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Scooter vs Motorcycles - the verdict is clear - Views on News from Equitymaster
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  • Apr 3, 2000

    Scooter vs Motorcycles - the verdict is clear

    As per a newspaper article scooter manufacturers like Bajaj Auto, LML and Maharashtra Scooters have all registered a decline in their sales figures for the first eleven months of FY2000. Overall scooter sales fell by 4.2% YoY to 1.14 m units for the period April'99-February'2000. However motorcycles bucked this trend by reporting a positive growth of 29% to 1.59 m units for the same period.

    The moped sector also reported a positive growth of 4.7% during this period with 0.65 m units as compared to 0.62 m units for the corresponding period of the previous year.

    This trend in the scooter segment is not surprising as this segment has been out of favour for sometime now. The main reason for this being that demand for scooters is higher in urban areas and since the industrial sector performance has been sluggish this segment did not perform well. The industrial sector growth has been slow over the last 2-3 years, it was 5.6% in FY97, 6.6% in FY98 and fell to 4% in FY99. The share of scooters in the two wheeler segment has been coming down in the past couple of years and fell in FY99 to 39% as compared to 44% in FY98.

    On the other hand motorcycles have seen good times mainly due to the strong agricultural growth as motorcycles are preferred in rural areas due to their higher wheel base. Rural areas account for 55%-60% of motorcycle demand. The agricultural sector grew by 7.6% in FY99, hence the positive impact of higher agricultural incomes was felt on this sector in FY2000. The share of motorcycles in India's two wheeler segment has been on the rise over the last couple of years. As of FY99 this stood at 41% as compared to 33% in FY98.

    Why it makes sense to buy a motorcycle ?

    The average price of a scooter ranges from Rs 30,000 to Rs 35,000 and the average price of a motorcycle ranges from Rs 45,000 to Rs 60,000. However inspite of this price differential ranging between 50% to 70% the demand for motorcycles has been going up mainly because it is inexpensive to maintain a motorcycle due to better fuel efficiency. The per kilometre cost of running a motorcycle works out to Re 0.5 (55 kms/litre) as compared to a scooter which works out to Re 0.8 Rupee (35 kms/litre), hence a saving of 36%. Some motorcycles even give 60 kms/litre of mileage. This saving due to lower maintenance cost of a motorcycle over the lifetime of the vehicle more than offsets the higher cost of buying a motorcycle. This makes sense from the buyers point of view to buy a motorcycle especially as the price of petrol is going up.



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