INDIAN DOMESTIC TWO WHEELER PLAYERS STRUGGLES HARD TO SURVIVE.
After witnessing tremendous growth, two wheeler industry is dipping
downwards towards sluggish demand and single digit growth. As
estimated by us, two wheeler industry reported growth merely of 6% in
last quarter compare to 15 % last year.
Downfall in economic growth, drying out of rural demand, hike in
petrol price and interest rate, increasing cost, over supply due to
increasing competition from MNCs have left Indian domestic two wheeler
market at a stagnant point.
In the month of July 2012 third largest two-wheeler maker of domestic
Indian market,Bajaj Autoreported 2.90 per cent fall in motorcycle
sales at 3,08,858 units in July. Its exports also fell by 12.84 per
cent during the month at 1,25,501 units compared to 1,43,996 units in
July 2011.In the three-wheeler category, Bajaj's sales stood at 35,292
units against 45,617 units in the same month last year, a dip of 22.63
per cent.TVS Motors equally had a slope down in sales falling to
1,61,255 units in July 2012 from 1,89,962 units in July 2011, a fall
of almost 15%. Their exports fell by 32 %. Hero MotoCorp July total
sales were down 1.5% at 4.84 lakh units versus 4.91 lakh units, YoY.
At the same time, there is another side to this coin. Domestic players
are losing grounds and MNC players like Honda, Suzuki & Yamaha are
strengthening their position in Indian market.
Honda showed tremendous growth of 56.90 % reporting sales of 2,39,094
units compare to 1,52,382 units in the corresponding month of the
previous year.
Honda wants India to be its biggest two-wheeler base globally, ahead
of Indonesia and Vietnam, which means the next few years could see a
lot of action.
The company, which recently appointed Bollywood star Akshay Kumar as
its brand ambassador, has so far invested Rs 5,000 crore in India,
including Rs 1,500 crore in its 4th plant at Karnataka, scheduled to
open in 2014, as also expansion of network. With this, the company's
production capacities will increase from 27 lakh to 50 lakh two-
wheelers annually, mostly to cater to the domestic demand. By the end
of this fiscal, the company aims to increase the number of their sales
and service network to over 2000 from the current count of 1500
dealers, and by the next fiscal year the aim is of 2700 dealers.
Besides this, the firm is all set to start production at the upcoming
3rd plant in Narsapur facility in Kolar district, near Bengaluru from
January 2013 In order to further improve its after-sales service
network, It will start an additional second line of production in its
2nd plant in Rajasthan in march 2013 to achieve its targets. HMSI will
set up 20 zonal offices (currently 5) with centres imparting training
to nearly 2,000 technicians from within the dealers' network in the
next two years.
Suzuki and Yamaha are as determined to push the envelope aggressively
while Piaggio has already launched Vespa and looking forward for much
more to come. Suzuki , with its continued investment in its current
plant in Gurgaon, as well as setting up on new plant in Rohtak
( Haryana), plans to deliver 1 million two wheelers by 2014.
Yamaha plans to invest Rs 800 crore on capacity expansion and new
product development in the next two years, as it looks to sell 10 lakh
two-wheelers by 2014 in India.
Market leader, Hero MotoCorp, who recently parted ways with Honda, is
looking forward for capturing a larger chunk of market. Hero MotoCorp
recently announced an investment of over Rs 2500 crore in setting up
two new plants, expanding capacity at existing plants and in building
an integrated R&D centre (at Kukas in Rajasthan). With this expansion,
total installed capacity of the company would be touching more than
nine million units in two years' time, which is equal to 7.5 lakhs
units per month. They have the benefit to have the most advanced
technology that Honda had given them.
The point to capture here is clear. Moderating demand of two wheeler
along with increasing competition from Japanese makers is indeed a
threat to our domestic players. When the market is slowing down and
competition from technologically superior MNC players is stiffening,
who is losing the game? The answer can be found in our recent results
where domestic players like Bajaj, TVS, and Mahindra have began the
downward ride.
As seen in the past with the other industries of India like 4 wheeler
industry, consumer durable industries like TV, air conditioner,
refrigerator manufacturers, where MNCs captured the major market share
leaving the domestic players struggling, the trend seems to be
repeating in this two wheeler industry of India. Predicting the future
of this industry becomes easy as the MNCs are taking over control over
the Indian market and slowly choking off the domestic makers. Indian
two wheeler industry is at a phase where the race can lead the leading
player Hero along with MNCs like Honda, Yamaha & Suzuki to escalate to
capture more than 90% of market leaving behind domestic players like
Bajaj, TVS and Mahindra struggling for the rest. Its time to wait and
watch that who comes out triumph in the race.
DISCLAIMER: - Smart Profit has taken due care and caution in
compilation of data for its reports. The market view and investment
tips expressed on Smart Profit are in no way a guarantee either
express or implied. However, Smart Profit does not guarantee the
accuracy, adequacy or completeness of any information and is not
responsible for any errors or omissions or for the results obtained
from the use of such information. CEO, Directors and staff may have a
position in the recommended stock.
FOR FUTHER DETAILS CONTACT:-
SUMAN JAIN (CEO)
+919820041126
Email:
sumanjain@smartprofit.in
ANKITA JAIN
(Director)
+919819854402
Email:
ankita@smartprofit.in
DIPAK MANGELA
(Research Analyst)
+919820260291
Email:
dipak.mangela@smartprofit.in
MANSINGH RAI
(Sr. Executive)
+919320907684
Email:
mansingh.rai@smartprofit.in
SHAILESH GOWDA
(Sr. Executive)
+919967394114
Email:
shailesh.gowda@smartprofit.in
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