Two-wheeler segment set for growth despite short-term challenges: Report

Auto sector outlook: The two-wheeler segment is witnessing a sustained recovery in demand, although it faced a challenging period just before the Holi festival. Despite this, retail growth in the two wheeler segment is expected to range from 10-12 per cent year-on-year (YoY) for March, buoyed by stable demand across regions, according brokerage firm Motilal Oswal.

In the passenger vehicle (PV) segment, retail growth is expected to be in the range of 3-5 per cent YoY, primarily driven by healthy demand in utility vehicles (UVs) and compressed natural gas (CNG) variants. However, the medium and heavy commercial vehicle (MHCV) segment is expected to decline by 5-7 per cent YoY, while light commercial vehicles (LCVs) are expected to remain flat. Tractors are also projected to witness a retail decline of 7-9 per cent YoY, with commercial tractor retail demand declining by 20-23 per cent YoY, analysts at Motilal Oswal said.

The brokerage forecasts a growth in dispatches for various segments in March 2024, including a 12 per cent, 16 per cent and 18 per cent YoY growth in two wheelers, PVs and three-wheelers (3Ws) respectively. However, CVs and tractors are expected to experience declines of 7 per cent and 18 per cent respectively.

The report highlights specific trends within the industry, such as the positive reception of Hero MotoCorp’s Xtreme 125R model, which has seen initial bookings with no significant cannibalization of other models. However, clarity on the dispatches of Mavrick 440 remains uncertain. Additionally, the electric vehicle (EV) segment is experiencing a pre-buy effect in March ahead of subsidy reductions in April.

In the PV segment, there is a slowdown in inquiries and bookings due to state elections and festival mismatches, particularly affecting entry-level demand. Despite this, retail sales are expected to grow, with a decrease in waiting periods for certain models.

Motilal Oswal remains positive on the PV segment, anticipating improved earnings growth driven by better product mix and increased SUV volumes. However, it expects CV growth to moderate in the near term due to factors such as elections, with a subsequent acceleration expected from the second half of FY25.