Ratings agency ICRA expects the domestic two-wheeler industry to grow 8-9 per cent in FY15 as replacement demand will support volumes in the short term. Over the medium term, the two-wheeler industry is expected to report a volume CAGR of 8-9% to reach a size of 22-23 million units (domestic plus exports) by 2016-17, a statement from ICRA said.

In the first five months of the current fiscal, sales volumes for the two-wheeler industry have expanded by 14.8 per cent YoY - the fastest pace of growth since 2010-11.

In the first five months, greater replacement demand and new motorcycle model launches by OEMs and strong demand for scooters (contributing 27% to domestic industry sales volumes in 5m 2014-15) have been the driving forces behind industry expansion.

Subrata Ray, Senior Group Vice President, ICRA Limited, said, “The fast expansion of the scooter segment’s pie has encouraged most OEMs to launch new models to capitalise on the growing opportunity offered by this segment. In 2012-13, three new scooter brands were launched in India, but the count increased to six in 2013-14. In 5m 2014-15, already four new models have been launched by OEMs with more in the pipeline.”

Compared to motorcycles (targeted at males), the penetration of scooters (targeted at both males and females) remains lower by a factor of 3-4 times which has been one of the primary drivers of demand for scooters as positioning of this product segment has become sharper. The increased supply push of new scooter launches should add to the growth momentum, he said.

ICRA believes that structural positives in the domestic market like favourable demographic profile, moderate 2W penetration levels (compared to other emerging markets), under-developed public transport system, growing urbanization and strong replacement demand remained intact. Added to these was the large opportunity in overseas markets, mainly Africa and Latin America.

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