The strange case of dip in scooter sales after 15 months of growth

Automobile sales data for May threw up a surprise. Sales of automatic scooters saw a drop of 1.4 per cent at 555,567 units.

While all other categories have been registering a volatile trend in sales in the past two years, the scooter segment has been maintaining double-digit growth. Most pessimistic among the analysts, at best, expected a slight slowdown in growth, but the contraction in sales came as a bolt from the blue.

Drop in May

Barring TVS Motor, Suzuki Motorcycle and Piaggio, all other companies, including market leader Honda (whose volumes exceeds the cumulative sales of all other players), reported a decline in their May sales when compared with the same month last year.

Is this negative growth a beginning of a moderation phase? Or even worse, are people losing interest in scooters?

Two-wheeler makers and industry analysts BusinessLine spoke to do not think so. They say the dip in sales is a temporary phenomenon and also dismiss the views on the trend of sales moderation in the scooter segment or saturation in the urban centres. They say the demand drivers remain strong for scooters.

Capacity constraints

For its part, market leader Honda attributes the drop in its May scooter sales to capacity constraints it faced that month for meeting its full demand.

“We were not able to meet in full the demand for scooters in May. There were some issues relating to capacity. Because of the very high number we delivered in April, there was an impact on the stock level during May,” said YS Guleria, Senior Vice-President - Sales and Marketing, Honda Motorcycle and Scooter India.

Honda is confident of meeting the demand in full and resuming double-digit growth from this month.

Base effect

Anupama Arora, Vice-President, Sector Head - Corporate Ratings, ICRA, felt de-growth was more of a base effect as the segment grew by 25.3 per cent and 24 per cent in April 2017 and May 2017, respectively.

“This decline seems to be a one-off event and could have resulted from inventory correction measures of some OEMs. Moreover, April-May, generally being the wedding season in North India and characterised by festivals in some other parts, has a bearing on the rural customer base that has a higher preference for entry and executive segment motorcycles,” she added.

Companies also highlight that there is no saturation in urban markets as the scooter penetration levels are still low in many States.

“There are States such as Kerala that have as high as 60 per cent penetration for scooters.

“At the same time, the penetration is 15-20 per cent in some markets. This wide gap gives us the hope for growth in low penetration States as and when infrastructure improves,” said Guleria.

Meanwhile, companies such as Suzuki, continue to maintain its sales momentum.

Its scooter sales in May grew by about 43 per cent at 47,088 units. TVS Motor’s scooter sales also continue to zoom.

Automatic scooters

“ Automatic scooters have been witnessing an upward trajectory for the last few years, and will continue due to many factors such as riding-comfort and the ease of maintenance,” said Sajeev Rajasekharan, Executive Vice-President, Suzuki Motorcycle India.

The sales in June will be keenly watched and will determine if the dip is indeed a one-off development or part of a trend that points to a slowdown in scooter sales.

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