Car and bike sales pick up, but with a K-shaped twist

First the good news. India’s car and bike sales are showing an incredible reversal of fortunes after years of low sales that even pre-dated the pandemic, indicative of a slowdown that had gripped the Indian economy as early as 2018.

In fact, the growth in passenger vehicles, at more than 19 lakh units in the last six months, is record-breaking, clocking higher sales than the last ‘normal’ growth period back in 2017-‘18.

Bike and scooter sales have also increased, bringing relief to an industry that was hammered by everything from rural distress, high insurance costs, BS-VI emission norms, Covid lockdowns and even supply chain woes. Two-wheeler sales at 83 lakh units (April-September period) is way higher than the 65 lakh domestic sales registered in the same period last year, when India was in the throes of the Delta wave.

However, the distinct sales graphs also clearly indicate the K-shaped trajectory that the larger economy seems to have taken since the pandemic shook up the financial system and consumer behaviour. While sales are robust in high-end and commercial vehicles, they are lagging way behind in categories catering to the common man and the rural economy.

Thus, the small car segment, once the staple of India’s auto industry and the dream of its middle class, is now steadily dropping, even as more expensive SUVs and bigger sedans are finding more and more takers.

The same applies to mopeds, scooters and entry-level bikes. While overall numbers of two-wheelers are up compared to the pandemic years, the share of affordable bikes is steadily on its way down — perhaps, in a wag, no surprise that last month, Japanese brand Honda usurped the 2-wheeler industry leader crown from Hero, which had dominated the category with its best-selling entry-level models for long.

“Off-take of entry-level two-wheelers and entry-level passenger vehicles have been of concern especially as the rural demand has not picked up,” according to auto industry body SIAM’s director-general Rajesh Menon.

Explained SIAM president Vinod Aggarwal, “(This drop) is clearly linked to (financial) stress at the level of people who buy them. Rural demand is also a factor.”

The entry-level sales crash is clearly indicative of the K-shaped turn the Indian economy has taken since the ‘stimulus’ and ‘Atmanirbhar Bharat’ restructuring of the economy, that is seeing financial travails for those at the lower end of the spectrum, while the formal, organised economy seems to be laughing all the way to the bank.

At least as far as the auto industry is concerned, there are hopes that the situation might improve. “Hopefully, better monsoon (and the) upcoming festive season should improve the situation,” hoped Aggarwal. Hiked interest rates, thanks to the repo rate increases, could prove to be a dampener here as well.