Second COVID-19 wave hits two-wheeler market hard

The two-wheeler market has been hit hard by the second COVID-19 wave, with sales declining by 30 to 50%; this is despite a mini festive season in April. Festive periods like Navrati and Gudi-Padwa account for a fair share of annual vehicle sales across the country.

A report by Motilal Oswal Financial Services highlighted that 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, 2020.

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

The report said 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. 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, it said. However, the dealers saw a significant increase in cancellations with the rise in COVID-19 cases.

Moreover, Maharashtra dealers on Gudi Padwa posted just 50% of expected sales. UP retails were also impacted by the ongoing Panchayat elections. 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.

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It said 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.

Thus, at the current rate of increase in COVID-19 cases, recovery is expected to be more back-ended.