X

Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.


Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
Scooters: Will they make a comeback? - Views on News from Equitymaster
 
 
  • PRINT
  • E-MAIL
  • FEEDBACK
  • A  A  A
  • Nov 9, 1999

    Scooters: Will they make a comeback?

      This must be the question uppermost in the mind of Mr Rahul Bajaj, Chairman and Managing Director of Bajaj Auto. Considering the two-wheeler scenario over the past two years, the possibility may seem distant to some, but no one's willing to write off scooters as yet.

      Not so long ago, scooters were to the Indian two-wheeler segment what Sachin Tendulkar is to Indian cricket today. Dominant with over 60% market share (in financial year 1994), the scooter was the most obvious choice when it came to selecting the first vehicle for the family. And why not? Scooters were sturdy, economical and fuel-efficient. Moreover they were cheaper to maintain than the more expensive motorcycles. Mopeds were considered mere poor cousins of the scooter.

      Scooters - urban and staid
      First the facts. The scooter is essentially an urban vehicle, high on comfort and reliability, although the same can't be said about its aesthetics and elegance. Scooters have always borne a strong correlation to industrial growth and economic stability.

      Close to 70 percent of domestic scooter sales are accounted for by customers interested in a 'value for money' product, and are unwilling to dig deep into their pockets for features that do not significantly enhance vehicle performance. Scooter retail prices for an entry level model range between Rs 23,000 (US$ 530) to Rs 28,000, with the premium model priced above that range.

      Currently, there are seven companies operating in the scooter segment with Bajaj Auto (with its brands Chetak, Super, Cub) accounting for the lion's share. Bajaj's share would have been even larger, had it not been for LML (Vespa), which over the years, ate into Bajaj's market share considerably. Given the consumer mentality, battles are mostly fought on the price front, and looks and style have to take a backseat. Discounts are the order of the day, and products priced on the higher side face the danger of floundering.

      Motorcycles purr ahead...
      The arrival of the Indo-Japanese motorcycle (Hero Honda, TVS Suzuki), wiped the smile off the face of scooter manufacturers. This factor combined with the economic slowdown in India, effected a structural shift in the two-wheeler segment, pushing scooters to the background and thrusting motorcycles to the forefront.

      The rugged and elegant motorcycle was perceived as an attractive alternative to the scooter, especially in the rural areas. Although priced higher than scooters, the motorcycle appealed to rural masses because of its larger wheelbase and ruggedness. Currently, the rural segment accounts for 50-55% of total motorcycle sales, and only 25-30% of scooter sales. The robust rural economy, blessed with eleven successive normal monsoons, accounted for the success of the motorcycle, while the economic slowdown in the country (since the financial year 1997), accounted for the decline of the scooter - most scooter sales take place in urban areas. As consumer spending declined, so did the market for scooters.

      Over a period of two years, the unthinkable became a reality, the scooter market shrunk, making way for the motorcycle. The decline in scooter demand adversely affected manufacturers like Bajaj and LML, inducing them to enter the fray, in order to catch a piece of the motorcycle action.

      Poised for a comeback?
      There can be no two opinions on the view that Indian scooters are the cheapest in the world and therein lies tremendous potential for exports. As far as domestic demand is concerned, all is not lost for the scooter manufacturers. With the economy showing definite signs of a revival, and industrial growth on the upswing, manufacturers are hoping that this will translate into higher scooter sales.

       

       

      Equitymaster requests your view! Post a comment on "Scooters: Will they make a comeback?". Click here!

        
       

      More Views on News

      Tata Motors Ltd: Another Disappointing Quarter, Management fails to Perform! (Quarterly Results Update - Detailed)

      Aug 14, 2017

      Tata Motors Ltd disappoints again for both India and JLR business. Management commentary indicates a slow year ahead.

      Maruti Suzuki Ltd: Bumpy First Quarter. GST dents Margins! (Quarterly Results Update - Detailed)

      Aug 2, 2017

      GST realted cost impacts Margins, Management expects good year ahead.

      Hero Motocorp Ltd: Riding on the Scooters Growth, Maintains Margins! (Quarterly Results Update - Detailed)

      Aug 1, 2017

      Good Recovery in the Scooters market, expects pick up in exports too.

      Bajaj Auto Limited: Recovery in Exports but Domestic Disappoints! (Quarterly Results Update - Detailed)

      Aug 1, 2017

      New Export Markets picking up, Management expects good recovery in domestic Three wheeler market.

      Bajaj Auto Limited: Finishes the Year with Headwinds. Poised for a Recovery Ahead? (Quarterly Results Update - Detailed)

      Jul 6, 2017

      Ends the year on a Flat note. Expects good recovery in the exports market.

      More Views on News

      Most Popular

      This Small Cap Can Drive Chinese Players Out of India (and Make a Fortune in the Process)(The 5 Minute Wrapup)

      Aug 17, 2017

      A small-cap Indian company with high-return potential and blue-chip-like stability is set to supplant the Chinese players in this niche segment.

      The Most Important Innovation in Finance Since Gold Coins(Vivek Kaul's Diary)

      Aug 10, 2017

      Bill connects the dots...between money and growth, real money and real resources, gold and cryptocurrencies...and between gold, cryptocurrencies, and time.

      It's the Best Time to Buy IT Stocks(Daily Profit Hunter)

      Aug 16, 2017

      The IT Sector could be in an uptrend till February 2019. Are you prepared to ride the trend?

      Bitcoin Continues Stellar Rise(Chart Of The Day)

      Aug 10, 2017

      Bitcoin hits an all-time high, is there more upside left?

      5 Steps To Become Financially Independent(Outside View)

      Aug 16, 2017

      Ensure your financial Independence, and pledge to start the journey towards financial freedom today!

      More
      Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
      Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

      LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

      SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

      Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
      Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407
     

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms

    S&P BSE AUTO


    Aug 23, 2017 03:19 PM

    COMPARE COMPANY

    MARKET STATS