The Indian two-wheeler industry, which had been recording high double-digit growth till October 2016, is likely to close the outgoing financial year with 7-8 percent growth.
As per an ICRA report quoted by PTI, the note ban-induced liquidity crisis saw sales fall 11.3 percent between November 2016 and January 2017. The conversion to BS-IV emission norms, which comes into effect from April 1, also resulted in some inventory correction across OEMs from February.
Overall, the industry closed the first 11 months of fiscal 2017 with a growth of 7.54 percent, which although better than the industry growth rates over the past four fiscals, remains a far cry from the double-digit growth prior to November 2016.
"The impact of note ban appears to have moderated with the industry limping back to normalcy as reflected by smaller volume contraction in January and expectations of flattish February and March. For the fiscal 2017, we expect the industry to grow 7-8 per cent," ICRA said in a report.
The agency also expects some deferred purchases during Q3 and Q4 to result in better sales in fiscal 2018, leading to 8-10 percent growth during the year. "While the gap in growth rates will narrow, scooters will continue to outpace motorcycles sales in fiscal 2018," the report said.
During the note ban period, only moped sales have remained relatively insulated, and have maintained their double-digit growth, albeit on a low base, growing 26.8 percent. On the other hand, scooters, while continuing to outpace the industry growth, has grown so far 12.5 percent, which though is much lower than the 24.7 percent growth till September.
Motorcycles, which had been on the path of revival from the de-growth and flat sales reported since fiscal 2013, again returned to low growth levels of 5.1 percent in the aftermath of demonetisation, the report said.
Overall, the agency has reiterated its stable outlook for the industry and over the medium term, the industry is expected to report a volume CAGR of 8-9 percent with demand expected to be driven by structural factors like favourable demographic profile, growing middle-class and urbanisation besides moderate penetration levels.
Over the medium-term, ICRA expects increasing penetration of organised finance into smaller towns as well as rural centres supported by favourable interest rates to support demand as current share of financed vehicles remains moderate.
The report further expects the industry to tap large potential in overseas markets especially in Africa, South Asia and Latin America.
"We expect exports to clip at a CAGR of 8-10 percent over the next three years with a gradual pickup from next second half as key markets are showing signs of a recovery," concludes the report.