Demonetisation Effect: Two Wheeler Industry Limping Back To Normal
car&bike Team
1 min read
Mar 11, 2017, 02:20 AM
Key Highlights
- The two wheeler industry saw a major drop in volumes post demonetisation
- Sales in February and March 2017 are expected to be flattish
- Scooters will outpace motorcycles in volume growth
The Indian two wheeler industry is slowly recovering from a liquidity crisis brought about by demonetisation in November 2016. According to an ICRA report, the liquidity crunch following demonetisation resulted in volume compression of 11.3 per cent during the period of November 2016 – January 2017 over the corresponding previous period. The industry seems to be limping back to normalcy with the impact of demonetisation becoming moderate by smaller volume contraction in January 2017. Sales in February and March 2017 are expected to be flattish.
"Overall, the domestic two wheeler industry closed the first ten months of FY2017 with a growth of 8.3 per cent, which although better than the industry growth rates over the past four fiscals, remain a far cry from the double digit growth reported prior to November 2016 when demonetization was announced," the ICRA report notes. For FY2017, ICRA expects the domestic two wheeler industry to close the financial year with a growth of about 7-8 per cent.
Volumes are likely to improve in FY2018, and while the gap in growth rates will narrow, scooters will continue to outpace motorcycles in volume growth in FY2018, according to ICRA. In YTD figures of January 2017, scooters, while continuing to outpace the industry growth, reported 12.5 per cent YTD growth, although it was much lower than the 24.7 per cent reported till September 2016. Motorcycles, however, reported low growth levels of 5.1 per cent in the aftermath of demonetisation.
ICRA notes that the agency checked with two wheeler dealers to gauge the sentiment and general sales trends. Most dealers indicated that sentiment has improved considerably since December 2016, when there was a steep decline in sales. Since the beginning of January 2017, however, two wheeler sales have begun to pick up, with alternate modes of payment like cheques, NEFT, RTGS, credit and debit cards. Many dealers are positive about the expectations of a complete recovery, expecting sales to normalise over February and March 2017.
Overall, ICRA has reiterated its stable outlook on the Indian two wheeler industry. Over the medium term, the agency expects to report a volume compounded annual growth rate (CAGR) of 8-9 per cent with demand expected to be driven by structural factors like favourable demographic profile, growing middle class and urbanisation trend. ICRA expects increased penetration of organised finance into Tier II and Tier III cities as well as rural centres supported by favourable interest rates over the medium term.
"Overall, the domestic two wheeler industry closed the first ten months of FY2017 with a growth of 8.3 per cent, which although better than the industry growth rates over the past four fiscals, remain a far cry from the double digit growth reported prior to November 2016 when demonetization was announced," the ICRA report notes. For FY2017, ICRA expects the domestic two wheeler industry to close the financial year with a growth of about 7-8 per cent.
Volumes are likely to improve in FY2018, and while the gap in growth rates will narrow, scooters will continue to outpace motorcycles in volume growth in FY2018, according to ICRA. In YTD figures of January 2017, scooters, while continuing to outpace the industry growth, reported 12.5 per cent YTD growth, although it was much lower than the 24.7 per cent reported till September 2016. Motorcycles, however, reported low growth levels of 5.1 per cent in the aftermath of demonetisation.
ICRA notes that the agency checked with two wheeler dealers to gauge the sentiment and general sales trends. Most dealers indicated that sentiment has improved considerably since December 2016, when there was a steep decline in sales. Since the beginning of January 2017, however, two wheeler sales have begun to pick up, with alternate modes of payment like cheques, NEFT, RTGS, credit and debit cards. Many dealers are positive about the expectations of a complete recovery, expecting sales to normalise over February and March 2017.
Overall, ICRA has reiterated its stable outlook on the Indian two wheeler industry. Over the medium term, the agency expects to report a volume compounded annual growth rate (CAGR) of 8-9 per cent with demand expected to be driven by structural factors like favourable demographic profile, growing middle class and urbanisation trend. ICRA expects increased penetration of organised finance into Tier II and Tier III cities as well as rural centres supported by favourable interest rates over the medium term.
Related News
Latest Cars
Upcoming Cars
Latest News
Jaiveer Mehra | Apr 21, 2026Hyundai Ioniq 3 Electric Hatchback Revealed; Smallest Ioniq EV Offers Up To 496 km RangeProduction-ready electric hatchback is offered with a pair of battery packs and the first Hyundai model for Europe to get the Android-based Pleos infotainment system.1 min read
Jaiveer Mehra | Apr 21, 20262026 Kia Syros Drops ADAS; Features Also Deleted From Base VariantKia has also made changes to the feature list of the Syros with the model year update, with top variants dropping some kit.1 min read
Bilal Firfiray | Apr 20, 2026Electric Mercedes-Benz C-Class Revealed; Claims Up To 762km Of RangeMercedes-Benz has revealed the all-new electric C-Class, which shares its underpinnings with the new GLC EV and offers 762km of claimed range, 480bhp and 10-minute fast charging.2 mins read
Jafar Rizvi | Apr 20, 2026MG Windsor EV Commute Variant Launched At Rs 13.49 Lakh: Check Out Features, ImagesThe Commute variant sits below the Excite trim of the Windsor EV and is essentially for fleet buyers.2 mins read
Amaan Ahmed | Apr 20, 2026New Renault Duster Bags Five Stars In Latest Bharat NCAP Crash Tests: Check DetailsThe all-new Duster -- which secured five stars for adult as well as child protection -- is the first Renault to be tested under India's own new car assessment programme.3 mins read
car&bike Team | Apr 20, 2026BMW F 450 GS Pre-Booking Started; India Launch on 23 AprilBMW Motorrad's most anticipated mid-displacement adventure tourer opens pre-bookings ahead of its 23 April India launch.2 mins read
Preetam Bora | Apr 20, 2026Hero Destini 110 Vs TVS Jupiter 110 Comparison ReviewThe Hero Destini 110 and the TVS Jupiter 110 both sit in the same price bracket and target the same buyer. But they take different approaches. Which 110 cc scooter should you buy?9 mins read
Amaan Ahmed | Apr 15, 2026Kinetic DX+ Review: Pure Nostalgia Can Only Take You So FarNo smoke, no two-stroke – the reborn Kinetic relies heavily on the charm of the original’s design to sway buyers, but can it offer genuine substance to go with the style?12 mins read
Janak Sorap | Apr 10, 2026Triumph 350 Range First Ride Review: More Affordable, More Refined, Still Fun?Triumph’s shift to 350cc aims to cut costs, but does it affect the ride experience?5 mins read
car&bike Team | Apr 7, 2026Flying Flea C6 Review: Royal Enfield’s Electric Gamble?The C6 is the beginning of Royal Enfield's EV journey under the Flying Flea brand. Does it make a strong impression? Read on.8 mins read
Janak Sorap | Mar 31, 20262026 Royal Enfield Guerrilla 450 Apex – First Ride Review: The Update That Changes EverythingAfter riding the updated 2026 Royal Enfield Guerrilla 450 for a round trip of over 140 km from Guwahati to Shillong, the new Apex variant feels like the version of the Guerrilla 450 that should have existed from day one.6 mins read