Two-Wheelers Not Luxury, Tax Cut Needed to Spur Demand: HMSI

Two-wheelers are a necessity and not luxury in the current Indian context and taxes on these vehicles must be reduced as the industry is staring at a single-digit growth next fiscal with affordability becoming an issue, according to a senior executive of Honda Motorcycle and Scooter India.

There is also a requirement for income tax rationalisation to enable middle-income people start spending again, Honda Motorcycle and Scooter India (HMSI) Director Sales and Marketing Yogesh Mathur told PTI in an interview.

In the ongoing fiscal, motorcycle sales have not done as well as the scooter segment due to softness in demand from rural market, due to a variety of factors including 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 actually not a luxury. It is a necessity for our people to commute," Mathur said when asked about demands from the industry for a cut in taxes on two-wheelers.

He pointed out that currently, the last-mile connectivity is not there yet in India and even the public transport is also not adequate and sufficient to take care of the growing population, especially the “urban areas which are choked right now”.

"We understand that two-wheeler still holds a necessity value, rather than the luxury...So from that perspective, in the personal mobility space, even 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 is there to the government," he added.

Also Read | Honda to Drive in 3 New Models in India by FY27 to Tap Growth in SUV Segment

Under the present regulations, two-wheelers up to 350cc engine are taxed at 28 per cent GST, while those above 350 cc engine attract 3 per cent cess, taking total tax payable to 31 per cent.

Rationalisation in GST will provide relief to the two-wheeler industry which is facing demand headwinds due to less spending by prospective consumers and also increasing costs of vehicles due to compliance of new regulations, he said.

"...few basic inherent problems which are there in the market for us in terms of the availability of funds in hand from the customer's point of view currently, which is not there. There is a requirement that the income tax should be rationalised so that middle income people should start spending," Mathur said.

He further said, "Farmers currently are also not getting the proper support of the MSPs. That is a challenge. So, money is limited only to certain people, and now the regulation change has also impacted the overall cost of the product being higher.

Mathur cited examples of emission norm changes from BS IV to BS VI, and On-Board Diagnostic (OBD) 2A to OBD2B set to come in from April 1 which have pushed up the cost of two-wheelers.

Also Read | Honda Enters India's EV Market With Activa e and QC1 Scooters

"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 be addressed only if surplus money is available in the hands of the consumers to spend with," he noted.

Due to these factors, in terms of industry growth, Mathur said, "We expect that next fiscal year to be high single-digit growth of the two-wheeler market.

As for the ongoing fiscal, he said, "We are expecting 10 to 12 per cent growth.

He said motorcycle demand in rural markets was 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 busy with the exercise, he added.

Yet, Mathur said, "From February again marriages will start and it will have an extended period till June. So we are expecting that the first quarter (next fiscal) will be better, and it should support motorcycle growth going forward in next year in terms of the growth."