Inside the struggle to sell entry-level vehicles

NEW DELHI : Entry-level cars and bikes are piling up in small-town showrooms amid lackluster bottom-of-the-pyramid demand, auto dealers said, prompting them to roll out discounts and offers offers.

Hero MotoCorp, India’s entry-level motorcycle segment leader, is offering attractive cash rebates and finance deals for products like the HF Deluxe and HF100 to attract buyers in rural and semi-urban areas. -urban. Uttar Pradesh, Rajasthan and Madhya Pradesh are key markets for this segment.

“Affordability has become such a nightmare for entry-level customers that even if they want and need to buy the vehicle, they find both the cost of acquisition and the cost of operation beyond their means. the cheapest entry-level bike isn’t moving; it’s 50% of my current inventory,” said a Hero MotoCorp dealer in Uttar Pradesh.

“For people at the bottom of the pyramid, a two-wheeler is a way to move from shared mobility to personal mobility or from a bicycle to a motorbike. They can be students, small entrepreneurs, traders and employees who want a vehicle to get to their place of work. Since food inflation has increased so much and it is an inelastic demand, they are forced to postpone their decision to buy a new vehicle and stick with the mobility solution they are currently using. These are buyers who are no longer coming to the market,” the dealership said on condition of anonymity.

In September, Honda Motorcycles and Scooters India overtook Hero MotoCorp sales as the former has a bigger game in scooters and the 125cc-plus category, which largely appeals to urban buyers. “We see the money, and financing is not a constraint in the 125cc and above category. Two-wheelers for urban customers have ambitious value, and we see many of them coming and moving to even s “they’re over budget. The demand is all in the premium category,” said a Honda dealership in Mumbai.

The trend is visible in mini and compact cars, which generally fall into the 5 lakh and below, and the Category 5-10 lakh. Both segments were down 44% and 9%, respectively, in Q2FY23, compared to FY19 volumes, according to the Society of Indian Automobile Manufacturers (Siam). Cars at prices 5 lakh or less now only accounts for 7% of the Indian passenger vehicle market, a sharp drop from 22% in 2019. Similarly, PVs priced at 10-15 lakh and 15-20 lakh increased their share to form 21% and 11% of the market, respectively, from 12% and 5%, respectively, in 2019.

The sharp contraction in small car sales can be attributed to automakers focusing on more profitable segments like SUVs, where packing cars with more features can attract a better price, said Ravi Bhatia, president and chief executive of JATO Dynamics, an automotive business intelligence company. .

Even as passenger vehicle sales reach record highs on the back of improved chip supply and large orders on the way, the segments driven by the heart of the population – the rural buyer – are lagging far behind their pre-pandemic peak, as rising inflation takes new vehicle EMIs beyond their means.

Entry-level two-wheelers, or motorcycles in the 110cc engine and below, saw a 35% drop in sales in the September quarter from their record FY19 volumes, according to data. data from Siam.

The price of an entry-level two-wheeler has increased by 40% in four years, while food inflation is also increasing. This has prompted many potential buyers in Tier II and -III cities who are budget driven and use a vehicle as their primary mobility solution to delay discretionary purchases. Most two-wheeler buyers in semi-urban and rural areas are banking on financing to purchase a new vehicle, and the higher monthly loan payments are also scaring away rural buyers.

Showrooms, however, reported good attendance over the weekend for Dhanteras. “The two-wheelers had much better sales these two days, compared to the start of the holiday season. There is some respite, but there won’t be a major correction in stocks,” said Nikunj Sanghi, managing director of Rajasthan-based JS Fourwheel Motors.

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