How a rising cost of ownership comes as a drag for 2-wheeler companies?
I still remember the time when my father got us a new bike and I was hardly 7! My brother and I were on cloud nine throwing tantrums about how best the bike was. Purchasing new accessories, the rituals for a new vehicle, sweets…it was all like a festive occasion! We later purchased a car, then cars and so many vehicles after we started earning for ourselves but the excitement we had for our first vehicle was ecstatic!! I wonder why we do not get the same kind of excitement every time we purchase a vehicle for the fact that it’s a new one every time and an enhanced version of course. If we dig into the answers, probably, it is the very “first” vehicle we owned and so was the enthusiasm soaring. Is the excitement same for all the new vehicle buyers? Yes!! In fact, it is even more!! The hurdles a common man has to cross to own a two- wheeler are not less than a scary feat these days and hence, crossing all of those obstacles to own a bike is all the more alluring.
Why I said it is a scary feat is due to the ever- rising costs of ownership!! Although, the two-wheeler sales have been on an upsurge in India in the past decade, experts opine that the nation has a potential for more sales with respect to their buying ability. However, the rising cost of ownership delay their buying time which drives lesser sales on a year on year basis. Had the buying norms been easier and cheap, there would have been more sales recorded. Let us understand that how a rising cost of ownership comes as a drag for 2-wheeler companies.
- Insurance: In India, bike insurance ranges between Rs.900 per year for third party insurance and Rs.2100 per year for a zero- depreciation insurance. The average cost can go up to Rs.1750 per year and since there are many other aspects involved in owning a bike, this can be a whopping amount for an average dweller.
- Finance: Majority of the buyers use finance option to own a two-wheeler. The difficulty of getting finance despite the wide-spread conception that getting finance has become easier is the main criteria. The huge interest rates make it a tedious option too. The variation to own a bike with and without finance is huge.
- Maintenance: As we all know that any vehicle would need servicing and the maintenance cost for two-wheelers start from 0.52p per KM for 4 years and this varies for different types of two-wheelers. The more you travel, the higher the charges would be. This applies to new vehicles and it increases multifold with every passing year adding to the rising costs of ownership dragging 2-wheeler companies
- RTO: The Regional Transport Office needs to permit you for owning a bike and for this clearance, it may cost around Rs.6100 approximately for scooters/hybrids and Rs.13000 for motor cycles. If one has to shift registration, it is all additional!
- Depreciation: Automobiles can be considered as one of the fastest depreciating assets. You will be surprised to know that majority of the bikes drop their value by 10-15% the moment they step out of the showroom and depreciate by 10% every passing year till 5 years.
Two-wheelers have always been an integral part of the Indian eco system. An average Indian gets free of the unreliable and untimely public transport system at the most affordable price if he/she owns a two-wheeler. The two-wheeler industry has been on the focal point in the past 5 years with slowing down volumes every year despite the fact that it has potential to increase sales due to the rising cost of ownership being a drag two-wheeler companies as stated above. It is difficult to analyze at this juncture whether the downturn is momentary or consistent. As per the financiers’ point of view, catering to the industry and the consumer segment especially, it is a tedious task to operate and execute the plans in the course of covering locations that are out of the city boundaries. It is also a difficult activity for them to rely on correspondent banking relationships and the collection process. When there is a downturn, caution surfaces the equation as financiers try to fix NPAs under the limit.