The market share of entry level bikes is showing initial signs of a declining trend, indicating a possible change in buying trends in the rural areas.

While poor rural demand on the back of two successive monsoon failures has been the primary reason for stress in the entry level bike segment (75-110cc), which is the largest segment in motorcycles, the rural market is also exhibiting a shift in preferences.

Growing penetration of automatic scooters in rural areas and increasing preference of rural youth for stylish and high-powered bikes are reported to be impacting the volumes. During Q1 of this fiscal, automatic scooter Honda Activa became the largest selling two-wheeler model in India outdoing the Hero Splendor which held the top spot for years. Activa sold about 6.98 lakh units, compared with Splendor’s 6.36 lakh units.

Despite a strong product portfolio across OEMs and roll out of refreshed variants in the recent months, the entry segment has been reporting falling sales for the past 5-6 quarters.

During the first quarter of this fiscal, motorcycle industry grew by nine per cent at 2.95 lakh units. Almost all categories of bikes reported growth. But, the entry segment reported a fall of two per cent at 1.73 lakh units.

Though two-wheeler makers assert that coming quarters will again see a growth in the entry segment too on account of better rural demand, its contribution to overall bike sales has come down to 58 per cent in Q1 of this fiscal from 62 per cent in 2015-16 and 64 per cent in 2014-15.

Industry representatives admit that there is some substitution happening in the entry segment.

“The trend is visible. It is not only higher powered-bikes, but also improving penetration of automatic scooters a reason for reducing contribution of entry bikes,” said YS Guleria, Senior Vice President – Sales and Marketing, Honda Motorcycle & Scooters India.

Due to limited disposable incomes, families in rural areas can’t afford multiple vehicles. Hence, an automatic scooter fits well for both male and female members of family. Also, improving education levels among women and better motorable roads are driving the penetration of scooters in rural areas.

Plus, rural youth is increasingly look for stylish and powerful bikes and may shift from 100cc bikes to 125cc or 150cc bikes, he said.

Eric Vas, President-Motorcycles, Bajaj Auto, also acknowledges that some substitution is happening in the entry segment. But, it is incorrect to say that it is due to scooters. They don’t compete with entry bikes. “100-cc bikes sell mostly in a particular market (rural). Since that market has been under stress, it has impacted the sales of entry bikes,” he added.

Icra’s Group Vice-President, Subrata Ray points out that the shift from 75-110cc segment to 110-125cc category is mainly in the urban centers. “The same has not been significant enough to cause demand pressure in the entry segment which continues to be hurt by weakness in rural demand,” he added.

It is to be seen whether the positive impact of monsoon and new product launches will help revive the segment. Else, a clear signal may emerge on the shift.

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