Car News

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
September 2012 quarter as compared to 15 % last year in same period.
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 July-September quarter 2012, third largest two-wheeler maker of
domestic Indian market, Bajaj Auto reported 10 % fall in motorcycle
sales to 9.29 lakh units. Its domestic motorcycle sales fell by 12% to
6,01,876. It's three wheeler sales were down by 12 % to 1.21 lakh
units. Its exports also fell by 5% per cent during the quarter on Y-o-
Y basis. TVS Motors equally had a slope down in sales falling by
almost 30% to 2.86 lakh units in current year as compared to 4 lakh
units last year in same period. Their net profit was down by 40% in
September quarter Y-o-Y. Their exports fell by 36 %. Hero MotoCorp
posted its worst sales decline in any quarter for the past decade with
a 14% dip to 13.32 lakh two wheelers, down from the 15.44 lakh sold in
the same quarter last year. According to reports, this year's
quarterly sale by domestic players is supported largely by piling up
of inventory at their respective dealers.
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 which operates a wholly owned subsidiary Honda Motorcycle and
Scooters India had posted impressive gains as its sales increased
43.40% to 7,04,803 units in the first quarter of FY13 compare to
4,91,510 units sold last year in the same quarter. Honda wants India
to be its biggest two-wheeler base globally, ahead of Indonesia and
Vietnam, which means the coming 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 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 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. Suzuki
showed growth of 38.50 % in September 2012 quarter with a rise of sale
from 83,082 units sold last year to 1,15,086 units sold this year in
same quarter.
Yamaha plans to invest Rs 1500 crore on capacity expansion and new
product development in the next two years, as it looks forward 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 2575 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.
Recent research shows that Bajaj started giving away huge discounts of
around Rs.3000-Rs.5000 after the festive season from end of November
2012. Hero & TVS are heard to follow similar trend.
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 Hero 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 to MNCs
like Honda, Yamaha & Suzuki escalate to capture more than 55-57% of
Indian market leaving behind domestic players like Hero, Bajaj, and
TVS struggling for the rest. It's time to wait and watch that who
comes out triumph in the race.

Click on given below link for upcoming production plant of two wheeler
industry

http://articles.economictimes.indiatimes.com/2012-06-05/news/320558331_gujarat-plant-r-d-centre-honda-in-hero-honda
http://www.autocarindia.com/News/275637,honda-inaugurates-third-two-wheeler-plant.aspx
http://articles.economictimes.indiatimes.com/2012-05-14/news/317013161_new-two-wheeler-production-capacity-hiroyuki-suzuki
http://articles.economictimes.indiatimes.com/2012-04-23/news/313869991_smipl-gurgaon-plant-wheeler

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