"There is a very strong possibility of matching last years' numbers as the demand has been very strong despite the Covid-19 situation. Hopefully with cases easing and markets opening up, the demand momentum will gain speed," an executive associated with one of the companies said. The production schedules for almost all two-wheeler companies in August and September are close to 100%, said four people supplying two-wheeler manufacturers.
Bajaj Auto executive director Rakesh Sharma told ET the recovery had been faster than many had expected. “The demand has returned very swiftly. The sale in the first half of July is back to normal levels, though it did take a hit in recent days due to new lockdowns. The clear signal from the market is that this momentum can sustain in the coming months unless there are any major lockdowns announced across the country,” he said.
Sharma, however, cautioned about the continuing risk from the pandemic. Future demand would be based primarily on two factors — the progression of Covid-19 and the response of the administration to it, he said. The June and July performance suggests that economic and psychological factors would be much less influential on two-wheeler demand than the management of Covid-related restrictions, he added. He said if the Covid-19 situation did not worsen, “the volume lost in the last three months can be recovered in the coming nine months, if not better, and Bajaj would certainly like to grow ahead of the demand”.
It is the question of getting adequate component supplies currently. Bajaj Auto’s channel inventory has come down to 30 days now from the normal 45 days. A Hero MotoCorp spokesperson declined to give a forward-looking comment on the company’s numbers, but said its sales had reached 90% of pre-Covid level, “The demand has been positive all across the country, however a major part of demand is emanating from rural and semi-urban markets, which have been helped by government’s stimulus packages. A normal monsoon forecast, a bumper rabi crop, and the upcoming festive season should keep the momentum going over the next few months,” added the spokesperson.
An uptick in vehicle financing in small cities and towns along with strong traction for accessible brands like the Splendor, Passion and HF Deluxe are helping Hero in this quick recovery. If the company maintains a monthly run-rate of 650,000-700,000 two-wheelers in the remaining months of the current fiscal year, it could match last fiscal year’s sales of 6.4 million units. Between July 2019 and March 2020, its monthly sales were between 3,30,000 and 6,12,000 units.
Bajaj Auto had sold 2.04 million bikes in the domestic market in the last fiscal year. In June, Bajaj sold 146,695 units of bikes in the Indian market. The production schedule of Bajaj in August and September is coming quite close to last year's sales volumes. It will have to clock a monthly run-rate of 207,000 units for the rest of the year to achieve volumes equal to the previous year. Ratings firm ICRA had forecast the two-wheeler market to decline 11-13% in FY-21, while Ind-RA had projected it to shrink 20%.
Hero and Bajaj’s rivals, however, are still quite sceptical of a complete recovery. A senior executive at a rival firm said it was going to be a very long, U-shaped recovery and not a V-shaped one. "The frequent lockdowns and the recent floods will make it difficult for a full-blown recovery to take place this year. Already two months have gone this year, which is 16% of the financial year. Thus, to make up volumes in the remaining months is not possible. But, I'll be the happiest if I am proven wrong," said the executive.