Mumbai, May 6: Two-wheeler makers are resorting to discounts and lower interest rates to jack up sales.
Industry data for April showed most of the players reporting single-digit growth. Apart from Honda Motors and Scooters India (HMSI), which posted a 45 per cent growth following a huge capacity addition last year, other companies grew at single digits. While the volume growth at Hero MotoCorp was at 7 per cent, it was below 5 per cent for TVS Motors and Bajaj Auto.
According to Jatin Chawla and Akshay Saxena, analysts at Credit Suisse, though the two-wheeler industry consistently registered double-digit expansion in 2011-12, growth will come off and stay at around 8 per cent this fiscal.
Analysts point out that high interest rates and costlier fuel prices coupled with a relatively lower demand from the rural markets have dragged down sales growth to single digits.
Sources said in such challenging times, firms are adopting novel methods to attract buyers. Mahindra and Mahindra, which provided free fuel of Rs 1,500 to customers last year, is offering cash for test drives on its scooters. Others such as Bajaj Auto and TVS Motors are offering sharply lower interest rates.
Bajaj Auto has also launched a variant of the Discover 100cc, a four-gear bike, at a price cheaper by over Rs 2,000 to boost sales at a time customers are preferring more fuel-efficient bikes. "This is the first sign of a price cut from the Big Two (Hero MotoCorp and Bajaj) after four years," Chawla said.
Some analysts said the reversal of the interest rate cycle could improve the prospects of the industry, though it would be felt in the second half of this fiscal. However, any hefty fuel price hike could be a dampener.
According to Hitesh Goel, analyst at Kotak Institutional Equities, the industry will grow at a compounded annual growth rate of 7 per cent between now and 2021 and penetration levels per hundred persons will increase to 14 by then from 6 in 2010-11. During this period, rural volumes will grow nearly 1.8 times that of the urban areas.