Domestic two wheelers demand likely to remain weak in near-term: ICRA

The rating agency ICRA in its latest report has said that the domestic two wheelers demand is likely to remain weak in the near-term on the back of implementation of BS-VI norms which is expected to further force a 10-12% increase in ownership cost, across segments. It observed that the industry is already facing several headwinds that have adversely impacted sales and the transition to new emission norms will further heighten the already subdued outlook.

According to the report, over the past couple of months, two-wheeler OEMs have started introducing BS-VI compliant variants in the market and ICRA’s analysis of new launches suggest that prices of 2Ws have risen by 10-12 per cent (on the ex-showroom basis). It pointed out that this sharp increase in prices is primarily because of a significant shift in the technology required to adhere to BS-VI requirements.

The rating agency has stated that as far as manufacturing of EFI system is concerned, as far as things stand, presently domestic manufacturing is limited. EFI system is being imported from prominent suppliers. Consequently, it said at the current levels of localization, cost differential of about 10-15 per cent have emerged in the EFI (BS-VI) Vs carburettor variants of the two-wheeler. However, it said given the scale of the Indian 2W market, auto ancillaries are expected to undertake phased localization of critical parts in the EFI system, which would subsequently bring down the cost of EFI systems as BS-VI gets implemented.