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2021 proved to be a mix of ‘shock and surprise’ for the Indian two-wheeler industry.
After a good start for 2021 with about 25 per cent growth in bike and scooter sales (wholesale) in the March quarter, the two-wheeler slipped into a sluggish phase in the subsequent period of the year with the second wave of the pandemic applying brakes to growth. April-November 2021 period saw a six per cent decline in bike sales as compared to the same period last year, while scooter volumes fell 3 per cent.
Key factors
Many factors pulled down the two-wheeler sales. They included a dent in the affordability and sentiments of prospective two-wheeler buyers due to reduced discretionary income on the back of job losses, salary cuts and higher medical expenses. Also, relentless hike in prices of two wheelers, record high level of petrol prices along with uneven monsoons and delayed harvest impacted the revival. Rural-dependent entry bike segment was among the worst affected even as the demand for premium two wheelers was relatively better till semiconductor shortage issue cropped up.
“Despite stable rural economy, there has been little to no improvement in the income levels and the actual cash in hand of the rural folks, perhaps employment opportunities have been scarce and uncertain. As a result, the mass market sub-125cc segment 2Ws, including bikes and scooters, have seen tremendous decline,” said Suraj Ghosh, Associate Director, Powertrain & Compliance Forecasts-South Asia, IHS Markit.
Though the two-wheeler segment may end 2021 with a marginal growth due to strong performance in Q1, the outlook remains challenging as enquiry levels at dealerships are low.
“The 2W market, which continues to face demand headwinds, may further go into a slump if the third wave becomes a reality,” said Vinkesh Gulati, President, Federation of Automobile Dealers Associations (FADA).
The E-wave
Amid this gloom, the E-wave spelt some cheer. Electrification caught on well in the two-wheeler segment in the post-second wave period and sales of electric two wheelers have been soaring.
“2021 has been disruptive for the Indian automobile industry marking the beginning of electrification and the green mobility revolution. The EV penetration will continue to grow in the coming years,” says Sohinder Gill, CEO, Hero Electric, country’s largest electric two-wheeler company.
While high acquisition costs of conventional two-wheelers and higher fuel prices pushed people in cities towards electric vehicles, the major driver has been the revamp of the Central government’s incentive scheme. Scooter segment has turned out to be most attractive for electrification now, though electric bike models have also hit the market.
According to rating agency ICRA, total electric two volumes crossed the one-lakh mark during January-November 2021 period. Share of electric scooters touched high single digit overall scooter volumes in November 2021. “The government’s move to increase the FAME II subsidy from ₹10,000/kwh to ₹15,000/kwh saw immediate impact on demand. Additionally, several state government EV policies have also added to the benefits and galvanised demand,” said Suraj.
New players
Interestingly, the electrification journey in the two-wheeler segment was spearheaded by new entrants. Though players like Ola Electric are struggling for a take-off after making a huge noise, other players such as Hero Electric, Okinawa, Ather, Pure EV, Ampere and WardWizard are carving a niche. Gradual increase in electric two-wheeler sales have prompted a number of new players to ramp up operations with additional investments even as they continued to join hands with many players to beef up charging infrastructure across the country.
“Considering the size of the two-wheeler market in India, it's one of the most important segments to undertake the decarbonisation process across the country. Customers have shown a positive intent towards the electric two-wheelers,” said Yatin Gupte, Chairman & Managing Director, WardWizard Innovations and Mobility Ltd.
The pace of acceleration has also driven conventional segment (internal combustion engine) leaders such as Hero, TVS Motor and Bajaj to accelerate their electric vehicle plans with several hundred crores of investments in product development and manufacturing.
But challenges abound. The supply chain of key EV components is still heavily dependent on imports, especially for batteries.
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