Three-wheeler sales hit a two-decade low in FY21

Ayushi Kar Mumbai | Updated on June 01, 2021

Limited mobility impacts segment

The Covid 19 pandemic has severely affected domestic sales in the three-wheeler auto segment. According to data released by the Society of Indian Automobile Manufacturers (SIAM), domestic sales for three-wheelers are almost at a two-decade low. Sales in 2020-2021 were below the domestic sales in the 2002-2003. Experts suggest that Covid 19, and consequent lockdowns impacted micro-mobility of people creating a negative impact on the rickshaw industry, which is the largest customer segment in this space.

The three-wheeler segment is made of two categories: the passenger segment and the cargo segment. The decline in overall numbers is largely due to a decline in sales in passenger vehicle segment. According to global analytics company, Crisil, 82 per cent of the sales in this segment are in passenger vehicles while 9 per cent are in the cargo segment.

People’s movement hit

“During the pandemic mobility services have been severely hit in comparison to manufacturing,” said Hetal Gandhi, Director at Crisil Research. As a result, the movement of people using public transport has been dented in comparison to the movement of goods. According to Gandhi, freight demand has picked up to near 2020 levels by the end of fiscal 2021. However, overall sales of the three-wheeler auto segment continue to remain poor due to their focus on passenger movement vehicles. In fact, if sales in the passenger-carrying four-wheeler vehicles (LCV buses) are compared to the passenger-carrying three-wheeler segment, the decline in sales is similar, according to Crisil Research data.

Rakesh Sharma, ED, Bajaj Auto Ltd, said: “While three-wheeler sales had staged a recovery by Q4 and reached up to almost 80 per cent of their normal levels, they declined by 50 per cent in April 2021 and are expected to fare worse in May. This is entirely the consequence of the lockdowns.” Lockdowns result in a reduction of public transport usage and the closure of institutions such as schools, offices etc has affected the daily earnings of the three-wheeler driver. “Since almost 90 per cent of three-wheelers purchased are financed, the reduction in earnings impairs the ability of drivers or owners to service the EMIs, leading to a loss of retail sales,” said Sharma.

EV transition

Experts also suggest that SIAM data for domestic sales could also be showing a skewed decline in sales, since the market is transitioning to electric three-wheeler vehicles which are largely supplied by the unorganised sector, thus not registered with SIAM. Transition to EV, however, appears to also be a business opportunity.

Thus, despite an overall 66 per cent decline in three-wheeler sales last year, Mahesh Babu, CEO, Mahindra Electric Mobility Ltd, remains optimistic, “While the overall three-wheeler industry has declined last year, the sales of Mahindra Treo EV range has increased by 9 per cent. Going forward, we expect electric vehicles and other alternative fuels to expand into the market share of traditional small commercial vehicles in both passenger and cargo segment.”

Crisil Research data also indicated that the goods-carrying three-wheeler segment has also underperformed, with the 26 per cent decline in sales; in comparison to the light commercial vehicles (LCV) segment, which showed a 12 per cent decline in sales. According to Gandhi, this is because demand for LCVs was driven by goods carrying organised players. Goods carrying organised players were more resistant to the pandemic in comparison to their unorganised counterparts. Therefore, the three-wheeler cargo segment was also affected since most of their demand comes from unorganised players.

Published on June 01, 2021

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