Two-wheeler inventory at dealers has once again gone up to the six-weeks level as manufacturers, including Hero MotoCorp, Honda Motorcycle and TVS Motor, despatched excess BS-IV stocks in December and January despite the slump in retail demand, dealers said. Executives at the Federation of Automobile Dealers Association (Fada) said as retail sales during the festive month in October and November improved slightly, manufacturers expected similar trend would continue thereafter. “Usually sales fall after the festive months but still excess stocks came in December and continue to come this month,” one of the dealers said.
Retail two-wheeler sales rose 5% year-on-year (y-o-y) in October and 3% y-o-y in November on account of festive demand and a steep rise in discounts. As a result, inventory had come down to three-week levels. However, retails — vehicles sold by dealers to consumers — fell by a huge 16% y-o-y in December. Even though manufacturers have been producing fewer units for the past one year on account of a prolonged slowdown in demand, dealers said a steeper cut in output is required for stock levels to come down to normal. They further said manufacturers produced high numbers in anticipation that consumers would rush to buy the BS-IV stocks, given that discounts are high and prices will increase once BS-VI models start coming in around April 2020.
Hero MotoCorp, HMSI and TVS Motor did not reply to emails sent till the time of going to press. Prices are expected to increase as the manufacturers start rolling out models with a BS-VI engine, when the industry switches to the new emission standards from April 1, 2020. Fada president Ashish Kale said, “Two-wheeler inventory still remains a concern, especially looking at the transition and the current weakness in demand”.
Sources said manufacturers produced more stocks in December but did not dispatch all of them. The remaining units manufactured in December were despatched in January along with fresh units produced during the month. In December, while Hero MotoCorp produced 4.72 lakh units, it despatched just 4.12 lakh units. Similarly, Honda Motorcycle & Scooter India (HMSI) manufactured 3 lakh units but despatched 2.3 lakh units. TVS Motor, too, despatched 77% of the stock manufactured in December. Analysts said initial pricing trends suggest that the two-wheeler industry is seeing the sharpest price increases by anywhere between 6-15% of the vehicle costs. “Thus, volumes for the sector are likely to stay under pressure,” analysts at Nomura said.
Two-wheeler demand has remained subdued since the second half of 2018 due to an increase in insurance premium and costlier finance options. Thereafter, price hikes implemented by companies on April 1, 2019, on account of features provided to comply with the new safety norms further impacted demand.