Hero and Honda sales on fire in September, but overall numbers below estimates

Like the passenger vehicle sector, the biggies in the two-wheeler industry are firing on all cylinders on the sales front. September 2017 sales for the top two players – Hero MotoCorp and Honda Motorcycle & Scooter India (HMSI) – have gone through the roof but despite their turbocharged numbers, overall two-wheeler industry sales could be below estimates.       

Despatches during September 2017 indicate that the industry has recorded a year-on-year growth of close to 10 percent. Indian two-wheeler industry sales data from SIAM maintains that growth in July and August was in the 9-10 percent range, similar to September which ideally should have logged in much more considering that the auspicious nine-day period of Navratri and Dussehra on September 30, when a large number of vehicle buyers prefer to make their purchases, fell in the same month.

A compilation of September 2017 sales, as declared by the major six OEMs (Hero MotoCorp, HMSI, TVS Motor, Bajaj Auto, Royal Enfield and Suzuki Motorcycles), suggests an initial industry growth of 9.62 percent YoY last month. These six companies’ cumulative sales total 1,965,383 units as September 2016’s 17,92,856 units.

All of them have reported YoY growth with Hero MotoCorp, HMSI and Bajaj Auto clocking single-digit growth. Hero MotoCorp and HMSI notched individual milestones – Hero crossed 700,000 units for the first time, and Honda sold over 600,000 units (including exports) for the second month in a row.

Among the volume gainers, TVS Motor Company topped the list by adding 53,186 units to its September 2016 sales. The South India-based two-wheeler major was followed by Hero MotoCorp and HMSI respectively.

How the OEMs fared
Although Hero MotoCorp, India’s largest two-wheeler manufacturer, has reported its best-ever sales for any single month in September 2017, it has recorded YoY growth of only 6.78 percent, albeit on a large base (September 2016: 674,961), with despatches of 720,739 units. According to the company, surpassing domestic sales of 700,000 units in any month is a global benchmark in the two-wheeler industry.

The record sales have come on the back of festive season as well as building dealer inventory across its expansive countrywide network, preparing for the incoming demand during Dhanteras and Diwali in October. Meanwhile, Hero claims to have sold more than a million units during this year’s festive season thus far.

Commenting on the company’s performance, Ashok Bhasin, Head of Sales, Marketing and Customer Care, Hero MotoCorp, said, “With close to three weeks still remaining in the festival season, we have set an all-time record by selling over a million motorcycles and scooters in domestic retail sales in the festive period so far, further consolidating our market leadership.”

Notably, prior to September, Hero MotoCorp had clocked its highest-ever monthly sales in August 2017 (678,797 units including exports of 17,307 units). The company has been reporting sales of over 600,000 units every month since May 2017, thus making September the fifth record month in a row.

Growth for Hero MotoCorp is primarily driven by demand for its popular Splendor, HF Deluxe and Passion brand of commuter motorcycles. While the demand for Passion has remained flat so far during this fiscal, the Splendor and HF Deluxe continue to outpace their YoY monthly sales. The Splendor has already sold more than a million units between April-August and its sales tally is estimated to be fast riding towards the 1.5 million-unit sales mark. Autocar Professional estimates that India’s most popular motorcycle brand will cross the 1.5 million-unit mark in October 2017.

The HF Deluxe too is nearing the million-unit mark and is likely to achieve that in October 2017. It is estimated that the HF Deluxe has already sold more than 900,000 units during the April-September period this fiscal.

On the cumulative front, Hero MotoCorp claims to have sold more than 75 million two-wheelers since its inception.

Although Honda recorded sales of 569,888 units last month, it managed additional volumes of only 30,484 units over its September 2016 sales (539,404 units). The company’s YoY growth stands at 5.65 percent, the lowest among all the OEMs in September 2017. Nevertheless, considering the total monthly sales of 601,998 units (including exports), September has now become the second month in a row when HMSI has reportedly breached the 600,000-unit mark.

Honda claims to have recorded a good Navratri with more than 52,000 units sold on Day 1 (September 21). Further, it claims to have retailed more than 100,000 units on Dussehra (September 30). Yadvinder Singh Guleria, senior VP (Sales & Marketing), said, “As a trend, we are seeing huge spike in our customer walk-ins and overall retails in every festival, be it Ganesh Chaturthi, Onam or the most recent 50 percent jump in Navratri. On Dussehra alone, Honda’s retails crossed the 100,000 mark for the first time ever. We are confident that the stage is set for a bumper festival ahead.” The company is currently operating at its peak production capacity.

TVS Motor Company, India’s third largest two-wheeler manufacturer, reported sales of 307,160 units in September, up 20.94 percent YoY (September 2016: 253,974). As a result of surging demand for its Jupiter scooter, TVS’ total scooter sales at 121,601 units were up by 43 percent. Its motorcycle sales grew 17 percent YoY to 143,923 units (September 2016: 122,813).

Festive demand has also helped Bajaj Auto record a YoY growth in September for the first time in CY2017. The company’s monthly domestic sales have been in the red right since demonetisation in November last year. The Pune-based motorcycle manufacturer sold 247,418 units last month, a YoY growth of 7.34 percent (September 2016: 230,502).

Meanwhile, Royal Enfield’s monthly sales are now inching closer to the 70,000-unit mark. It sold 69,393 units in September, up 21.83 percent YoY (September 2016: 56,958). The iconic midsize motorcycle brand is seeing a sharp spike in demand since the past year and has recently expanded manufacturing capacity.  

Suzuki Motorcycle India sold 50,785 units, a YoY growth of 37 percent (September 2016: 37,057).

Although September 2017 marks the second month in a row when Suzuki has sold more than 50,000 units, it had sold more than August (56,745 units). The company, which has targeted domestic sales of 500,000 units this year, is fast expanding its dealer network, now standing at 467 dealerships across India.  

Commenting on Suzuki’s sales, Sajeev Rajasekharan, EVP, Sales and Marketing, said, “We are thrilled at the flying start we have made to the festive-season. Our performance in September is just an extension of the excellent run we have been enjoying in 2017-18.”

Will October see sales soar?
Overall, while there’s no doubt that the continuing uptick in the two-wheeler industry’s fortunes is being driven by the return of demand from rural India, ratings agency ICRA has raised concern surrounding the adverse impact on farm cash flows due to uneven rainfall in the ongoing southwest monsoon.

Commenting on this, Subrata Ray, senior VP and Group Head, Corporate Ratings, ICRA, says, “While monsoon arrival was timely and progression was in line with expectation of key weather forecasting agencies till July, rainfall precipitation has been weak since August, with several areas receiving deficient rainfall in the current season. Thus, monsoon deficiency has been reported across key states of Uttar Pradesh and Madhya Pradesh, with 20 percent sub-divisions across India reporting deficient rainfall. Even Southern India was reporting deficiency in rainfall till August, which has to an extent been offset by heavy rains in September 2017. On the flip side as against deficiency in Central and North West, other key states like Bihar, Gujarat and Rajasthan have reported instances of excess rainfall.”

With Diwali in mid-October, all OEMs are busy stocking their dealerships across key target markets with their most popular models and offering handsome discounts on those that are slackening. They are also banking on government and salaried personnel opening their wallets, following receipt of Diwali bonuses, during the festive month.

The continuing wave of scooterisation, particularly in Tier 2 and 3 towns and also rural India, is also giving a smart boost to ovrall industry numbers. Expect the scooter segment to post handsome growth in the second half of FY2018.      

The two-wheeler industry anticipates that rural demand, which is largely dependent on the rainfall and growth in farm output, will grow further in October, riding on the back of Dhanteras and Diwali.