Economy

Resilient export market smooths the road for 2W firms

G Balachandar Chennai | Updated on January 28, 2021

A robust growth in motorcycle exports, and its strong potential to sustain, are expected to give a big boost to the margins of homegrown two-wheeler (2W) companies at a time they are cautiously optimistic about domestic market prospects.

The December 2020 quarter saw motorcycle exports from India grow 22 per cent to about 9.78 lakh units, against 8.02 lakh units in the previous-year period, supported by a faster recovery in key markets such as South-East Asia, Africa and South America.

Bajaj, TVS Motor and Hero MotorCorp account for about 88 per cent of bike exports from India, with Bajaj holding the largest pie. The fourth largest 2W company in the Indian market by volumes, Bajaj recorded a 26 per cent growth in exports, at about 6.08 lakh units, in Q3.

The company’s export revenue stood at ₹4,082 crore during Q3 FY21, compared to ₹3,037 crore in the previous-year quarter, an increase of 34 per cent. On the other hand, its domestic market revenues rose just 5.7 per cent, to ₹4,648 crore.

“The export markets remained resilient in Q3. Among geographies, South Asia (except Sri Lanka) and Africa are back at pre-Covid levels while Latin America is at about 90 per cent levels and the key market of Philippines is at just about 50 per cent,” the Bajaj management told a recent conference call.

Bajaj Auto expects exports to grow in double digit and exports realisations to be steady this quarter, too.

“The Indian 2W exports reported a robust growth in Q3 FY21. This was supported by demand emanating from its key target markets, viz Africa, Latin America (barring a few nations) and South-East Asia, which were not as severely impacted by the pandemic as the US and Europe. In addition, rising commodity prices (favourably impacting income for importing nations), relatively steady exchange rates and continued focus of Indian OEMs to expand their network in these foreign markets also augmented the demand,” said Shamsher Dewan, Vice-President, Icra.

TVS Motor Company and Hero also reported strong growth in their bike exports. TVS Motor’s exports grew 37 per cent at 2.08 lakh units, while Hero recorded a 47 per cent growth at 48,344 units. An improved export mix is expected to boost their margins in the quarter.

Increased presence

Meanwhile, domestic players continue to strengthen their presence overseas. TVS Motor has roped in new distributors in Colombia and Philippines over the past couple of quarters.

“Indian OEMs have a strong market position in African and Asian countries and are trying to increase their presence in other markets with new launches, setting up production/assembling facilities and increasing distribution network. Though Chinese OEMs have a higher market share, the competition is fragmented, and Indian OEMs have superior quality,” said a recent report of India Ratings.

Published on January 28, 2021

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