Two-wheeler industry projects tepid growth despite recovery signs

Despite four months of consistent growth, companies and industry analysts project tepid outlook for the two wheeler industry this fiscal.

In 2015-16, total two wheeler market grew by 3 per cent at 16,455,911 units. Scooters grew by 12 per cent (at 5.03 million units), bikes had a flat year (at 10.7 million units) and mopeds declined by three per cent at 7.23 lakh units.

The downtrend in two wheeler industry seems to have been arrested, although recent months (March-April) benefitted from early marriage season, regional new years (in April), arrival of rabi harvest besides the expectation of a good monsoon to aid rural demand and continued uptick in urban demand.

Thus, the first fiscal 2017 started off on a strong note as domestic two wheeler industry reported a healthy 21.2 per cent growth in April at 1.56 million units, driven by increase in demand in both rural and urban markets and strongly supported by the recent new launches.

In April this year, motorcycle segment reported 16 per cent growth at 1.02 million units, while scooters continued their strong double digit growth rate at about 36 per cent (at 4.68 lakh units). Among scooter models, Honda Activa and the recently launched Hero Maestro Edge, Hero Duet and Yamaha Fascino garnered good sales during the month.

However, the overall growth is expected at a single digit this fiscal after a modest three per cent increase in 2015-16. While bikes are forecast to register better growth than last year, scooter growth will be moderate, though it will be higher than bikes.

Country’s largest two wheeler brand Hero MotoCorp has guided for single digit growth in FY17 and expects second half this fiscal to show better sales than the first half. In 2015-16, it clocked 6.4 million units (include both bikes and scooters) in the domestic market.

Rating agency ICRA expects demand for two-wheelers to grow at a muted pace of 4-6 per cent during this fiscal. “Though higher rural allocation in the latest Union Budget along with government’s focus on improving irrigation infrastructure, would augur well for the farm sector, demand recovery from rural households is expected to be linked to the volume of monsoon rainfall,” according to Subrata Ray, Senior Vice President – Group Corporate Ratings, ICRA Ltd.

TVS Motor has indicated that favourable monsoon will help revive growth in bike segment, leading to overall two wheeler market growth in high single digit.

Bajaj Auto expects the domestic motorcycle industry to grow by 6-7 per cent this fiscal.

However, HMSI, the second largest two wheeler firm in India by volumes, is bullish on growth outlook and is targeting a double digit growth during this fiscal, supported by capacity expansion plans and new product launches. In 2015-16, it recorded a marginal growth (0.71 per cent) at 4.28 million units in the domestic market.

Hero MotoCorp remained the leader in the Indian two wheeler industry, but it lost market share in April 2016 (38.5 per cent from 40.8 per cent in April 2015) due to weaker than industry average growth. Other players such as Honda, Bajaj Auto, TVS and Yamaha reported higher growth. HMSI had a share of 26.5 per cent (25.6 per cent). Bajaj Auto emerged as the third largest player in the domestic two-wheeler industry with a market share of 12.8 per cent (12.5 per cent).

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