After record sales, motorcycle market dips to multiyear lows amid high inflation

Soaring unit prices, fuel prices, and inflation have dragged the motorcycle market to multiyear lows in the last two months following the highest-ever sales for the first seven months of this year.

According to two-wheeler marketers' intelligence data, the industry registered 22% sales growth to nearly four lakh units in January-July in continuation of the five-year trend of rising sales. Then, sales kept declining in August and September.

Industry sales dropped to around 36,000 units in September, which was nearly half of that sold in April this year.

"This was the worst September after 2017 when the industry entered the manufacturing localisation wave to reduce prices and expand the market," said Abdul Matlub Ahmad, president of the Bangladesh Automobile Assemblers and Manufacturers Association.  

The slowdown was primarily a consequence of soaring costs that forced companies to increase prices, in contrast to the last five years' trend of gradual price declines, said Ahmad who is also the chairman of Nitol-Niloy Group – the local manufacturing and distribution partner of India's largest player Hero MotoCorp.

Since the beginning of the Ukraine war in February, motorcycle prices, in frequent trenches, soared 10-22%, despite the fact that companies were too cautious there for the sake of the affordability of the masses.

Soaring fuel's cascading effect  

Unit price hikes alone have been a problem for the masses and the sharp hike in fuel prices on 6 August added to the struggle.

The 40%-50% jump in fuel prices further hurt motorcycle sales, not because of that people were too worried about their per-kilometre riding cost, instead, the fuel price hike has had a cascading effect on their lives, said Nayeemur Rahman, head of business planning at Uttara Motors Ltd – manufacturer and distributor of the Bangladesh two-wheeler market's leader Bajaj.

Higher fuel prices add to the costs of virtually everything.

In Bangladesh, the official inflation is at nearly 10%, while families are feeling the pains of a much higher practical rate of inflation.

Matlub Ahmad said when an average-income person struggles to meet the expenses of daily essentials, he has no disposable income, and he is in fear of an uncertain economic future, he barely dares to buy a motorcycle.

"And, it is happening now," he said.

Motorcycle sales dropped to some 43,000 units in August, from over 60,000 in July and around 55,000 units in both August and September last year.

As days go by, soaring inflation is further hurting the masses' purchasing power which was reflected in further decline in September.

Nayeemur Rahman of Uttara Motors said the biggest slump is being observed in the affordable motorcycle segments, the average income people tend to buy most.  

Also, the rural dealerships across the country are leading the market decline, he said citing the trends observed across the largest motorcycle dealership network in the country.  

His brand Bajaj has long been leading the Bangladesh market with one-third to nearly half of the market shares in terms of unit sales, thanks to its popularity in the affordable commuter segments being a 100 cc bike or a 150 cc one.

Except for the well-off customers who are not thinking much to pay more for a premium-category 150-165 cc bike, the masses are either ending up opting for a lower-specification bike or deferring their purchases.

The mass market-focused brands Bajaj, TVS, Honda, Runner, Hero all had a sharp decline in sales since August, while premium segment-focused Yamaha and Suzuki, attracting more of the premium segment 150-165 cc bike lovers, registered year-on-year sales growth to acquire more market share in the two months of market slowdown.

Subrata Ranjan Das, executive director of ACI Motors that manufactures and distributes Yamaha motorcycles, said customers who can afford are looking for fuel economy alongside performance nowadays, and that already made Yamaha, mostly due to its technologically advanced fuel injection engines, the market leader in the 150-165 cc segment.

For the sake of affordability, companies including his one, are compromising in their profit margins and the price hike this year was much less than the cost hikes due to dollar appreciation and higher international price of raw material and parts.

AKM Tauhidur Rahman, chief operating officer (COO) of Rancon Motorbikes Ltd that manufactures and distributes Suzuki motorcycles, said his company has had a sales growth last month compared to the same period of the previous year, but not compared to the preceding months this year. 

What to come?

Bangladesh Motorcycle Assemblers and Manufacturers' Association General Secretary Biplob Kumar Roy, also the chief executive officer (CEO) of TVS Auto Bangladesh Ltd, finds little breathing space considering a sales concentration factor in the January-July period this year.

Both the Eids that boost motorcycle sales in the country most were before August this year, while in recent years half of the festival boosts used to be in the months of August and September, he said, explaining a part of the reasons behind the roller coaster ride of the motorcycle market this year.

Matlub Ahmad feels the slowdown is here to persist at least till December-January.

If the economy improves by the end of this year and the exchange rate stabilizes, the market might continue the annual growth trend, hoped ACI Motors' Subrata Ranjan Das.

Against nearly six lakh units sold in 2021, the industry sold nearly 4.8 lakh bikes in the first nine months of this year and if the market does not further decelerate in the last three months of the year, 2022 might end up as a flat year.

Industry people, however, are worried about the unpredictable restrictions on motorcycles observed this year.  

Such as banning motorcycles on the country's most significant bridge on the river Padma that connected 22 Southwestern districts with the capital, or the road transport authority's moves for no bike registration before a driving license.

These contributed to the slowdown, and would hurt the market more unless the government decides to make the lives of motorcycle sellers-buyers easy, said Subrata Ranjan Das.

The Bangladesh Road Transport Authority (BRTA) deferred its plan up to the middle of December for not allowing new motorcycle registration without the owner's driving license.

The chicken and egg problem might slow the market further down next year, if not considered rationally as the majority of motorcycle customers are first-time buyers in Bangladesh.

"Without having a motorcycle, how can one learn to ride and avail a driving license?" questioned Rancon COO, echoing everyone. 

The industry barely saw higher sales in October, he told TBS on Saturday.