. Before demonetisation, two-wheeler sales were up by 8.72 per cent in October 2016, but post demonetisation, the two-wheeler sales collapsed.