Honda Predicts Double-Digit Negative Growth For Industry

Honda Motorcycle and Scooter India (HMSI) is still struggling with negative wholesale numbers, although the festive season has been cause for cheer in retail sales. Speaking about the two-wheeler industry after a prolonged slowdown in the Indian auto industry, Yadvinder Singh Guleria, Senior Vice President - Sales and Marketing, HMSI, told Carandbike that the slowdown is likely to continue, and despatches from the factories (wholesale numbers) are not expected to pick up anytime soon, even in the next 3-4 months. The short-term market outlook still looks bleak, but the long-term fundamentals are in place, the HMSI official said.

"We're still cautious on the demand. Festival has been an exception mainly on the retail sales. It helped most of the manufacturers to correct their inventories to bring it to controllable levels. So, I don't think anyone would like to make the mistake of again build up the inventories, especially once you have the transition from BS-IV to BS-VI. As such, the production activity is going to get activated and you'll start seeing the numbers in the wholesale, I don't think that is going to happen, especially the BS-VI ramp up is also going to happen. So, you cannot have the similar kind of efficiency for the production line when a new model starts on the production line. Combining all these factors, it looks like we still will continue to have a negative growth, and even at the end of financial year the industry will have a double-digit negative result," said Guleria.

The Honda SP 125 is the company's first BS6-compliant motorcycle

Guleria was speaking on the sidelines of the launch of the company's first BS6-compliant motorcycle, the new Honda SP 125. Two months ago, HMSI had launched the company's first BS6-compliant two-wheeler, the new Honda Activa 125, which has already received good response from the market. The Bharat Stage VI (BS-VI) emission regulations will come into effect from April 1, 2020, and all auto manufacturers will need to make their products compliant with the new regulations. HMSI has already started rolling out BS6-compliant models, but across the board, all two-wheelers are expected to see a price increase of between 10-16 per cent over the BS-IV models.

However, with increased prices in the middle of a slowdown in the industry, demand is likely to remain lacklustre, even for most part of the next financial year. In the short term, the slowdown is likely to continue with volumes not gathering steam like the way it has for the past couple of years. And although the festive season did see some spurt in retail sales, growth is unlikely to pick up, even in the 2019-20 financial year, more so with all two-wheelers becoming more expensive in the BS-VI era.

"It may take some time for the new price point in the market to settle down. Once all the products are there in the market by 1st of April, customers will come to know the average price, what is the increase in price in terms of percentage. However, the current market situation and overall economic condition is such that any increase in the price is not so welcome. There's the NBFC crisis, the GDP is not growing, there have been some reports of unemployment being on the higher side compared to last couple of years; that is also evident in the industry numbers. It's the eleventh consecutive month where the industry has seen a slowdown in the market. In the short term, it looks like the slowdown will continue. Post-festival, it's difficult to have sustainable volumes that you got during the festive season. But overall, the long term demand attributes will sustain very strong for the acceptability of two-wheelers for the daily commuting needs in the market," added Guleria.

(The Activa 125 Std is priced at Rs. 67,490, the alloy variant is priced at Rs. 70,990 while the top-spec Dlx variant is priced at Rs. 74,490)

Honda's retail sales posted double digit growth in the festive season this year, and this helped bring down the inventory levels, which will help Honda's transition to BS6 models become smoother in the next 3-4 months. With the auto industry already in the grip of an unprecedented slowdown, and an expected price increase on BS6 models from the next financial year, the slowdown is likely to be sustained for some time, although long term prospects of the Indian two-wheeler industry are still strong, he added.