*2-wheeler sales rise in April, but recovery unlikely to continue: Analysts | Business Standard News

Clipped from: https://www.business-standard.com/article/companies/2-wheeler-sales-rise-in-april-but-recovery-unlikely-to-continue-analysts-122050201035_1.html

High raw material prices and semiconductor shortage puts recovery in doubt for companies’ plans

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Two wheeler market leader Hero MotoCorp led the sales rally

Motorcycle and scooter dispatches increased year-on-year (y-o-y) in April for the first time in ten months, shows monthly sales data from vehicle manufacturers.

An early harvest coupled with a pent-up demand for weddings and festivals bumped up sales. Last year’s low base also made the y-o-y sales performance look impressive. However, the good show is unlikely to continue beyond a few months. High raw material prices forcing companies to jack up prices will weigh on demand, and the continuing shortage of semiconductors will plague the supplies. Meanwhile those at the bottom of the pyramid have yet to recover from the economic impact of the pandemic.

Cumulative dispatches at the firms including Hero MotoCorp, TVS Motor, Bajaj Auto, Suzuki Motorcycle, Royal Enfield and Suzuki Motorcycle India increased 15.3 per cent to 8,00,567 units from 6,94,120 units in the corresponding period last year. Auto firms in India count dispatches to dealers as sales.

“Sales are likely to remain under pressure as the demand and supply side issues including an impending price hikes by the manufacturers will come back to haunt the buyers,” according to Mitul Shah, head of research at Reliance Securities.’

He expects margins of two-wheeler companies to drop, as manufacturers reeling under cost pressures due to high commodity prices will have limited headroom to pass on the costs.

Others agree. “The momentum is unlikely to last beyond a couple of months,” said Hemal Thakkar, director at Crisil. The agency expects the fiscal to end on a flattish note for the segment. The pressure could be higher if the monsoon is not normal, said Thakkar.

Two wheeler market leader Hero MotoCorp led the sales rally. The maker of Splendor and Passion bikes saw its monthly dispatches advance 12.4 per cent year on year. The company attributed the growth to the opening of the economy and government policy support.

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TVS Motor Co the third largest in the pecking order also saw its dispatches jump 37 per cent over the corresponding period last year. The shortage in the supply of semiconductors has affected the production and sales of premium two-wheelers, the company said in a statement.

“Our new products have been well received by the customers and we are optimistic that volumes will revive once the semiconductor supplies improve,” it said.

The semiconductor shortage chipped sales at Bajaj Auto. Its sales during the month skidded 26 per cent year-on-year. April was one of the worst months for the company in terms of availability of semiconductors, Rakesh Sharma, executive director, Bajaj Auto said last week in a post earnings call with reporters after its earnings. Bajaj has guided for a 15-20 per cent impact on the domestic volumes, due to the chip shortage.

Sales at Suzuki Motorcycle declined 8 per cent y-o-y Satoshi Uchida, managing director, Suzuki Motorcycle India said the two-wheeler industry continues to navigate through the challenges thrown by the pandemic and semiconductor shortage.

“We look forward to easing out of the supply limitations so that we can cater to the ever increasing demand for Suzuki two-wheelers both from the domestic and overseas markets,” he said.

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