Two-wheelers are a necessity, not a luxury, in the current Indian context, and taxes on these vehicles must be reduced, as the industry faces single-digit growth next fiscal due to affordability becoming an issue, according to experts.
There is also a need for income tax rationalisation to enable middle-income people to start spending again, said Honda Motorcycle and Scooter India (HMSI) Director of Sales and Marketing, Yogesh Mathur.
In the ongoing fiscal, motorcycle sales have not performed as well as the scooter segment, due to a softness in demand from the rural market, stemming from factors such as delayed monsoons, he added.
"From the rationalisation of GST point of view, we have been requesting the government to really take care of it because two-wheelers are not a luxury. They are a necessity for our people to commute," Mathur said when asked about demands from the industry for a reduction in taxes on two-wheelers.
He pointed out that currently, last-mile connectivity is lacking in India, and even public transport is inadequate to cater to the growing population, especially in “urban areas which are currently choked.”
"We understand that the two-wheeler still holds a necessity value, rather than being a luxury. So, from that perspective, in the personal mobility space, even a two-wheeler becomes a necessity, and that necessity should not be taxed at 28 per cent. That’s what our request from the industry body to the government is," he added.
Under the current regulations, two-wheelers with engines up to 350cc are taxed at 28 per cent GST, while those above 350cc attract a 3 per cent cess, bringing the total tax payable to 31 per cent.
Rationalising GST would provide relief to the two-wheeler industry, which is facing demand headwinds due to lower consumer spending and rising vehicle costs because of new regulation compliance, Mathur said.
"... there are a few basic inherent problems in the market, such as the lack of funds available to customers at present. There is a need for income tax rationalisation so that middle-income people can begin spending," Mathur said.
He further mentioned, "Farmers are also not receiving proper support for MSPs. That is a challenge. So, money is limited to certain people, and now, regulatory changes have also driven up the overall product cost."
Mathur cited examples of emission norm changes from BS IV to BS VI, and the introduction of On-Board Diagnostic (OBD) 2A to OBD2B set to take effect from April 1, which have increased the cost of two-wheelers.
"The price increase is phenomenal, which has created a problem in terms of affordability for the people. So, that's a challenge, and that cannot be immediately addressed. It can only be tackled if surplus money is available in consumers' hands to spend," he noted.
Due to these factors, in terms of industry growth, Mathur said, "We expect next fiscal year to see high single-digit growth in the two-wheeler market."
As for the ongoing fiscal, he said, "We are expecting a 10 to 12 per cent growth."
He added that motorcycle demand in rural markets has been impacted this fiscal, as 'marriage dates' were absent in the first quarter, which is one of the two big seasons for high sales, along with the Diwali period.
Moreover, the general elections also had an impact on rural demand for motorcycles, as consumers were preoccupied with the process, he said.
However, Mathur stated, "From February, marriages will resume, and it will have an extended period until June. So, we expect the first quarter of next fiscal to be better, supporting motorcycle growth moving forward."
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