Cheaper loans in rural areas to lift sales: Hero

livemint.com:

NEW DELHI : Hero MotoCorp Ltd, India’s largest maker of entry-level motorcycles, expects a “dramatic" drop in interest rates on two-wheeler loans offered by non-banking financial companies (NBFCs) in rural regions—typically marred by defaults—to boost demand for two-wheelers in three-four years, its chief executive Niranjan Gupta said on Tuesday. Gupta said the company is considering adding connected features, which it offers in motorcycles in its premium portfolio, to its entry-level motorcycles, which can make repossessions and traceability easier for financiers. This in turn could lead to lower interest rates and mitigate the impact of the double whammy of high inflation and high interest rates, which has crimped sales in the rural India.

Hero MotoCorp also sees green shoots of revival in rural demand. “As we move forward, we do see over the next coming quarters that this segment will be bouncing back and there are green shoots already," Gupta told reporters. The sales of entry-level motorcycles, typically defined as motorcycles with an engine capacity of up to 110cc, took a beating after touching peak volumes 2019 onwards.

The switch to the Bharat Stage-VI emissions regime, addition of mandatory safety features and general inflation made two-wheelers significantly more expensive. Alongside, the covid-19 pandemic resulted in widespread job losses and income losses, especially at the bottom of the pyramid. “What we see now from the data is that consumer confidence is moving up very rapidly from that (rural) segment.