Car News

 

After witnessing tremendous growth, two wheeler industry is dipping downwards towards sluggish demand and single digit growth. As estimated by us, two wheeler industry merely reported growth 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 2012third largest two-wheeler maker of Indian market Bajaj Auto today reported 2.90 per cent fall in motorcycle sales at 3,08,858 units in July. BAL said 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. 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 4^th 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 delars. Besides this, the firm is all set to start production at the upcoming 3^rd 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 2^nd plant in Rajasthan in march 2013 to achieve its targets. HMSI will set up 20 zonal offices with centers 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 in 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.The point to capture here is clear. Moderating demand of two wheeler along with increasing competition from Japanese makers is indeed a dangerous threat to our domestic players.  When the market is slowing down and competition from technologically ahead MNC players is stiffening, who is losing the game? The answer can be found in our recent results where domestic players have began the downward ride.

 

Hero Motocorp won't be much affected by the MNCs as they still follow the technology of the world leader Honda.

 

They 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.

 

As seen in the past with the other industries of India like 4 wheeler industry, television sets industry, electrical industry Air Conditioner industry, fridge industry and many more where MNCs have captured the major market share leaving the domestic players shutting down , 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 of the Indian two wheeler industry. So it won't be a surprise to see 90 % of market share owning will be of the MNCs and Hero motocorp after the timeframe of 2 years, and the rest 10 % will be belonging to BAJAJ AUTO, TVS, Mahindra and other local players.

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