Mumbai: India’s second largest two-wheeler company and the largest scooter manufacturer, Honda Motorcycle & Scooter India Pvt Ltd (HMSI) said that the surge in demand for two-wheelers is expected only from Diwali later this year.

“It is difficult to see growth because of the (ongoing) economic situation and the price gap between the BS IV and BS VI compliant models. This price gap is more than 10%. We plan to provide better financing schemes to counter this problem. However, the market will remain tough going forward and it will still take time to get back to the normal growth," Minoru Kato, president and chief executive officer at HMSI told Mint. He was talking on the sidelines of the Activa 6G scooter launch in Mumbai on Wednesday.

“Affordability is the most important parameter. It will take some time for the customers to digest the new price points (under BSVI regime). We may see uptick in demand from festive season, that is only from Diwali," added Y S Guleria, senior vice president, marketing and sales, HMSI.

Data released by Society of Indian Automobile Manufacturers (Siam) suggests that the two-wheeler segment volumes have dropped 16% year-on-year in three quarters ending December 2019. The segment, also an indicator of purchasing power of the masses, comprises motorcycle, scooter and moped categories.

HMSI has upgraded three of its bestselling two-wheeler models to comply with BS VI norms. The company says that it has already sold more than 75,000 units of the BS VI Activa 125cc scooter and Shine 125cc motorcycle.

“With Activa 6G, models contributing more than 50% of our business are now converted to BS VI. The BS VI volumes that we have sold already give us first mover advantage," Guleria said.

The company has invested a sum of ₹1,800 crore in fiscal 2019-20, which accounted for the transition to BS VI norms, new product development, installation of new equipment and upgrading factories, among other areas.

In September last year, Mint had reported that HMSI had altered its production schedules to align with the subdued market demand. Sticking to its plan of installing the third assembly line at its Gujarat plant in Vithalapur, Guleria said, the company has taken no decision to make it operational yet.

While the third assembly line at Vithalapur facility takes the plant’s total annual installed production capacity to 1.8 million units, HMSI’s total capacity across four plants stand at 7 million units per annum.

Guleria said on Wednesday that a few products will be discontinued in the transition to BS VI norms including the low selling models: Navi and Cliq scooters. However, it does not plan to exit the 110cc commuter motorcycle segment under the stricter emission norms from April.

“We will continue to focus on the commuter motorcycles too. We will not drop out the 110cc bikes (under BSVI) because there is a large segment there," he added.

Earlier on Tuesday, Bajaj Auto had reiterated similar expectations on consumer demand in the next fiscal. Senior executives at the Pune-based two-wheeler maker had said that the first two quarters of next fiscal would remain subdued on price increase under BS VI regime.

Chairman and managing director of Yamaha Motor India group, Motofumi Shitara too had told Mint recently in an interview that he expects CY 2020 to remain flat with recovery only in 2021.

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