INSIGHT & OUTLOOK
Indian Two-Wheeler Industry Volume growth decelerates in Q3, 2011-12; slower growth expected in Q4, 2011-12 as well THE Indian two-wheeler (2W) indust ry recorded sales volumes of 3.4 million units in Q3, 2011-121, a growth of 11.0percent (YoY) but flat (QoQ ). Although the YoY volume growth of the indust ry remained in double digits, the pace of growth during the last quarter was at its lowest gear in the last three years. The deceleration in growth was contributed mainly by the motorcycles segment which grew at a much lower rate of 9.2percent (YoY) in Q3, 2011-12; even as the scooters segment continued to post 20percent+ (YoY) expansion. Overall, ICRA expects the domest ic 2W indust ry to report a volume growth of ~13 percent in 2011-12 as we expect growth to fade further in Q4, 2011-122 due to base effect. In an environment where the northward movement of inflation, fuel prices and interest rates has been the nemesis of the Indian automobile industry at large, the 2W industry has been the most resilient reflected in its healthy volume growth of 15.0percent (YoY) in 9m, 2011-12. The growth has been supported by various struct ural 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 urbanisation and expected strong replacement demand, besides moderate share of financed purchases. ICRA expects these strengths, coupled with the OEMs’ thrust on exports, to aid the 2W industry to report a volume CAGR of 10-12 percent over the medium term to reach a size of
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AFTERMARKET MARCH 2012
21-23 million units (domestic + exports) by 2015-16.
Overview The Indian two-wheeler (2W) industry recorded sales volumes of 3.4 million units in Q3, 2011-121, a growth of 11 percent (YoY) but flat (QoQ ). Although the YoY volume growth of the industry remained in double digits, the pace of growth during the last quarter was at its lowest gear in the last three years. The deceleration in growth was contributed mainly by the motorcycles segment which grew at a much lower rate of 9.2 percent (YoY) in Q3, 2011-12; even as the scooters segment continued to post 20 percent+ (YoY) expansion. Overall, ICRA expects the domestic 2W industry to report a volume growth of ~13 percent in 2011-12 as we expect growth to fade further in Q4, 2011-122 due to base effect. In an environment where the northward movement of inflation, fuel prices and interest rates has been the nemesis of the Indian automobile industry at large, the 2W industry has been the most resilient reflected in its healthy volume growth of 15 percent (YoY) in 9m, 2011-12. The growth has been supported by various struct ural 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 urbanisation and expected strong replacement demand, besides moderate share of financed purchases. ICRA expects these strengths, coupled with the OEMs’ thrust on
exports, to aid the 2W industry to report a volume CAGR of 10-12 percent over the medium term to reach a size of 21-23 million units (domestic + exports) by 2015-16.
Sales Volumes Analysis: Scooters Barring Q1, 2011-12, the growth in scooter segment’s sales volumes has generally outperformed that of the motorcycles segment, partly due to the former’s smaller base. In Q3, 2011-12 too, the sales volumes of the domestic scooters segment at ~660,000 units recorded a growth of 21.6percent (YoY), higher than the 9.2percent growth in motorcycle sales. With this, the share of the scooters segment in the total domestic two-wheeler volumes increased to 19.4percent in Q3, 201112 from 17.6percent in 2010-11.
Market Share Trends The Indian motorcycles segment continues to be dominated by Hero MotoCorp (erst while Hero Honda) which has been recording sequential gains in market share over the last three quarters. The top three players accounted for 88.2percent of the industry’s volumes in Q1, 2011-12 (92.0percent in 2007-08), with Honda Motorcycles having overtaken TVS since Q1, 201011 as the third largest player after Hero MotoCorp and Bajaj Auto.
Short to Medium term Outlook • ICRA expects the entry segment volumes in the domest ic market to grow at a much slower pace than the overall 2W indust ry and volume growth to be driven mainly by