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Second Covid Wave Impacting Two-Wheeler Sales Harder: Report

Dealers commenced April with high inventory owing to factors such as the year-end push and high sales expectations from the festive and wedding season (northern and central India) and also rural demand from the rabi harvest

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The second Covid wave has impacted the two-wheeler markets harder than the earlier one with sales declining by 30-50 per cent so far in April despite a mini festive season during the month, according to a report.

Smaller cities are seeing the impact of the second wave (unlike the first wave), amid the cases reported in the second week of April surpassing the peak of September last year, brokerage firm Motilal Oswal Financial Services said in its report.

Gudi Padwa, which is a major festival of Maharashtra, fell on April 13 while the 9-day fasting period Navrarati commenced from the same day last week, among other festivals.

Festive periods like Navratri and Gudi-Padwa account for a fair share of annual vehicle sales across the country, as per the report.

Noting that the month-to-date (MTD) saw significant decline in demand in two-wheeler retail sales, the report said that if demand fails to recover amid the mini festive season and wedding season, demand recovery may be deferred up to October, which is main festive season.

Dealers commenced April with high inventory owing to factors such as the year-end push and high sales expectations from the festive and wedding season (northern and central India) and also rural demand from the rabi harvest, it said.

However, according to the report, sales were much lower from the festive season and the rabi harvest with expected two-wheeler demand recovery during this period is yet to play out and is much lower than normal.

According to Motilal Oswal, inventory at some of the major two-wheeler manufacturers was manageable at the start of the month, with a supporting number of inquiries and bookings. However, dealers saw a significant increase in cancellations with the rise in Covid cases.

Maharashtra dealers on Gudi Padwa posted just 50 per cent of expected sales. UP retails were also impacted by the ongoing Panchayat elections, it stated.

Stating that unlike the first wave, the second wave would see limited benefit from pent-up demand, the report said, as per dealers, after the first lockdown, sales were driven by pent-up demand on account of the wedding season along with rabi harvest as well as non-availability of public transport.

Demand was further supported by cash in the market as well as a very low number of cases. However, people have lesser savings amid the second wave as a consequence of a slow economic activity in the current fiscal coupled with minimal cash inflow from migrant relatives and high medical bills.

Therefore, at the current rate of increase in Covid cases, recovery is expected to be more back-ended, it said.

On the wholesales side, while FY21 wholesales were down 12 per cent, retail registrations were down 32 per cent. This implies 23 per cent of wholesalers were used to stock up on inventory post the BS6 transition, which is not likely to be the case this time around, as per the report.

It also said that since April 2020, OEMs are gradually taking price hikes post the BS6 launch to cover the increase in commodity prices as well as recover contribution margins on cost inflation. The two-wheeler OEMs took a price hike of 5–8 per cent up to April this year (since April 2020). This is adding to the hyper cost inflation of around 25 per cent seen in 2Ws over April'2018– April 2020, which has also served as a deterrent, according to the report. 

(PTI)