While passenger cars and commercial vehicles battled a slowdown, two-wheelers continued to perform well. The reasons behind the stellar performance of two-wheelers is worth finding out.
May it be the downturn of 2008, or that of 2013, two-wheelers fared better than passenger vehicles and commercial vehicles. In March 2014, two-wheelers sold 1,334,214 units as compared to 1,101,203 units sold during the corresponding period the year before, recording a growth of 21.16 per cent. In comparison, 2,38,212 passenger vehicles (cars & SUVs) were sold in February 2014, recording a decline of 7.31 per cent. Commercial vehicles also recorded a decline (24.55 per cent) in March 2014. Two-wheelers put up a stellar performance in March 2014, a month that seemed to show some effect of the reduction in excise duty on automobiles. The auto industry sold 1,677,4453 units in March 2014 as compared to 1,486,664 units in February 2013, recording a 12.83 per cent growth after a decline spanning more than a year. Of the three main segments – two-wheelers, passenger vehicles and commercial vehicles – it was two-wheelers, which contributed handsomely to the automotive sales growth in February 2014.
If passenger vehicle manufacturers launched new models and facelifts to keep the excitement going, and help increase the sales, two-wheeler manufacturers also introduced new motorcycles and scooters at the volume-centric level as well as at the premium level. At the volume-centric level, manufacturers like Yamaha (India) found an entry into the rapidly rising gearless scooter segment with the Ray in 2012. This was about the same time when the slowdown in the Indian auto industry started showing signs of extending its stay. Since its launch in September 2012, the Ray gearless scooter has sold more than 1.5 lakh units. Yamaha Motor India sold 60,281 scooters in FY12-13, and another 34,583 scooters in the first quarter FY13-14. Encouraged by the response, the Indo-Japanese two-wheeler manufacturer launched its second scooter, the Ray Z some time back. It returned to the market recently to launch its third scooter, the Alpha. Aimed at male riders unlike the Ray, which aims at women riders, Alpha sold 500 units in a span of ten days of its launch at Bangalore. Over 3,000 Alpha bookings were received. Overwhelmed, Yamaha is said to be working on a completely ‘local’ gearless scooter for 2016. By the time the new, completely locally made scooter hits the road, Yamaha’s plant near Chennai would have gone on stream.
Of the two products made at HMSI’s new plant at Kolar near Bangalore, one is the Activa. If this presents an idea of how important scooters are to Indian two-wheeler manufacturers, they are also the ones that are growing the fastest. Considering SIAM’s records, 3,602,744 scooters were sold in the period between April 2013 and March 2014, recording a 23.24 per cent growth. During the corresponding period the year before, 2,923,424 scooters were sold. In comparison, 10,479,817 motorcycles were sold in the period between April 2013 and March 2014, recording a growth of 3.91 per cent. During the corresponding period the year before, 10,085,000 units were sold. Motorcycles may hold the numbers, it is scooters that are growing faster than motorcycles. Said Roy Kurian, Vice President – Sales & Marketing, Yamaha Motor India, “We feel that scooters are going to drive volumes.” Scooters are already driving volumes at HMSI.
HMSI sold 1,954,740 scooters in the period between April 2013 and March 2014 as compared to 1,173,595 numbers during the corresponding period the year prior. Reinforcing its leadership in gearless scooters, HMSI scooter sales grew at a healthy 34 per cent in comparison to 21 per cent growth of domestic scooter industry during the FY 13-14. HMSI’s first commuter segment motorcycle, Dream Neo and Dream Yuga, also did well. Highlighting numbers, they sold 6.3 lakh units during FY13-14. Contributing handsomely to HMSI’s 73 per cent growth in the 100-110cc commuter motorcycle segment. The segment growth was 4 per cent in FY13-14. Rethish Varma S, Analyst, HDFC Securities, expressed that the Indian two-wheeler market is expected to grow at 13-15 per cent CAGR (compounded annual growth rate) for the next five years. The growth, he reasoned, would come from the fact that two-wheelers will remain a major mainstay for daily commuting. “Given the shortage of public transportation system in major cities and towns, there are no cost-effective solutions to the daily commuting. There’s little doubt therefore, that two-wheelers will remain the preferred vehicle for the purpose. In rural areas too, they will remain one of the major mode of conveyance to nearby urban areas,” he added. Rethish is of the opinion that two-wheelers will retain their edge over other modes of transport due to multiple reasons like lower price, low operating costs, better fuel efficiency, and flexibility to manoeuvre in city traffic.
