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India's two-wheeler industry set to record fastest growth in five years in fiscal 2017

Economic Times:  August 09, 2016

Mumbai: India's two-wheeler industry is set to record its fastest growth in at least five years in fiscal 2017, boosted by plentiful monsoon rains that invigorated the key rural market and higher spending expected in cities because of a salary hike to government staff.

Industry players are predicting the market to grow at least in high single digit in current fiscal year through March 2017. If the monsoon rains continue to be plentiful, the rate may even break into double digits.

With softening fuel prices and easing interest rates, fundamentals are already in place to drive demand, they said. Two-wheeler sales last grew in double digits in fiscal 2012, when the increase was 14%. Since then, the growth has been between 3% and 8%.

India's two-wheeler industry set to record fastest growth in five years in fiscal 2017

"The prospective buyer has been deferring his purchase for way too long. He is expected to come back thanks to the improved macro-economic sentiment," said YS Guleria, the head of sales and marketing at Honda Motorcycle & Scooter, the country's second largest two-wheeler maker. "The festive season this year is going to be among the best we have seen in recent years. We expect the market to grow by 9-10%." If the monsoon is good, growth may even exceed this forecast, he added.

The two-wheeler market grew 14% in the April to June period, the first quarter of the fiscal year, albeit on a low base. Scooter sales have grown at a rapid pace of 27.12% due to increased supply from Honda and with other companies getting aggressive in the segment. The motorcycle segment, which has been a laggard in recent years, expanded 8%.

Motorcycle sales in the past four to five years had increased at less than 4%. Industry experts cite abnormal rainfall, which hurt the rain-dependent rural economy that drives motorcycle sales, for the weak performance.

This time, with a normal monsoon so far and the upcoming salary hike to government employees, both rural and urban folks are expected to have disposable income, and a part of that is expected to be spent on consumer durables. Two-wheeler makers, too, expect to benefit from this discretionary spending. Hero MotoCorp projected high single digit growth both for the company and the industry.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.