The ongoing chip shortage, which has affected automakers, especially the passenger vehicle segment, for the past year, is now impacting the premium two-wheeler segment.

According to data provided by the Society of Automobile Manufacturers, since April, the premium bike segment has seen major degrowth unable to keep up with the demand surge. For the first half of the 2022 fiscal, monthly production of high-end two-wheelers has rarely crossed 2 lakh units. Though the production numbers for October was 2,18,549 units, the premium two-wheeler automakers will not be able to meet the demand surge, producing 22 per cent lower units than what was produced at the same time last year.

The domestic share of premium two-wheelers sold has shrunk from 18 per cent in April to 10 per cent as of August.

Hemal Thakkar, Director at CRISIL, said this is a clear indicator of supply-side issues. “Demand for premium two-wheelers is extremely robust at the moment, especially given that the customer segment for premium is not facing an income pinch,” Thakkar explained. Chip shortage is the primary reason for the supply side issue because, “the two-wheeler OEMs’ economy and executive segments are yet to recover to their former sales numbers as a result of the economic downturn,” Thakkar said adding “this means that they have production lines that are free to be able to cater to the premium demand surge, but they are unable to source the chips.”

According to Anish Rankawat, Equity Research Analyst (Autos) at Centrum Broking Limited, “Bikes which are 150 cc and above (the premium segment) have a higher demand of semiconductors (chip density) in comparison to entry-level bikes, especially to enable technologies such as anti-lock breaking system, which needs an electronic control unit (ECU) chipset.”

Major OEMs including Bajaj and Royal Enfield have raised supply-side issues related to the chip shortage in their earnings call. Bajaj, TVS, Royal Enfield and Honda Motorcycle and Scooter India Private Limited are likely to be affected.

According to Royal Enfield, “The ongoing global shortage of semiconductor chips and the recent lockdown in certain source markets impacted volumes for the last quarter. We have been able to manage the supplies through close monitoring of the situation and appropriate actions by our agile supply chain team. The situation saw an improvement towards the end of September, and we expect the availability of parts to scale up during this quarter.”

Queries sent to Bajaj Auto and TVS, remained unanswered.

Thakkar, however, believes that it will be quite some time before the premium bike makers come out of the woods. “There is no doubt that this category is going to see growth in the second half of FY22. However, the shortage of semiconductors is going to remain a dampener for quite some time,” he warned.

According to reports, semiconductor shortage is likely to continue for at least another year.

Related Topics
comment COMMENT NOW