Strong two-wheeler performance drives supplier growth
Two-wheeler supplier margins may not be the best, it is the volumes that make the suppliers ride the growth curve. Expectations of quality are rising as companies like Harley Davidson stress on local content, and local manufacture. With suppliers like Endurance Group bagging prestigious contracts for critical components from Harley Davidson, two-wheeler suppliers in India are no less competent than their counterparts in Europe or USA. Suppliers like Endurance and Varroc have acquired two-wheeler components manufacturers in Europe and other parts of the world. For auto components suppliers like Keihin, Lumax, RICO, Munjal Auto Industries and Gabriel, two-wheeler supplies have been driving good growth.
Major supplier to HMSI of both shock absorbers and front forks, the commissioning of the new plant at Kolar by HMSI is said to be translating into over and above the average industry growth for Gabriel. Having emerged as world’s largest two-wheeler supplier of cables in 2012, Surprajit recently announced a Rs 600 million capex plan spread over 18 to 24 months starting 3Q FY14. The plan would include a new cable plant at Narsapura near Bangalore, and at Vallam-Vadagal near Chennai. Over 60 per cent of Surpajit’s business is said to come from two-wheelers. With a presence in replacement and OE markets, the OE clients of the supplier include Hero Motorcorp, Yamaha, Bajaj Auto and others.
What makes the performance of two-wheelers particularly startling is the fact that they attract a higher rate of interest on finance than a car loan. If ‘Made-in-India’ high-end motorcycles like the Harley Davidson Street 750 (costing Rs 4.1 lakh) are set to enjoy good success despite the high rate of interest on finance, it is the volume-centric motorcycles like Dream Yuga that are attracting the numbers. Zooming ahead are the run-of-the-mill models in the commuter segment motorcycles and gearless scooters – Honda Activa, Hero Splendor, Bajaj Discover and others. To ensure that these motorcycles and scooters retain their leadership role, their manufacturers are dressing them with technology. Technologies like ‘HET’ (Honda Eco Technology) from HMSI; iSmart (start-stop system) from Hero MotorCorp, and 4-valve DTS-i technology from Bajaj Auto. At the outset, these technologies may not look as exciting. They may not be capable of turning the products into hybrids. What they do for certain is enhance the fuel efficiency. Make the riding experience more rewarding.
With Total Cost of Ownership (TCO) assuming importance when it comes to two-wheelers, especially with growing rural penetration, it is the volume-centric two-wheelers that are truly the agents of success. With the Indian two-wheeler market expected to double every four years till 2020 according to SIAM, it is worth considering that most two-wheeler manufacturers have active Facebook pages, Twitter accounts, and are running exclusive web 2.0 portals for their top selling machines. Now the second largest two-wheeler market in the world after China, India is at a stage where the need to make the technology felt by riders is growing. It does not matter even if it is a 100cc commuter motorcycle, or a commuter gearless scooter. If this indicates a growing close co-operation of Indian two-wheeler manufacturers with global technology providers like AVL, and global two-wheeler manufacturers like KTM and Buell, it also hints at a rising prowess of the Indian two-wheeler industry. Its ability to tide over rough weather, the way it did in 2008 and 2013. The stellar performance of the two-wheeler industry, when others were fairing badly, could be contributed to the economic scenario for certain. However, it could be contributed to the way the two-wheeler industry has learned to address the needs of the buyers. Has given them what they need the most.
Western India leads two-wheeler growth
Western India has been maintaining a clear lead in two-wheeler sales. For FY11-12, the CAGR growth rate of two-wheelers was pegged at 19.6 per cent. South India CAGR growth rate was pegged at 15.5 per cent. North and Central India GACR growth rate was pegged at 15.3 per cent, and East and North-East India CAGR growth rate was pegged at 16.08 per cent. Industry experts claim that the strongest selling two-wheelers will continue to be commuter segment motorcycles and gearless scooters at least for the next five years. The sales triggers in metros being ease of commuting, the other trigger include the lack of quality transport services that connect rural areas with urban, or semi-urban areas with urban areas. Prices of petrol are rising, and also the lack of space. Lack of infrastructure, is directly or indirectly contributing to the stellar growth of two-wheelers in India. Demand boosters include first time buyers, which constitute 50% of the total two-wheeler buyers. Customers that are upgrading to a newer, more stylish or powerful two-wheelers make 30 per cent of the market. Buyers seeking a second vehicle make 20 per cent of the market.
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