FY 2022 Sees A MASSIVE Drop In Two-wheeler Sales

Society of Indian Automobile Manufacturers (SIAM)’s annual report for FY 2021-2022 is out, and things are not looking pretty for the Indian two-wheeler industry. The sales fell down to 13,466,000 units, which is the lowest in ten years compared to sales in FY 2011-2012, when 13,409,00 units were sold in the country.

Such a massive drop in sales is due to several factors in play. Here are some of the key concerns:

Prices go up, demand goes down:

In India, two-wheelers are primarily an affordable mode of transportation than anything else. Pricing is extremely crucial if manufacturers have to play below the 150cc segment, which accounts to most of the sales in the country. Motorcycles like Hero Splendor, Hero HF Deluxe and scooters like Honda Activa consistently rake in lakhs of units a month. In recent years, the cost of such two-wheelers have gone up considerably, and the baseline price of 100-110cc two-wheelers have reached the level of 125cc offerings a few years ago. And when the cost of such affordable two-wheelers increases, the demand naturally goes down, particularly in rural areas where every penny counts.

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The increase in prices are attributed to several factors including rising raw material costs and also tightening emission norms. BS4 to BS6 graduation was itself a huge leap, and manufacturers had to figure out a way to make the (more often than not) age-old engines comply with stricter emissions. This commands the need for complex modifications, which obviously have an impact on the pricing.

Rising fuel prices:

ICE-powered two-wheelers have substantial running costs, with the highest contributor being the price of fuel. In the recent months, fuel prices have skyrocketed, and recent developments including the Ukraine-Russia conflict and increase in crude-oil prices have contributed directly or indirectly to the increase in fuel prices. Even though small-capacity two-wheelers are fuel efficient, such massive and consistent hikes in prices will make prospective customers think twice about buying a petrol-powered two-wheeler. Which brings us to the next point:

Proliferation of EVs:

The rising concerns of climate change have pushed manufacturers to look for alternatives to ICE-powered vehicles, and with the current level of technology, electric vehicles are the most promising option that offer a balance of low-emissions and cost. Sure, the initial cost of buying an EV is still high, but to mitigate this, the Indian Government has come up with FAME II subsidies that massively reduce the final price of an EV. Adding to this, there are additional subsidies in select states that also make EVs more affordable.

With their inherently low running costs, EVs do make a lot of sense to an urban buyer, who is looking for short commutes within the city. This also impacts the sales of ICE-powered two-wheelers that offer similar levels of performance compared to their EV counterparts.