Demand for two-wheelers may increase due to petrol price rise

The runaway petrol price, which has singed many, has found an unexpected beneficiary in the Indian auto market: motorcycles and scooters. With customers looking for cheaper mobility options over pricier cars following the steepest-ever jump in fuel prices last week, the demand for more affordable motorcycles and scooters is likely to go up in the coming months.

Traditionally, the demand for two-wheelers has been stable in the Indian market, but a spike in fuel prices or interest rates always bring them into play in a much bigger way.

"With each jump in fuel price, the cost of running a car goes up tremendously. Based on the changing economic scenario, where inflation is already forcing people to curtail spending, customers look for cheaper transport options to manage their budgets," said a senior executive of Hero MotoCorp, India's largest two-wheeler company.

Petrol now costs a record Rs 73.18 a litre in New Delhi and Rs 78.57 a litre in Mumbai after the 11 percent hike of Rs 7.50 by oil companies.

"Demand for motorcycles as a means for personal transportation has been strong in India. But in a grim economic scenario, where both vehicle and fuel prices are shooting up, customers fall back on cheaper mobility options like bikes and scooters. As the economy expands, everybody needs mobility and since they can't afford expensive transport, they stick to affordable options," said Sageraj Bariya, managing partner of Equitorials, an independent research firm.

India's top-selling bike, the 100cc Hero Splendor, starts at an ex-showroom price Rs 42,950 in New Delhi while the cheapest car in the country, Tata Nano, is priced at Rs 1.43 lakh, according to companies' websites. Hero Pleasure scooter sells for Rs 41,700 in Delhi and Maruti Suzuki's lowest-priced car, the Maruti 800, sells for about Rs 2.05 lakh (ex-showroom, Delhi).

It is clear that the difference in basic prices and the total cost of operating them has started influencing demand patterns in the Indian market. Motorcycle manufacturers are gaining at the expense of car companies like Volkswagen, General Motors, Honda Siel, Tata Motors and Ford Motors, who have posted lower sales in the recent past as consumers are putting off their plans of buying new cars. The dwindling demand for cars is already forcing carmakers and its apex body, Society of Indian Automobile Manufacturers, to cut its full-year growth forecast of 10-12% for this fiscal.

The high interest rates, coupled with rising fuel prices and a jump in car prices, have knocked down car sales to decade's lowest of 3.4% in April while the two-wheeler segment grew at a fairly healthy pace of 11% in the same month.

"The impact becomes clear as demand for scooters has been consistent and strongest across all segments of passenger vehicles with a visible strong shift in urban centres. While customers were battling high interest rates in times of double-digit inflation, the steepest ever increase in fuel price should spur demand for fuel-efficient scooters and bikes," said Atul Gupta, vice-president of Suzuki Motorcycle India Pvt Ltd.