The high cost of living has hit the buyers of Chinese bikes and rickshaws hard. The two-wheeler segment is passing through a strange phenomenon in which sales of costly Japanese bikes are soaring in sharp contrast to plummeting sales of low-priced Chinese assembled bikes.

The lower- and middle-classes are now feeling the heat of squeezed buying power on account of soaring food inflation and utility bills. These buyers have either suspended their purchase of new Chinese assembled bikes or shifted towards used bikes.

Another view is that some limited buyers, whose salaries and incomes have risen, have shifted towards Japanese bikes which have also become a symbol of status.

Honda, Suzuki and Yamaha sold 798,657, 21,240 and 14,038 units in the first seven months of the current fiscal year as compared to 732,041, 12,682 and 12,654 units in the same period last year, up by nine per cent, 67pc and 11pc respectively.

Frequent price shocks in two-wheelers appear surprising when a leading Japanese 70cc bike assembler claims to have achieved over 96pc localisation while the other two Japanese players are also rolling out bikes with at least 60pc locally made parts

Chinese bike assemblers such as Road Prince and United Auto Motorcycle suffered sales declines of 30pc and 27pc to 63,286 and 168,546 units as compared to 89,855 and 230,370 units.

As per data of Large Scale Manufacturing (LSM), the overall country’s bike production in July-December 2021-2022 fell by 4.4pc to 1.189 million units from 1.243m units in the same period last fiscal year due to depressed sales of Chinese assembled bikes.

In view high demand, Japanese assemblers have been raising prices frequently, citing rising freight charges, rupee devaluation and increase in input cost due to rising rates of raw materials like plastic, steel etc. Surprisingly, Chinese bike assemblers have also followed suit despite plunging demand and sales to offset soaring input costs.

In the last three years, manufacturers and traders of various goods have enjoyed a field day in jacking up prices amid no check and balance from authorities. The Chinese and Japanese bike assemblers have also applied the same strategy towards price hikes.

A bike assembler, who asked not to be named, said the low- and middle-income group people were actually well satisfied with the price of Chinese bikes in the range of Rs 40,000-45,000 a few years back, paired with the monthly installments’ options offered by their dealers.

“Prices of Chinese 70cc bikes have now crossed Rs65,000 taking the cheap bike option away from the reach of many consumers who are now unable to cope with the high cost of living,” he said. As the prices shoot up, the installment plans by dealers have also become difficult, he added.

In the current difficult times, the Japanese bike assemblers are a bit lucky. The high-end buyers with multiple incomes are still fixated on buying branded items like clothes, cars, Jeeps and bikes.

He said some cash-rich car owners are also purchasing costly Japanese bikes as for certain travels they often prefer bikes to avoid traffic congestion. Some upper-middle-income groups prefer bikes to save on petrol consumption while running errands.

Rural buyers, especially in Punjab, have also remained brand-conscious which is evident from the impressive sales of Atlas Honda Limited. However, some rural buyers, who were previously buying Chinese bikes, have also switched over to Japanese brands, he said.

A few upper-class buyers feel that there is no harm in paying over Rs95,000 for Honda CD-700 rather than purchasing over Rs65,000 for a Chinese bike.

In total bike sales, rural buying holds a 65pc market share as compared to 35 per cent in urban areas. Farm incomes play a major role in shrinking and dwindling bike sales.

Chairman Association of Pakistan Motorcycle Assemblers, Mohammad Sabir Sheikh said banks have started leasing branded bikes on zero per cent markup for a limited period to lure buyers, while Pak Suzuki Motor Company Limited has already been doing this for the last year at its dealerships’ network.

He said higher engine power bikes’ prices have gone up by Rs40,000 in the last 1.5 years followed by a jump in Chinese bikes of up by Rs15,000 while Honda CD-70’s price saw a hike of Rs18,000-20,000. As a result, the demand for used bikes has soared resulting in rising prices by Rs10,000-15,000 depending on the engine power capacity.

Frequent price shocks in two-wheelers appear surprising when a leading Japanese 70cc bike assembler claims to have achieved over 96pc localisation while the other two Japanese players are also rolling out bikes with at least 60pc locally made parts.

Three-wheelers

As per the figures of Pakistan Automotive Manufacturers Association, Qingqi, Sazgar, Road Prince and United Auto three-wheelers’ sales stood at 8,386, 8,388, 5,342 and 1,903 units in 7MFY22 as against 11,553, 9,028, 6,030 and 4,465 units in the same period, down by 27pc, 7pc, 11pc and 67pc respectively.

The non-availability of compressed natural gas (CNG), fear of closure of pumps and thin saving ratio in CNG as compared to petrol have also forced three-wheeler owners towards petrol.

A three-wheeler assembler, however, attributed the downward trend in sales to the shrinking purchasing power of buyers due to the rising cost of living.

He said rickshaw prices have also gone up due to a meteoric rise in steel and plastic materials prices owing to the rupee fall against the dollar and higher freight charges.

“We have not increased prices the way raw material prices have shot up keeping in view buyers’ limited purchasing power,” he said.

Published in Dawn, The Business and Finance Weekly, January 28th, 2022