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Honda Activa sales decline – Company reduces production by up to 20 percent

Demand for two wheelers have been steadily falling ever since the start of 2019 and are expected to go down even further in this quarter. Compared to motorcycles, it is the scooters which have seen a steeper fall and this has affected India’s largest scooter maker – Honda Motorcycle and Scooter India (HMSI). Honda sells on average 2 to 2.5 lakh units of Activa a month. In March 2019, their sales declined by about 47%, which has resulted in them losing their No 2 spot in two wheeler industry.

Live Mint reports that the company has taken a decision to cut production of two wheelers by 15-20 percent in this quarter. This has been confirmed by four of the company’s suppliers. This is the first time that the company is cutting down on production ever since it began producing scooters in 2001-02.

According to the vendors, HMSI sends out vehicle production targets to all vendors each quarter. This schedule of production lists out forecasts for the next quarter so that the suppliers can manufacture and stock up on required parts. This quarter’s production manual has asked suppliers to scale down production as the company itself will be resorting to a 15-20 percent cut.

HMSI relies extensively on sales of scooters, which made up 66 percent of the company’s total domestic production in FY18-19. The company sold over 38 lakh scooters during this period. About 30 lakh of these sales, were thanks to Honda Activa.

The decline in the scooter market is the result of many factors. The slowdown was noted ever since September 2018 when insurance premiums increased significantly which in turn affected the cost of scooters. The other factor includes the mandatory installation of Combined Braking System on all two wheelers with engine capacity upto 125cc and Anti Lock Braking System on two wheelers with engine capacity above 125cc. This will also result in higher prices and hence have more of an adverse impact on two wheeler sales.

It is also seen that unlike rivals such as Hero MotoCorp and Bajaj Auto, HMSI does not have its own financial arm to finance its two wheelers. Buyers show more preference towards companies having ready financial schemes which also goes a long way in boosting sales of two wheelers in domestic market. The upcoming general elections could prove to be a deterring factor in terms of two wheeler sales in the country.

Honda, Yamaha numbers credit Auto Punditz.

In terms of sales, HMSI has noted a dip in sales by as much as 46.79 percent in March 2019. Total sales during the past month stood at 2,22,325 units as against sales of 4,17,830 units in the same month of the previous year, making it one of the worst declines that HMSI has ever experienced in India since its entry. Though not as severe, Hero MotoCorp and TVS Motors also noted a dip in demand by 21.50 percent and 6.58 percent respectively.

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