Two-wheeler sales may fall due to rising petrol prices

Skyrocketing petrol prices have dampened demand for motorcycles and scooters as the only affordable means of personal transport for rural people and sections of the urban middle class are getting out of reach due to fuel costs.

This is also affecting sentiment in the automobiles sector because two-wheelers were the ones that saw some sales growth this year, when demand for passenger cars and commercial vehicles declined. Two-wheelers consume over 60% of the country's 16 million tonnes gasoline sales, and 30% of this comes from villages, according to oil ministry data and a survey by Neilsen.

Petrol prices have increased to a record after nine-rounds of price hikes, which raised the fuel's cost by 20% in four months. Diesel prices have increased by about 50 paise a month, but over the year, they have gone up 25%.

"Despite domestic sales of 1.13 million two-wheelers in July, the segment recorded a marginal de-growth of 0.1 %," said the data keeper for the oil ministry Petroleum Planning & Analysis Cell (PPAC) in a report.

Rising fuel rates have a bigger impact on mass products such as the 100-125 cc motorcycles and 110 cc scooters because the running cost is a key consideration for buyers in this segment, industry experts said.

Automobile makers are trying to lure customers with offers of better mileage, which they claim will offset at least a part of the higher fuel cost. "While petrol prices have gone up by 13% since January this year, our revolutionary Honda Eco Technology introduced this year has enhanced mileage by 11% to 74km/liter in our bikes," says Honda Motorcycle & Scooter India VP-marketing &sales, YS Guleria.

"In the long term the consumer sentiment gets affected by rising petrol prices. We at Honda have tried to neutralise the fuel price hike by consistently increasing fuel efficiency," Guleria added. State oil marketing firms justify fuel price hike citing rising international crude oil rates and say sales of bikes and scooters would continue to grow because of poor public transport facilities in rural areas and increased youth mobility during an election year.

"The petrol price hike story is perhaps here to stay for some more time, given the poor public transportation system and the not-so-bad growth in two-wheeler market. And as for elections, past trend only indicates more growth for auto fuels, both petrol and diesel," Indian Oil Corp executive director N Srikumar said.

Automobile manufacturers say dynamics of the two-wheeler segment are different from other consumer segments like cars. Customers of bikes between 100cc and 125cc are typically in the 18-35 age group and include college students or office goers, who prefer the most affordable mode of commuting.

Auto industry observers say that customers prefer entry-level models over the higher versions, which have more engine power but are costly and less fuel-efficient.

According to SIAM, motorcycle sales declined 2% in the first five months of the fiscal. But there is a saving grace — the 15% increase in sales of scooters, the only growing automobile segment.

Related: Two-wheeler sales rise 2.90 per cent during FY 2012-13