Demonetisation appears to be taking the fizz out of the fast-growing scooter segment. Sales of Honda’s Activa declined for the first time in several months.
This has also upset Activa’s position as the country’s most sold two-wheeler for two consecutive months, October and November. Rival and former partner Hero’s motorcycle Splendor has sold more than the Activa in these months.
Domestic scooter sales had grown by over 23 per cent in the first seven months (April-October) of the financial year to a record 3.61 million. In November, however, sales declined by 2 per cent.
The government had withdrawn high-denomination currencies from circulation from November 9, impacting cash transactions across sectors, including automobiles where down payments are made by many buyers in cash. In rural markets several transactions happen entirely in cash.
Scooters, unlike motorcycles, are an urban phenomenon and there sales were not impacted in the last two years when the country had deficit rainfall. They could not escape the brunt of demonetisation, however.
For Honda Motorcycle and Scooter India (HMSI), the largest scooter maker in the country, sales of scooters to dealers declined in November, the first time in many years. Its scooter sales slipped 2.2 per cent to 203,076, year on year. The month on month decline in November was much steeper at 28 per cent.
Honda Motorcycle and Scooter India, the biggest two-wheeler player in the country after Hero, gets 67 per cent of its volumes from scooters.
In February this year, HMSI inaugurated its first dedicated scooter plant in India in Gujarat. With expanded capacity, the company was hoping to post 20 per cent growth in 2016-17. Between April and October, its domestic sales grew by 20.8 per cent. This has slowed down to 18 per cent now.
“The entire industry will face the impact of demonetisation but we still remain cautiously optimistic about double-digit growth,” said YS Guleria, senior vice-president, sales and marketing, HMSI.
Activa held the tag of the country’s most sold two-wheeler for nine consecutive months of this calendar year. Splendor, the country’s most sold motorcycle, reclaimed its position as the most sold two-wheeler in both October and November.
Note ban puts brakes on scooters sales
Considering the strong festive demand in October, many of the company’s dealers entered November with zero stock of the Activa, the company said. Two-wheeler dealers were expected to replenish stocks in November.
The company said it rationalised capacity and dispatched two-wheeler units according to market demand. It increased exports by 81 per cent to 26,066 units to offset the decline in domestic demand. “This led to Honda’s sales remaining steady while taking care of the financial health of our dealers,” said Guleria.