Two-wheeler volumes to decline, EV demand grows: CRISIL

While the sales volume of the two-wheeler industry is expected to witness a 8-10 percent drop in the fiscal, the sale of electric vehicles is seeing robust demand said a CRISIL report. The decline in volume is expected on an already-low base after two consecutive years of decline, at 13 percent in fiscal 2021 and 18 percent in fiscal 2020.

This is also the first time in over a decade the two-wheeler sales are declining for three successive fiscals. A number of inclement factors, including sluggish rural demand, low festive-season sales, higher prices, and deferred purchases as consumers eye electric vehicles (EVs), were said to be the reason.

Anuj Sethi, Senior Director, CRISIL Ratings, said, “The second, third covid waves and delayed harvest impacted rural demand for two wheelers this fiscal. Besides higher vehicle and fuel prices also affected rural demand this fiscal, unlike last fiscal, when rural India was less impacted by the first covid wave. Consequently, sales of rural-focused economy motorcycles (-52 percent to two-wheeler sales), are expected to fall 5-6 percent this fiscal.”

CRISIL also said that the sales of electric two-wheelers is expected to gradually dent sales of ICE scooters to a larger extent over next two fiscals before penetrating the motorcycle segment. Overall share of electric two-wheelers is unlikely to exceed 5 percent over the next couple of fiscals. Also, investments in e-mobility are expected to rise through the organic and inorganic routes, and are likely to be funded from internal accruals.

The report also said that a segment-wise motorcycle volume will see a drop of about 8-9 percent this fiscal. Sales of premium motorcycles are expected to decline by 7-8 percent due to supply side constraints of semiconductors. Scooter sales will fall 10-11 percent on an already low base due to downtrading to electric scooters (including low speed), marking the fourth consecutive year of volume decline. 

 “Volume growth is expected to be better at 6-8 percent next fiscal, on a low base, due to moderate recovery in rural incomes, new product launches, normalisation of chip availability, and sharper focus of manufacturers on premiumisation,” said Gautam Shahi, Director, CRISIL Ratings