During the 2018-2019 period, two-wheeler sales in India are likely to grow at 8-10 percent amid concerns over the increasing cost of acquisition disturbing positive demand drivers, as per ICRA (an Indian independent and professional investment information and credit rating agency).
According to ICRA, the drivers of the growth are supported by the higher minimum support price (MSP), growing per capita income, near normal monsoon during the past three financial years and farm loan waiver in selected states due to which the domestic two-wheeler industry is expected to grow at 8-10 percent during the financial year 2018-2019. The rating agency further has said that it has a stable outlook on the two-wheeler industry.
The sector since April-October 2018 has reported 11.1 percent year on year growth in volume despite the setback received due to the increase in the insurance premium across the country, recent floods in Kerala and regulatory changes in West Bengal that mandates two-wheeler sales only to valid license holders.
But there are concerns that could disturb the positive demand such as the increasing cost of acquisition of two-wheelers due to rise in raw material prices and hike in insurance premiums, rising interest rates and somewhat unevenly distributed monsoon in the financial year 2019.
For a medium term, the two-wheeler industry is expected to report a volume CAGR of 7-8 percent with positive structural factors like growing middle class, rapid urbanization, favourable demographic profile and participation of women in the workforce.
ICRA has even advocated for increasing penetration of organised finance into second and third tier cities as well as in rural centres so as to support domestic demand as the current share of financed vehicles remains moderate.