Two wheeler sales are finally on the recovery path

Two wheeler sales are finally on the recover path, reflecting improved consumer sentiments amongst the aspirational middle class families

The remarkable recovery in GDP growth rate to 8.7% in the financial year 2021-22 was marked by a crucial paradox. Virtually all credible surveys of consumer sentiments including those conducted by the Reserve Bank of India, Centre For Monitoring The Indian Economy and C Voter have revealed during this period that a majority of households were finding it difficult to make ends meet. That was because family incomes had either stagnated or declined while living expenses had shot up because of high inflation. Even in early 2022, two thirds of the respondents to the C Voter tracker poll clawed that it was difficult to manage family budgets. While those in well paid white collar jobs faced no financial difficulties, it is the aspirational middle class that found the going very tough. This was reflected in hard data. For instance, the sale of SUVs saw a more than 40% jump in 2021-22 to about 14.50 lakh units. For the first time, sales of SUVs exceeded that of sedans and hatchbacks that are less expensive. In contrast, two wheeler sales (the staple of aspirational middle class declined by more than 11%in the sae time period to 1.35 crore units. That works out to an average monthly sales figure of 11.25 lakh units.

But as the accompanying chart clearly shows, two wheeler sales are finally on the recover path, reflecting improved consumer sentiments amongst the aspirational middle class families. Sure, the recovery is still patchy and not is by no means a return to the boom years of the previous decade. But a recovery is clearly discernible. The first three months of the current year have shown sales that are consistently and considerably higher at a monthly average of 12.2 lakh units. This is because ordinary middle class families are now beginning to feel relatively more optimistic about their future financial prospects. In 2022, more respondents have stated clearly that they expect their family finances to either improve or stay the same during the C Voter tracker survey. Similar sentiments have been expressed by respondents in the recent bi monthly RBI surveys of consumer sentiments. The Hindu newspaper recently carried the results of a sentiments survey conducted by Sambodi Panels in June 2022. One of the questions was: Looking back, do you think your (and your households’) current financial situation these days is better, about the same or worse or worse as compared to last year? In urban India 50.2% of respondents said they are better off while just 5.7% sad they are worse off. In rural India, 40.7% felt better of while 11.3% felt worse off.

Most independent and objective analysts are of the opinion that the sentiments of consumers, particularly the aspirational middle class will improve further even in rural India once the Kharif harvest is in. Another piece of good news is that while retail inflation is still very high, it seems to have peaked in May, 2022. Besides, food inflation, that hurts the aspirational middle class the most, is expected to moderate with the Kharif harvest. That is good news for the Dian economy.