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Coronavirus
VERY HIGH
Pakistan Deaths
18,537
10824hr
Pakistan Cases
845,833
419824hr
Sindh
288,680
Punjab
312,522
Balochistan
22,900
Islamabad
77,065
KPK
121,728

Despite a substantial drop in sales this fiscal year, motorcycles together with three-wheeler rickshaws did not buckle entirely under the pressure. And the pressure itself had been building given a marked economic slowdown during the first half of the year and recent lockdowns on account of covid-19. But overall volumes for the segment are still higher than the post-2015 period when the market was flooded with a spree of new launches including Road Prince, Yamaha and United Motors. Evidently, the reduction in overall demand has been cushioned.

In a country where car penetration is low and mass transit absent, motorcycles are popular across urban and rural areas and considered more affordable—given the alternatives—for the mid to low income households. Specially for the average working male in Pakistan, motorcycles are the safest bet for transport—from the ease of commute to the cost of capital and monthly expenditure racked up.

Motorcycles have also very high localization in Pakistan (some estimates suggest over 90 percent for the lowest engine vehicles), which in addition to the competition amongst players has kept prices at a stable level. Companies have offered easy instalment packages (many with zero mark-up) to facilitate end-users in making purchasing decisions.

The decline of 22 percent in FY20 for 2-wheelers and 29 percent for three-wheelers year on year comes at the back of reduced incomes, on-and-off lockdowns across the country and the general fog of uncertainty that has engulfed the country. Prices for motorcycles have remained more or less the same, though in most cases, motorcycles have relatively inelastic demand (i.e. sensitivity to price changes is low) which makes demand for motorcycles remaining unperturbed if prices are raised—of course, to a certain degree. However, demand is sensitive to income changes which means, if incomes go down (or up), demand goes down (or up). Apart from the obvious mobility restrictions, the demand suppression has come from incomes being slashed, layoffs, and the like.

However, there is hope for a quick recovery come FY21. Motorcycle manufacturers (Honda, Yamaha) have raised prices from July-1 across their variants citing higher cost of production but this may not put a huge dent on organic demand as the economy resurfaces from covid-19. Work has resumed, factories and businesses are reopened and travel has subsequently revived.

An additional positive development is the government’s decision to introduce electric motorcycles to consumers through investment incentives in the segment—for parts, charging stations and imports of electric motorcycles. If the infrastructure is in place soon, this will substantially cut down fuel expenses for end-users (which is a substantial burden) in addition to having a greater choice and variety of motorcycles available in the market. The sooner this happens, the better for the market.