Wonder which automobile segment is clocking lowest growth this year? No, it is not the motorcycle, the three-wheeler, or the light commercial vehicle. It is the scooter, a product that saw at least seven consecutive years of strong double-digit growth until 2017-18 (FY18).
Growth in scooter sales volumes (from manufacturers to dealerships) in the first five months of 2018-19 is less than 7 per cent vis-à-vis the corresponding growth of over 18 per cent in FY18.
Motorcycles, which had grown at just 8 per cent in the first five months of FY18, have climbed up almost 15 per cent this year. Some in the industry think the wave of scooterisation has hit a saturation level and high growth rate is no longer sustainable.
The data with the Society of Indian Automobile Manufacturers shows the domestic passenger vehicle segment grew at almost 10 per cent in April-August. Medium and heavy commercial vehicles and light commercial vehicles grew at 55 and 34 per cent, respectively. Three-wheelers clocked an impressive growth rate of 44 per cent. Two-wheelers showed a double-digit growth rate of 11.50 per cent.
However, this growth is motorcycle-driven (unlike in the last few years). Motorcycles have grown at 14.67 per cent. At 6.77 per cent, scooters happen to be the only sizeable segment of the automobile industry with single-digit growth.
Roy Kurian, senior vice-president (sales and marketing) at two-wheeler maker Yamaha Motor India, is surprised. “The drop in growth rate is a surprise for us. We were expecting high growth rate of previous years to sustain. In my view, the trend of scooterisation is facing a kind of saturation,” Kurian told Business Standard.
This decline is not limited to Yamaha alone. Hero MotoCorp, the third-biggest player in the scooter market, has seen a drop of more than 11 per cent in sales this year to 313,950 units. In the same duration, Hero’s motorcycle volumes in the domestic market are up more than 12 per cent to 3.07 million units. “One of the factors driving customers away from scooters towards motorcycles is the ever-increasing price of petrol. Automatic scooters — despite their driving comfort and convenient usage — have never been known to be fuel-efficient,” said an executive with a two-wheeler maker.
Japanese auto major Honda, which has a 59 per cent share in the domestic scooter market, has grown at 7 per cent in the first five months. Its motorcycle growth is higher at 9 per cent. The company did not respond to queries on single-digit growth in the scooter market. Sales of the Honda Activa scooter, the most-sold domestic two-wheeler, grew by just 3 per cent to 1.5 million units, while Hero’s Splendor motorcycles grew by 16 per cent to 1.33 million. Even though leading scooter makers have been talking about scooters finding traction in rural markets, the revival in rural demand appears to be benefiting motorcycles alone.
Two-wheeler makers, who have a higher contribution of scooters in overall sales, are growing at a rate lower than the overall growth of the two-wheeler industry. Honda, for instance, has grown at below 8 per cent in the first five months, while TVS Motor, too, has grown at 8 per cent. Hero, which has a 50 per cent share in the domestic motorcycle market, has grown at 10 per cent. Bajaj Auto, which does not make scooters, has seen its motorcycle sales grow at 33 per cent, although on a low base of the previous year.
A spokesperson for Hero MotoCorp said the motorcycle segment was on a strong growth path again on the back of various drivers, including higher support prices for farm produce and strong rural demand, and also due to the launch of motorcycles by the company. “The recent slowdown in scooters is an early trend, mostly driven by the decline in the 110cc scooters, which forms the bulk of the scooter market,” the spokesperson added. Scooters are not expected to stop growing. But the forecasts that scooters could capture the bulk of the two-wheeler market might not come true soon. “In four-five years, scooters may capture 40 per cent of the two-wheeler market,” said Kurian.
*April-August Source: Society of Indian Automobile Manufacturers