Shifting gears: Election and crop payments to drive 2-wheeler sales in first half of 2024

• Two-wheeler sales in December were driven by weddings and harvest payments to farmers.
  
• Increased marketing, elections, crop prices and potential fuel price reductions can drive the 2W market in the long-term, says FADA.
  
• The personal vehicle category continues to face high inventory challenges even as SUVs see good traction.
  

The two wheeler industry looks to be on the upshift mode after reporting a sharp rise in sales in December. The category grew 28% year on year, outpacing the entire auto retail for the month which grew at 21% in the same period as per a release by Federation of Automobile Dealers Association (FADA). Moreover, the first half of the year looks promising with multiple tailwinds.

In December, the two-wheeler sales were driven by an abundance of wedding dates and the distribution of harvest payments to farmers, which enhanced purchasing power. “The availability of a wide range of models and variants, coupled with favourable weather conditions and a generally positive market sentiment, contributed to this robust growth,” said Manish Raj Singhania, president of FADA.

Now, increased marketing efforts, buzz around general elections, possible good crop prices and potential fuel price reductions are short-term drivers that will push demand post mid-January. This as the inauspicious Kharmas period, that started on December 16 will end on January 15.

In the long-term, festivals, robust wedding season in the first quarter of 2024, is also expected to push demand. “The sector expects a boost from new model launches, especially in the first half of the year, and an overall better economic condition coupled with higher EV participation. Improved customer sentiments, due to factors like lower fuel prices and crop payments to farmers, are likely to drive demand,” FADA says.

All India vehicle retail data for December 2023
Source: FADA

PVs: The stress of inventory overhang

The sales of passenger vehicles (PV) paled in comparison to 2Ws and three-wheelers, growing by 3% year on year in December. The PV category continues to face challenges with high inventory levels, despite a slight decline observed at the end of December. The average inventory for PVs ranges from 55-58 days, while the same stands at 15-20 days for 2Ws.

“A significant concern was the high inventory levels, reflecting over-supply. This ongoing issue of high PV inventory, despite a slight decrease by the year's end, remains a critical area for OEMs to address, emphasizing the need for further moderation in inventory management," said Singhania.

Within PVs however SUVs saw strong demand, with extended waiting periods for key models. This surge was fuelled by aggressive year-end promotions and the introduction of new models.

In the short-term, the sector will have to focus on clearing pending bookings and launching new 2024 models. Despite concerns over high inventory levels and the impact of year-end discounts, positive market sentiments and the introduction of new models are likely to drive growth, FADA says.

New launches, stable market sentiments and many OEMs launching their EVs should keep the PV market busy in 2024.

“However, caution should be exercised regarding excess inventory as well as the need to match production with actual market demand,” says FADA.