Wednesday, October 17, 2007

While unrelenting high interest rates have stolen the growth of bike sales, it is the rural market that has borne the brunt so far while the sales in urban areas have continue to grow. In the first half of the current fiscal, sales in the entry-level 100cc segment, which is largely driven by rural demand, have come down by 21% cent compared to last year while the urban driven executive segment has still managed to grow by 11% . Sales in the overall motorcycle segment is down by 15.2 % in the same period.

On the contrary, for the full fiscal year 2006-07, the entry-level 100 cc segment had grown by 7.66% while the executive segment with bikes of 125cc and above had grown by 38.36% . While interest rates have eaten into the growth of the executive segment as well, it is the entry level which is in total disarray.

“The major issue arising out of high interest rates is credit availability. Banks are now less savvy about taking risks and more cautious with first-time buyers. This has created a problem in rural markets,” said Society of Indian Automobile Manufacturers (SIAM) director general Dilip Chenoy. “A number of banks have actually stopped disbursing loans in states like UP and Bihar and that has impacted sales.”

The demand in urban areas has also seen scooterette sales go up substantially. As opposed to fiscal 2006-07, when the segment grew by only 3.48 per cent, this year sales have grown by 20.13 per cent. “While motorcycles will continue to rule, it is largely dependent on demand in rural markets while ungeared scooters are a primarily urban product. As we have seen in the last six months, despite high interest rates scooters are the only other segment to grow in double digits,” said Kinetic Motor MD Sulajja Firodia Motwani.

Despite the festive season hype, industry does not expect demand in rural markets to pick up in the times to come. “We have seen wide-scale postponement of purchases in rural areas and for the next six months, we expect things to remain the same. Consumers are upgrading from 100 to 125cc but the rural market is still predominantly 100cc,” said Bajaj Auto (BAL) two-wheeler division CEO S Sridhar. “This festive season will not be as good as last year’s. High interest rates is an issue in urban areas as well but in rural areas it is a bigger concern, as availability of finance itself is an issue there.”

Split Cycle

•Motorcycle sales dips to 2.72mn in April-Sept 2007 against 3.21 mn last year.

•Entry level segment down by 21.72%. Hero Honda sales skid by 4.3 per cent, Bajaj & TVS see 43% and 44% decline

•Executive segment (125cc & above) grows 11% from 0.62 mn to 0.69 mn

•Scooter segment posts

comeback, grows by 20.13% from 0.44 mn to 0.53 mn

•Rural markets to stay sluggish, pull bike sales down for rest of fiscal

Source:- Indianexpress