Scooter, bike companies offer freebies to drive sales

Prospective two-wheeler customers have never had it so good. A test ride of scooter leaves them with a handsome Rs 500 cash without any compulsion to buy the two-wheeler, hoping that the customer will stick with the first impression and not look around for other models. This bold offer comes from Mahindra & Mahindra that leads the utility vehicle zone, which is trying to make inroads into a market dominated by Hero MotoCorp, Honda Motorcycles & Scooters and Bajaj Auto.

Slowing demand due to high interest rates coupled with rising fuel prices have brought discounts and freebies back for those vying for scooters or its faster siblings, bikes. Two-wheeler makers in their bid to reduce inventories have also lined up various options to attract customers after almost a gap of more than four years, doling out cash benefits and lower rate of interest.

"This is for the first time that scooters, basically an urban-centric product, attract discounts. The market conditions are increasingly getting tougher amid adverse economic sentiments simmering in the past few months. The low consumer sentiment is tapering off demand for bikes and scooters unlike 2011, when we saw highest ever sales growth in a single year," said Atul Gupta, vice-president (marketing) of Suzuki Motor India.

According to industry players, demand has been slowing particularly in smaller towns and rural areas. This follows a splendid 11.39% growth to 13.43 million units sold in April to March 2012. A stagnating passenger car segment forced companies to dole out huge discounts for most part of 2011, and they had raised it even further this year to bring customers back to their dealerships. Two-wheeler industry is now mirroring the same strategy.

For the first time companies are doling out rebates, such as free insurance on scooters, despite a record growth of this segment in the two-wheeler market. Scooter sales had jumped by a quarter to record 25.62 lakh in the last fiscal. The segment leader, Honda Motorcycle and Scooter India (HMSI) flagship model Activa comes with free insurance and easier down payment of Rs 7,999 for instant delivery any many markets.

Dealers said that they were offering these benefits to reduce stocks as the demand has been slowing with retail sales getting being low and the cautious customers are postponing their purchase decisions. However, the company refused to acknowledge any offer. "There are no schemes or discounts offered by HMSI in the market," the company spokesperson said. However, analysts tracking the sector say that cash discounts and gifts options are being offered in selective markets.

"We have noticed many companies coming up with cash options as well as finance options coming in many markets as interest subvention offered by different companies," said Mahantesh Sabarad, senior vice-president, research, Fortune Securities.

Bikes and scooters are small-ticket purchases and banks and financial institutions take high interest rates on their loan schemes. Currently the interest rates are hovering in the range of 23-26% for financing two-wheelers. Companies like TVS Motors and Bajaj Auto are offering interest discounting in the range of 6-9% to attract customers. "It attractive packaging being done in some market but we are not offering any direct discounts," Bajaj Auto's two-wheeler unit president K Srinivas said.

These benefits to customers are mainly coming from dealers as attractive marketing initiatives to improve retail sales. Analysts tracking the market said that discounts from dealers are precursor to what the company may offer in next few months. "As the ticket size of two-wheeler purchases is less they are not immediately impacted by the macro economic sentiment. But if dealers are giving benefits to consumer, companies may not be far behind," said analyst with a Mumbai-based brokerage firm.