» Business » Bike buyers upgrade to pricier variants amid economic uncertainty

Bike buyers upgrade to pricier variants amid economic uncertainty

By Shally Seth Mohile
November 03, 2020 15:08 IST
Get Rediff News in your Inbox:

In September, sales of 125cc models - that include the Hero Glamour, Splendor, Pulsar 125, Victor Star City, among others - grew by a whopping 30 per cent over the same period a year ago to 305,615 units.

Amid economic uncertainty and the Covid-19 pandemic, motorcycle buyers are responding enthusiastically to pricier variants (125cc and above), giving entry-level models a clear miss.

This buying trend bumped up average realisations in the July-September quarter for most two-wheeler companies.


This is even as sales of motorcycles with an engine displacement of 100-110cc - categorised as entry level - remained subdued in the three months till September over the corresponding period.

Such bikes account for eight of the 10 models sold in the domestic market.

In September for instance, sales of 125cc models - that include the Hero Glamour, Splendor, Pulsar 125, Victor Star City, among others - grew by a whopping 30 per cent over the same period a year ago to 305,615 units.

Bikes with engine displacements between 125cc and 150cc showed similar traction.

The overall sales of such bikes zoomed from 67,769 units to 123,52.

“Compared with the entry-level segment, buyers of these models are relatively insulated to the overall economic scenario.

"There is tendency among first-time buyers to directly purchase a 125cc or 150cc model. This has led to brisk growth.  It also comes on a low base,” said Mitul Shah, head of research at Reliance Securities.

It may become onerous for companies maintain margins, even as commodities and other expenses which were benign in the second quarter start inching up, added Shah.

The trend seen in the motorcycle segment is in sharp contrast to cars, where manufacturers are seeing sales of entry-level models overtaking pricier ones.

Take car market leader Maruti Suzuki India, for instance.

The maker of the WagonR and Swift, its average realisation in the September quarter dropped 5 per cent, as buyers downshifted to cheaper entry-level models.

It was also led by the absence of diesel cars in its portfolio, which commanded a higher pricing, compared to gasoline models.

Among two-wheeler makers, the trend of a superior product mix was most pronounced for Bajaj Auto.

The Pune-based firm sold a record 340,000 Pulsars (including 125cc and 150cc) in the September quarter, in both the domestic and export markets.

Rakesh Sharma, executive director, Bajaj Auto, said the record sales buffered the company from headwinds such as near collapse in three-wheeler volumes.

It was also a quarter of record volumes for the ultra-premium brands such as KTM, Husqvarna, and Dominar.

“The Pulsar franchise, along with the ultra-premium brands, helped us clock the highest margins in the domestic motorcycle business in 15-16 quarters,” said Sharma.

A richer mix of models helped the company return a margin of 18.2 per cent, against 16 per cent a year ago.

Two-wheeler market leader Hero MotoCorp, which has a stronghold in the entry level of the motorcycle market, is now seeing an upturn in the premium segment, company’s officials told investors during the earnings call last week.

It’s getting “very strong reviews, very strong responses” to the newly launched premium models, including the Xpulse, Xtreme 160R, and Passion Pro, said Naveen Chauhan, head of sales and aftersales at HeroMoto Corp.

It has helped the company increase its share in urban markets in the South, West, East, and the rest of the markets.

Hero is looking accelerate its play in the premium segment, with the recently announced partnership with Harley-Davidson.

It’s a similar story at Chennai-based TVS Motor, which, too, saw its blended realisation improve to Rs 53,000 in the September quarter, from Rs 59,000 a year ago, largely because of an improved model mix.

The company saw marginal growth during Navratras over the past year.

K N Radhakrishnan, director and chief executive officer at the firm, said growth was led by higher sale of premium models in both urban and rural markets.

“There’s a higher pull for products which are a bit more premium,” he said, referring to the Ntorq, Jupiter, and Apache’s sale in rural India, where disposable income has improved in the recent past.

Get Rediff News in your Inbox:
Shally Seth Mohile in New Delhi
Source: source

Moneywiz Live!