The fear of lower resale value of BS4 two-wheelers after the implementation of BS6 emission norms is making people avoid buying new bikes
It was October 2018 when the sales of two-wheelers started falling. On the other hand, the month of September 2018 saw the highest industry sales of bikes and scooters in the country. This was the month when the Government made a 5-year 3rd party insurance mandatory. The prices of all the two-wheelers shot up by a few thousand rupees.
Soon after the month was over, word-of-mouth spread across the nation telling everyone that the prices have increased and people started refraining from buying new two-wheelers. Even today, almost every two-wheeler owner rides without insurance, thus Indian mindset rebelled against this new mandatory insurance norm and as a result, sales fell.
Indian two-wheeler industry sales are down by -11.7% in June 2019 YoY
Most of the new buyers take home their new bike or scooter on a finance term for 12 to 36 months. If you add extra insurance cost in the Equated Monthly Installments (EMI), you’ll find a small increase in the EMI. Hence, this is just some bad reverie people are getting from a slight increase in prices.
Another hit in the name of safety norms was slapped on the two-wheeler industry. All two-wheelers are now mandatorily come with CBS or ABS according to their engine capacity. Prices of all the two-wheelers increased ranging from Rs 500 for CBS to Rs 15,000 for dual-channel ABS.
I heard some people talking about the fear of poor resale value of BS4 two-wheelers once BS6 emission norms are implemented. This could be a reason but not the major one to slump the two-wheeler industry in two digits de-growth.
BUT these are not the reason for the fall
The real problem is non-avaialbility of finance. Liquidity crunch which started after the fall of India’s largest NBFC IL&FS in late 2018. Non-Banking Financial Companies (NBFCs) slashed the lending of auto-loans following the disaster which led to head-first fall of the whole industry.
NBFCs were responsible for about 65% of loans for the two-wheeler industry. And it is now completely understood that if there are no loans there won’t be sales, period.
RBI has further reduced the repo rate to 5.4% which is lowest in the last 8 years. If PSU and private banks don’t involve themselves in the auto-sector things won’t get better no matter how much discounts and tax cuts are made.
Ride Safe, Ride Hard, and always wear a helmet while riding. Stay Tuned for more from the world of motorcycling.