ICRA expects growth in two-wheeler sales this fiscal
The Rating agency ICRA NSE 0.20 % on Thursday kept its growths maintained for two-wheeler sales at 12-14%, despite the second wave of the coronavirus pandemic, which hugely impacted rural consumers sentiments. A low base, healthy rural cash flows, and continued preference for personal mobility support two-wheeler demand in the festive season, ICRA stated.
ICRA said, “While the overall consumption and investment demand takes some time to recover after the devastating second wave, India’s rural economy is expected to provide support”.
ICRA expects a 12-14 % year-on-year growth in two-wheeler volumes in FY2022, amidst an evolving COVID-19 situation”.
ICRA added Expectations of a healthy rabi production, the timely arrival of the monsoon and a hike in minimum support prices of Kharif crops, and other income support schemes by the government will help rural demand sentiments revive and support the two-wheeler offtake in the festive season.
“The continue preference for personal mobility solutions, between the pandemic, would also drive some demand. Even if the pace of domestic demand recovery is uncertain, the steady growth in two-wheeler exports seems encouraging and is expected to support the industry volumes in FY2022,” According to the rating agency.
The surge in infections in non-metro and rural hinterlands has decreased rural consumer sentiments as well. It has reflected a sharp fall in 2W retail sales in April-May in the mini festive and wedding season.
Amit Gupta, Director of ICRA, said several 2W original equipment manufacturers had advanced their shutdown maintenance schedules during these months, which hits the wholesale volumes notably in April and May 2021.
“The inventory dealerships, over 30 days at May-end, was relatively higher, which means only a gradual recovery in wholesale volumes, till the stocking begins for the approaching festive season,” he said
Amit Gupta said with ICRA’s stable outlook on the industry, the credit profile of Two Wheelers OEMs is expected to remain healthy, supported by solid balance sheets, limited debt, healthy cash and liquid investments.
“While the CAPEX is likely to be higher than the FY2021, major expansion plans are expected to be delayed till there is a meaningful demand recovery. However, the OEMs will carry on its investment in new product development and network expansion in domestic and overseas areas,” he said.