All manufacturers have benefitted from the environment of rising prices in the 16-month rule of the PDM government. The two-wheeler industry is no exception, playing havoc with the prices by citing rupee devaluation against the dollar.

Despite declining demand and claims of high localisation, buyers still face high price shocks. Prices have increased significantly more than the 58 per cent depreciation of the rupee in the past 16 months. One dollar was worth Rs182.93 when the prime minister took office on April 11, 2022, and closed at Rs289 on August 9 after leaving office.

Prices for Honda motorcycles have increased significantly. The CD-70cc, CD-Dream, Pridor, and two special edition models now range from Rs157,900 to Rs282,900.

The increase in price by Atlas Honda Limited in various models ranges between 47-70pc in the last 16 months despite achieving over 96pc localisation in the iconic Honda CD-70cc.

Honda sold one million bikes in FY23, posting a decline of 26pc compared to FY22. However, net sales for the fiscal year ending March 31, 2023, rose by 3pc to Rs135.5 billion from Rs132bn during the same period ending March 31, 2022. Profit after tax plunged by 10.4pc to Rs5bn from Rs5.85bn.

Despite declining demand and claims of high localisation, buyers still face high price shocks as assemblers maximise profits

Honda’s sales during April-June 2023 stood at Rs35.6bn compared to Rs37.68bn in the same period last year. Profit after tax inched up to Rs1.6bn from Rs1.5bn.

Yamaha YB125Z and YB125Z DX prices are now Rs380,500 and Rs408,000 compared to Rs210,500 and Rs226,000. The price increase stands at 80pc-81pc. Total Yamaha sales plunged by 43pc to 13,217 units in FY23.

The price of Suzuki GD110S and GS150 is Rs335,000 and Rs364,000 as compared to Rs207,000 and Rs225,000. Pak Suzuki has appreciated prices by 58-85pc in various models, while its sales clocked in at 29,274 units during FY23, down by 23pc.

The above price hike practice by the assemblers suggests that rising dollars usually shake up the cost despite record-high localisation in decades-old and outdated models. Assemblers keep increasing the prices of 70cc and 125cc bikes without any innovation while the government fails to regulate them.

For example, the 70cc 1993 model of Honda CD-70cc is still in vogue without any change in design and model, while the Chinese bike assemblers have also been rolling out Honda 70cc replicas. The same is the case with the 125cc model.

The Sub Committee of Public Accounts Committee (PAC) of the National Assembly has been continuously grilling the car assemblers, but the two-wheeler assemblers have enjoyed impunity as hardly any successive governments have ever bothered seriously to check soaring prices, unchanged models and designs, quality and safety standards.

The two-wheelers are the most price-sensitive given its diversified buyers segment, hailing from small to large crop growers to various income groups in urban areas.

Wheat harvesting in March/April as a result of bumper crops and jump in wheat support price for the growers to Rs4,000 per 40 kilogram triggered some buying activities in the rural areas, pushing up sales of motorbikes. Rural areas account for 55pc of total bike sales while the assemblers rely on urban areas for the remaining 45pc.

Growers purchase bikes when crops do well, while urban buyers have been trying to adjust their lifestyle to inflation after getting soaring power and gas bills coupled with exorbitant food item prices.

As per large scale manufacturing data, the country’s overall bike production nosedived to 1.297m units in FY23 from 2.19m units in FY22, down by 41pc.

A senior bike market leader at Akbar Road, Mohammad Sabir Sheikh, said the price of a Chinese assembled 70cc has swelled to Rs102,000-108,000 from Rs65,000 in April 2022 despite achieving 80pc localisation. Consumers pay Rs7,000 extra to get their registration.

On rising bike prices despite higher localisation, he said, “it seems that the assemblers are keeping their profit margin to the maximum level and slowing down production to offset inflated power and gas bills and other overhead expenses.”

However, part vendors are also dependent on the import of raw materials, which are vulnerable to rupee-dollar parity.

“I think the only solution to help consumers get cheaper bikes and reduce energy import bills is to shift towards electric bikes by giving attractive duty incentives in its parts, motor and battery,” Mr Sheikh said.

He was of the view that the country’s economic indicators and wild fluctuations in rupee-dollar parity may subside after the new government takes over power.

He said some assemblers, with the help of private banks, have been trying to attract credit card holders by offering them petrol versions and EV bikes on zero markups for nine to 12 months instalment plans.

Mr Sheikh said banks’ documentation process usually irks customers while charging high processing fees and take at least 50pc price of the total bike in advance.

Shopkeepers also offer two-wheelers on monthly instalments but face recovery issues as people default due to the rising cost of living, he added.

Published in Dawn, The Business and Finance Weekly, August 28th, 2023