Ratings company ICRA on Thursday maintained its progress forecast for two-wheeler gross sales at 12-14 per cent for the continued fiscal, regardless of the second wave of the coronavirus pandemic hitting non-metro and hinterlands that dampened rural client sentiments.
A low base, wholesome rural money flows, and continued desire for private mobility would help two-wheeler demand within the festive season, ICRA mentioned in a press release.
“While the overall consumption and investment demand may take some time to recover after the devastating second wave, India’s rural economy is expected to provide some support,” it mentioned.
ICRA mentioned it “expects a 12-14 per cent year-on-year growth in two-wheeler (2W) volumes in FY2022, amid an evolving COVID-19 situation”.
Expectations of a wholesome rabi manufacturing, well timed arrival of the monsoons, a hike in minimal help costs for kharif crops and different earnings help schemes by the federal government are doubtless to assist revive rural demand sentiments and help the two-wheeler offtake within the festive season, it added.
“The continued preference for personal mobility solutions, amid the pandemic, would also drive-up some demand. Even as the pace of domestic demand recovery remains uncertain, the steady growth in 2W exports is encouraging and is expected to support industry volumes in FY2022,” the scores company mentioned.
Commenting on the scenario, ICRA Vice-President & Sector Head, Corporate Ratings Rohan Kanwar Gupta mentioned, “the extensive localised lockdown measures, implemented due to the second wave between April and June 2021, were almost akin to the nationwide lockdown last year.”
Unlike the primary wave, the surge in infections in non-metro and rural hinterlands, dampened rural client sentiments as nicely. This mirrored in a pointy sequential fall in 2W retail gross sales within the mini festive and marriage ceremony season in April-May, he added.
Gupta additional mentioned a number of 2W unique tools producers (OEMs) superior their shutdown upkeep schedules throughout these months, which hit wholesale volumes considerably in April and May 2021.
“The inventory at dealerships, at (over) 30 days at May-end, was also relatively high, which could mean only a gradual recovery in wholesale volumes, till the stocking begins for the forthcoming festive season,” he mentioned.
While uncertainty continues to persist relating to a potential third wave, ICRA mentioned it continues to keep up a ‘stable’ outlook for the 2W business.
“It is predicted {that a} low base, wholesome rural money flows, and continued desire for private mobility would help 2W demand within the festive season.
“Nevertheless, the same would be closely linked to the pace of the vaccination drive and demand disruption due to the resurgence of COVID-19; uneven monsoons or volatilities in exports could pose downside risks to the current estimates,” it added.
Gupta mentioned consistent with ICRA’s steady outlook on the business, the credit score profile of 2W OEMs is predicted to stay wholesome, supported by sturdy steadiness sheets, restricted debt and wholesome money and liquid investments.
“While the capex would likely be higher than the FY2021 levels, major expansion plans are expected to be deferred till a meaningful demand recovery. Nonetheless, the OEMs will continue to invest in new product development and network expansion in both domestic and overseas arenas,” he mentioned.
