Petrol price reduction may support Two wheeler market recovery

The reduction in petrol prices on account of excise duty cut by the Central government is expected to provide a much needed break for the two wheeler segment. While the rural economy is showing signs of improvement, petrol price reduction, along with the opening up of schools and colleges, should forecaster well for two wheeler replacement demand. Also, if the States follow it up with cuts in VAT, then it will provide strong blast for two ­wheeler sales.

In the post-covid phase, a gradual demand upturn was witnessed in passenger and commercial vehicles. But the two wheeler segment didn’t indicate a sustained recovery amid a suitable rural economy. A huge increase (about 25%) in the purchase cost of new two-wheeler and a sharp increase in petrol prices proved to be major complainer for demand improvement in the two-wheeler segment.

Even so, a low base and a good wedding season in northern India have supported the recovery in two-­wheeler volumes in the past two months despite continuing supply chain challenges. Wholesale volumes were higher by 15% at about 1.2 million units in April 2022. While retail volumes were also higher in April, they were still lower than pre-pandemic levels.

The reopening of educational institutions and the return to office by workers in the corporate world has boosted sentiments and thereby supported the demand recovery, particularly in urban areas. Industry representatives and financiers state that the rural economy is showing signs of recovery with many good factors. While this forecaster well for two-wheeler sector, in particular motorcycles, fuel price cut will boost sentiments further.

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