ICRA estimates the domestic 2W industry to post modest 2-4% volume growth during 2015-16 owing to moderate growth under scooters. In ICRA’s view, over the medium term, the 2W industry is expected to report a volume CAGR of 8-9% to reach a size of 22-23 million units (domestic + exports) by 2017-18, as the structural positives associated with the domestic 2W industry including favourable demographic profile, moderate 2W penetration levels (in relation to several other emerging markets), under developed public transport system, growing urbanization, strong replacement demand and moderate share of financed purchases remain intact; as also the large opportunity available to grow presence in overseas markets, mainly Africa and Latin America.
Overall growth continues to disappoint hurt by weakness in motorcycle segment : Two wheeler sales volumes in the domestic market have continued to disappoint so far witnessing a YTD de-growth of 0.4% (YoY basis) during H1 FY16. Softening interest rates, lower fuel prices and overall reduction in inflation levels have failed to perk up the demand for two wheelers – particularly motorcycles – which have been impacted by stressed rural demand – which in turn was hit by sluggish wage rates, untimely rains hurting crop realizations and limited increase in minimum support prices of crops. Though scooters had a weak start to the year, posting single digit growth during April 2015 and May 2015, volumes gathered steam subsequently drawing support from improved demand in the urban markets. During H1 FY16, scooters reported YoY growth of 9.9% whereas motorcycle volumes de-grew by 4.1%. On the other hand, mopeds too failed to sustain the growth momentum witnessed early during the current fiscal and registered a decline in volumes of 5.2% YoY during H1 FY16.
Scooters: Volume growth gathers steam after a modest first quarter The sharp deceleration in the scooter volumes early into the current fiscal gave the industry participants a scare; however, the subsequent revival in demand leading to healthy volume growth during June, July and August provided some relief. Keeping in line with the trend over the past few years, scooters have continued to post higher than industry average growth rates during H1 FY16 with volumes expanding by about 9.9% YoY. While the average growth during the first three months of the current fiscal was lower at 7.3%, the same improved to 12.2% during the last three months thereby supporting the overall YTD growth. Further, the average volumes during the first two months of FY16 stood lower at 354,413 which expanded to an average of 423,120 units during the subsequent four months. Within scooters, the trend in increasing preference for higher engine capacity scooter is becoming evident with higher growth rate being witnessed in the relatively high base 90-125 cc segment even as sub-90cc segment volumes remain sluggish with a de-growth of 32.3% during Q2 FY16. However, overall, the current low penetration levels, increasing urbanization and new model launches continue to favour scooter category growth and are likely to drive its volumes up in the future.
Motorcycles: Impressive performance of the higher displacement bikes fails to cheer overall motorcycle volumes The domestic motorcycle industry is highly skewed towards the entry/commuter segment bikes which account for almost two third of the category volumes. Consequently, weaker performance of these segments during the last six months weighed down on the overall performance of the motorcycles category which witnessed de-growth of 4.1% YoY during H1 FY16. While the higher displacement bikes continued to sustain the growth momentum (albeit on a relatively smaller base) – with volumes under 150- 250cc bikes having grown by a robust 61.5% (YoY) and those over 250 cc having registered a growth of 54.3% (YoY) during Q2 FY16 – the same failed to uplift the overall volumes under motorcycles owing to their small share in the total volumes thereby limiting the impact. The average monthly sales volumes in the 75-110 cc segment was significantly lower at 894,065 units during H1 FY16 as compared to 931,888 during the same period previous fiscal.
Bajaj and Honda expand market share in the motorcycles and scooters segment respectively –
Hero MotoCorp Limited (Hero MotoCorp), continues to dominate the motorcycle market with a market share of 52.4% in H1 FY16 mainly due to its dominant presence in the 100cc category where the company enjoys ~70% market share on back of its main products – Splendor, Passion, Dawn and Deluxe. Sales from the 100cc segment constitute ~85% of the sales for Hero MotoCorp. After ceding market share in FY13 and FY14 Hero MotoCorp has now consolidated the same in the 52-53% region and has lined up 35 new launches over the next three years to strengthen its market share. Hero MotoCorp’s export thrust together with recent new model launches are expected to aid in volume growth for the company going forward.
– Bajaj Auto Limited (Bajaj) has gained significant market share in the motorcycle segment in H1FY16 (18% compared to 16% in FY15) on back of new launches of CT 100, Platina ES and new range of Pulsars. Bajaj continues to be the second largest player in 100cc segment, though it has suffered with market share loss over last two years owing to increasing competitive intensity in this segment and lack of success with it line extension on its Discover range. However in H1FY16 Bajaj gained significant market share in this segment on the back of re-introduction of CT 100 brand at an aggressive price point and launch of new Platina ES (Electric Start). Bajaj has also launched three new Pulsars in CY2015 and has few more new model launches lined up under Pulsar family across segments – Super Sport (150cc) and Cruiser Sport (400 cc) which is expected to provide a leg up to its volumes and market share going forward.
Honda Motorcycle and Scooter India (Honda) continues to maintain its leadership position in the scooters segment through its flagship brand Activa (besides Aviator and Dio) – which crossed the 10 million sale volume mark in September 2015. Furthermore, its launch of Activa 3G in Jan 2015 and refreshed Dio subsequently has helped in gaining market share during H1FY16 compared to Q4FY15. While the capacity constraint could act as a dampener to its volume growth in the near term, expected capacity addition of 1.2 million units at Gujarat in FY16 dedicated for scooters is likely to provide support over medium term.
Riding on the success of new launches (new Wego in May 2014 and the Scooty Zest (110cc scooter) in August 2014), TVS Motor Company Limited (TVS) has somewhat recouped its domestic market share in the scooters segment which recovered to 15.6% in Q2 FY16 from 12.7% in FY14
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