 "Two-wheeler")
In the rural market, there is a continued popularity of motorcycles over scooters likely due to the fact that motorcycles are seen as more practical for rural roads and conditions.
There has been a recovery in the two-wheeler (2W) segment in the first half (H1) of 2024, primarily due to the emerging performance in rural areas. According to the Federation of Automobile Dealers Associations (FADA), the rural contribution has jumped by approximately 57 to 60 per cent in the first quarter of 2024 (April to June), indicating a rising demand for two-wheelers in these regions.
Experts believe this trend is likely to continue, fuelled by a good monsoon season and government initiatives focused on rural development.
Overall two-wheeler sales in the first half of 2024 increased by 11.76 per cent compared to the same period in 2023 despite challenges such as extreme heat and the election period.
Analysts highlight that adequate rainfall, affordability, and the lack of public transport options in rural areas are critical factors influencing this recovery. Sanket Kelaskar from Ashika Group notes that the new coalition government’s focus on rural development could further bolster two-wheeler sales. Key factors to watch include agricultural output driven by adequate rainfall and potential reductions in fuel prices to maintain affordability.
“The formation of a new coalition government is expected to lead to increased focus on rural development. This could result in more government capital expenditure and schemes aimed at boosting rural incomes and disposable spending power. Improved rural economic conditions would directly benefit demand for entry-level two-wheelers and scooters, which have a major market share in rural India.”
Echoing a similar sentiment, K. N. Radhakrishnan, chairman, managing director and chief executive officer, TVS Motor Company, in the fourth quarter of FY24 investment call, revealed that they expect healthy growth for the two-wheeler industry this year, driven by both urban and rural markets. He sees a significant opportunity in the scooter segment, which caters to both men and women in urban, semi-urban, and even rural areas due to the improving road infrastructure in rural India.
TVS is optimistic about the rural market, expecting a normal monsoon this year to bring positive momentum. He highlighted that young generation rural customers are not just budget-conscious but also aspirational, looking at premium products like Apache, Raider, or Ntorq. TVS estimates the rural share in TVS Motors’ domestic sales to be around 45 to 50 per cent, with financing penetration at a healthy 56 per cent.
Yamaha, Honda Motorcycle and Scooter India (HMSI), Hero, and Bajaj did not respond to queries sent by Business Standard.
Analysts also predict that maintaining affordability and controlling the overall cost of ownership will be crucial for driving two-wheeler sales in price-sensitive rural markets. Thus, a reduction in fuel prices supported by tax reductions can positively impact two-wheeler sales.
The recovery is expected to benefit manufacturers like Bajaj Auto and Hero MotoCorp, as Bajaj’s launch of the Freedom 125, a CNG-powered motorcycle, offers a cost-effective alternative for rural consumers, while Hero MotoCorp’s strong presence in the entry-level segment positions it well to capitalise on the increasing rural demand.
Anurag Singh, managing director at Primus Partners, emphasises that the rural market has been a major driver of two-wheeler sales for nearly a decade.
“With a good monsoon, higher minimum support prices for crops, and increasing rural economic power, motorcycles remain a practical choice for rural roads and conditions, ensuring sustained growth in this segment.”
In the rural market, there is a continued popularity of motorcycles over scooters likely due to the fact that motorcycles are seen as more practical for rural roads and conditions.
Although the total sales of two-wheelers from January to June 2024 marked an 11.76 per cent increase, reaching 8,982,502 units compared to the same period in 2023, there was a slight decline of 0.189 per cent in sales compared to the latter half of 2023.
Earlier, due to the uneven precipitation which impacted farm cash flows and consequently rural demand, concerns were raised about a consistent recovery for the industry. Hence, credit rating agency ICRA remains cautiously optimistic about a sustained demand recovery despite multiple headwinds, including elevated ownership costs, persistent inflationary pressures, and rising financing rates.
The combination of a growing rural economy, a positive monsoon season, and government support programs is putting more money in the pockets of rural residents, who are increasingly turning to two-wheelers to meet their transportation needs.
First Published: Jul 21 2024 | 3:56 PM IST
