Motorcycles sweep the two wheeler market - Views on News from Equitymaster

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Motorcycles sweep the two wheeler market

Aug 18, 2000

For the 1QFY2001, motorcycles sales grew by 31.2% YoY, mopeds grew by 11.7% YoY while scooter sales continued to show a decline of 12.4% YoY. During this period the two wheeler segment as a whole grew by 12.1% YoY, as compared to a 6.8% growth in the first quarter of the previous year. The two wheeler segment has continued to do well in the current year, as compared to most other automobile segments which have seen a slowdown. Two wheelers segment has been the most vibrant in the automobile sector. In the past five years this segment has grown at a CAGR of 19%, as compared to cars which grew at 13% and commercial vehicles which fell by 3%. It is the only automobile segment which has withstood the economic downturn of the past few years.

The reasons for this are many: rise in income levels, impact of urbanisation, easy availability of finance and of course the most important, the fact that two wheelers are preferred entry level vehicles.

The composition of the two wheeler industry has undergone a big change in the past few years. Scooter volumes have declined during this period while Indo-Japanese motorcycles have reported robust growth rates. Demand for scooters have a direct correlation to industrial growth, while motorcycles have a correlation to agriculture growth. The agriculture sector has performed very well over the last couple of years, while the industrial sector performance has been lacklustre during this period. This has lead to higher demand for motorcycles.

1QFY01 Sales nos. % to total
Scooters 258,680 27.6%
Motorcycles 499,869 53.4%
Mopeds 177,042 18.9%
Two wheelers 935,591 100.0%

The key players in the motorcycle segment are Hero Honda, Bajaj Auto and TVS Suzuki. Hero Honda leads the market with a 42% market share. Its tie-up with Honda Motors gives it access to the best available technology. It continues to report good growth in volumes and has the distinction of introducing the first disc brake model in India. Bajaj Auto has the second highest market share at 24%. BAL though a late comer has recently become very aggressive in motorcycles and is stepping up its capacity to capture a higher market share of the industry.

In the current year motorcycles segment is expected to maintain a steady growth, with introduction of new models and higher technology. The agriculture sector performance is expected to be on line due to expectations of a normal monsoon in the current year. This will continue to back the rural demand for motorcycles.

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