Motorcycles pick up speed to surpass scooters in growth after eight years

Motorcycles are back in action, taking away some of the limelight that scooters had been hogging for several years. Scooters, after having grown at a faster pace to motorcycles for eight consecutive years, are lagging behind in growth. Data for the first five months of 2018 calendar year shows motorcycle sales have grown at over 22 per cent compared to a growth of about 15 per cent in scooters.

In India, the world's biggest two-wheeler market, motorcycle sales grew at 6.44 per cent in 2017, less than half compared to the 14 per cent growth in scooters. The last time motorcycles managed to grow faster than scooters was during 2009. However, in the first five months of this calendar year, sales of motorcycles expanded 22.44 per cent to 5.7 million units, Siam data shows. Scooter sales grew at 15.68 per cent to 2.84 million units. These are sales from manufacturers to dealerships. In each of the last four months (February, March, April and May), the rate of growth for motorcycles has been stronger to scooters. In the last two months of April and May, motorcycles grew at 19.38 and 15.16 per cent, respectively. The comparable number for scooters was 12.63 per cent and a decline of 1.40 per cent.

A strong comeback in demand for motorcycles has a direct positive impact on the fortunes of two leading listed two-wheeler makers: Hero MotoCorp and Bajaj Auto. Hero, the biggest player in domestic two-wheeler market, gets about 88 per cent of its sales from motorcycles while the rest comes from scooters. In case of Bajaj Auto, its entire domestic two-wheeler volume comes from motorcycles as it does not make scooters. Both these companies are clocking a double-digit growth in domestic motorcycle sales in recent months.

While the current growth leading position of motorcycles is based on data for the first five months, demand is expected to get a further boost post the kharif crop harvest around September-October which also coincides with the festive season. "With the forecast of a good monsoon this year, there is an expectation of an uptick in market demand in the later part of the year. This will lead to a sustained momentum in the positive turnaround in sentiments across the country," said a Hero MotoCorp spokesperson.

This will be the third consecutive year of a normal monsoon and even though there has been surplus and price pressure in certain farm products the sales growth in motorcycles and even tractors point to an intact demand from rural markets. Half of the domestic motorcycle sale is estimated to come from rural buyers and Hero has a 51 per cent share of the overall motorcycle market.  

While this trend of a stronger demand for motorcycles (which have a base double to scooters) augurs well for some players it may not be great news for companies relying heavily on scooters. Japanese auto major Honda Motorcycle and Scooter India (HMSI) gets two-third of its domestic sales from scooters. Y S Guleria, senior vice president (sales and marketing) at HMSI said the first quarter typically has a lot of seasonality attached, with monsoon and marriage season pushing up the sales momentum for motorcycles while scooters growth accelerates starting June. But Q1 data of FY18 did not show this seasonality when scooters grew by 20 per cent and motorcycles by just 3.44 per cent.

Guleria admits that the rural demand is 'reviving'. "Motorcycles account for nearly 80 per cent of the two-wheeler industry in Uttar Pradesh, Bihar and Rajasthan. Since these three states bring 30 per cent of national motorcycle sales a seasonal impact in these markets will always impact the overall industry. However, the scooter growth story is also strong," he said.

Unlike motorcycles, scooters are largely an urban product and therefore in years when the former came under pressure due to challenges in rural economy, the growth in scooters continued. "Scooter penetration is low in some geographies but demand is now growing exponentially," said Guleria, adding that it will continue to see a double digit growth.

Some in the industry, however, maintain that scooters have faced some pressure due to a surge in petrol prices. Motorcycles usually offer 25-30 per cent higher fuel efficiency compared to scooters and therefore in the event of a continuous hike in petrol price there is some shift in demand patterns. The change is evident in the fact that in two of the last three months the most sold two-wheeler was the Hero Splendor motorcycle, followed by Honda Activa scooter. Activa had been dominating the top position for months together until the recent change in pecking order.

Calendar Year Per cent growth in motorcycle sales Per cent growth in scooter sales
2009 17.78 16.41
2010 27.11 27.11
2011 14.71 14.71
2012 2.09 2.09
2013 1.41 1.41
2014 6.05 6.05
2015 -3.42 -3.42
2016 6.48 6.48
2017 6.44 6.44
2018 (Jan-May) 22.44 22.44

Source: Siam

Data for domestic sales to dealerships