Increasing demand for 2 Wheelers will ensure business sustainability in Indian Multi-brand Outlet Market: Ken Research
1. Two wheelers dominate the domestic Indian auto market accounting for almost ~75% of the overall automobile sales
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Indian auto industry recorded strong growth in FY22, post recovering from the effects of the COVID-19 pandemic. Electric vehicles, especially two wheelers, are likely to witness positive sales in FY23. 1/2 of the households in big cities and developed rural areas own two-wheelers. Upper Middle class people are preferring to purchase 4Ws instead as evidenced by ~13.5% market share in FY’20 growing up to ~20% Market share in FY’22. Moreover, India has become the world’s largest producer of two-wheelers since FY’19. One in three Indians use 2Ws for their daily commute to and fro work. 2Ws are primarily a utilitarian choice for Indians rather than an aspirational or lifestyle choice. First-time buyers in rural and semi urban areas have been the biggest drivers in this segment.
2. India has higher sales penetration for Motorcycles rather than Scooters via MBOs due to its high mileage and being a preferred medium of commuting
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As of FY’22, Motorcycles are preferred over scooters owing to their high mileage. Motorcycle although occupies the largest share in India 2-Wheeler MBO market, scooter segment is expected to rise sharply in coming years as scooter is more convenient to any family member regardless of age or gender hence it will become a preferable choice in the future. Another reason is the cost effectiveness of a scooter compared to a motorcycle.
3. It takes anywhere between 2-48 hours to disburse the loan amount via a bank or a NBFC for 2Ws after examining the CIBIL Score and detailing financial background check of an applicant
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Banks mostly provide loans to a MBO via authorized dealer. Invoice is generated by the authorized dealer. While NBFCs can directly partner with the MBO, basic documentation is completed by an MBO executive. Both the parties’ partner with a Direct Selling Agent to receive loan enquiries in most cases. The Agent codes are generated to give payouts to the MBOs. Banks hold a major share in the MBO finance because they have lower interest rates and better connectivity.
Rise in the ASP of the vehicle will push the lower income group to look for financing options. Another reason is the expanding female applicants will give a slight push to the financing market parallel to the overall 2W sales. Inclination towards top variants of the 2W will also help finance market to grow.
