Two-wheeler Industry Power pack

KEY POINTERS TO UNDERSTAND 2 Wheeler INDUSTRY

Overall Industry Size, Growth and Segmentation

Industry Market Share Trends in the previous 5 years

Segmental Analysis
Segmental Growth and Changes
Segmental Market Share
Analysis of Cost Structure
Capacity Utilization Trends in the industry
2Future Outlook and Growth Drivers

Overall Industry Size, Growth

and Segmentation

The size of 2 wheeler industry in India was Rs, 755 bn in 2014-15

with the sales volume of 18 million units.

INDUSTRY SIZE AND GROWTH

Revenue of the Indian two-wheelers industry to have grown to Rs 755 billion in 2014-

15 with sales volume of 18 million units.

Overall growth was mainly driven by a 7.9 per cent CAGR in motorcycle sales as well
as a strong 25.2 per cent CAGR in the scooters segment during the same period.

Factors which contributed to growth in the two-wheelers industry include:

Aggressive capacity expansions

Model launches at competitive prices

Expansion of dealership network

Strong growth in exports

Though motorcycles still form the largest category, share of scooters

have increased significantly.

SHARE OF DIFFERENT SEGMENTS

Source: SIAM

Industry Market share

Hero Moto corps market share has been decreasing steadily while HMSIs share
has increased significantly.

OVERALL MARKET SHARE

Source: SIAM
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HMSI and TVS Motors gained market share in the recent years..

MARKET SHARE TRENDS

Between 2009-10 and 2014-15, HMSI's market share doubled from 12.7 per cent to 26.6 per
cent with a robust sales growth of 26.6 per cent CAGR.
Over the past 2-3 years, strong sales from model launches in the executive and premium
motorcycles subsegments as well as healthy growth in the scooters segment have helped HMSI
consolidate its position.
TVS Motors surpassed Bajaj in 2014-15 to become the third-largest player in the domestic twowheelers industry as new model launches in the scooters segment increased its market share to
13.2 per cent.
Bajaj Auto continued to lose its market share and descended to the fourth position in 2014-15.
Over 2009-10 to 2014-15, its market share dropped from 19.1 per cent to 11.1 per cent, mainly
owing to its absence in the scooters segment and poor product-mix in the motorcycles
segment.
Foreign players such as India Yamaha Motors Pvt Ltd and Suzuki Motorcycles India are still
struggling to garner a substantial market share.
Over the past 2-3 years, Royal Enfield has started gaining market share on account of an
increase in capacity and distribution ramp-up in the premium motorcycles segment.
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Segmental Analysis

Motor cycles are categorized into 3 segments and executive sub-segment

constitutes the biggest of all.
MOTORCYCLE SEGMENTS
Motorcycles are divided into three sub-segments - economy, executive and premium.
The economy sub-segment comprises lower-end motorcycles (priced at Rs 30,000-45,000

when launched), whereas the executive (with a launch price of Rs 45,000-65,000) and
premium sub-segments (with a launch price higher than Rs. 65,000) consist of higher-end
motorcycles.
Between 2009-10 and 2014-15, the economy sub-category has held 18-20 per cent share in
the motorcycles segment and grew at a CAGR of 6.8 per cent.
As of 2014-15, the executive sub-segment dominated sales with a share of 62 per cent.
The share of the premium motorcycles has also increased up to 18 per cent in 2014-15 from
14.2 per cent in 2008-09.

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Hero Moto Corp has 53% share whereas Bajaj Auto has 16.5% share in the
motorcycle segment.
MOTORCYCLES: PLAYERWISE MARKET SHARE

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Source: SIAM, Industry

Scooters has been the fastest growing segment in the 2 wheeler

industry.
SCOOTERS : GROWTH ANALYSIS
Between 2009-10 and 2014-15, scooter sales have grown at a CAGR
of 25.2 per cent vis-a-vis a 9.6 per cent growth in 2004-05 to 2009-10.

High growth is mainly driven by demand for the hugely popular

heavy ungeared scooters.
The share of scooters in total domestic two-wheeler sales volume

has almost doubled to 28.2 per cent in 2014-15 from 15.6 per cent in
2009-10.
In 2014-15, domestic scooter sales grew robustly by 25.1 per cent,

against an industry growth of 8.1 per cent y-o-y.

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HMSI is the market leader in the scooters segment with about 55%
share followed by TVS Motors and Hero Moto Corp.
SCOOTERS: PLAYERWISE MARKET SHARE

Source: SIAM, Industry

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TVS is the only player in the mopeds as other players have exited.
MOPEDS : MARKET SHARE
Moped sales increased at a CAGR of 5.8 per cent during 2009-10 to 2014-15,
contributing 4.7 per cent to domestic two-wheeler sales in 2014-15.
Demand for mopeds mainly comes from small businessmen, shopkeepers and
farmers in rural and semi-urban areas.
In recent years, sales have also been driven by an improvement in supply - in
order to widen their reach across regions.
Over the last few years, Kinetic Engineering, Majestic Auto and Kinetic Motors

have shut down their moped business operations.

As a result, TVS Motors is the only player in the segment and mopeds are only
sold in south India.

In 2012-13, growth in moped sales slowed sharply to 1.5 per cent as rural
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incomes were restricted by a poor monsoon and kharif output.

Analysis of Cost Structure

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Raw material costs constitutes more than 70% for the 2-wheeler
companies.

TREND IN COST STRUCTURE

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Source: Company Reports

Steel and Aluminium form the 2 biggest components of Raw material

costs.
RAW MATERIAL COSTS
Raw material cost (as a percentage of net sales) declined in 2009-10, as the
global economic crisis pulled down steel and aluminium prices.
As the global economy picked up again, raw material costs rose(See chart
above).
In 2013-14, two-wheeler manufacturers gained as they were able to pass on
the increase in steel and aluminium prices through consistent price hikes,
which again pulled down raw material costs' proportion in sales.
In 2014-15, prices of most raw materials dropped y-o-y, owing to a fall in
feedstock prices.
However, its benefit was visible only in the last quarter of 2014-15.
17Hence, the share of raw material prices remained firm at 71.7%.

CAPACITY UTILIZATION

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Capacity utilization of the industry has come down since the high of
2011-12.

Trend in capacity utilisation of two-wheelers industry

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Source: Industry

Capacity expansion of the players coupled with demand slow-down

has led to fall in capacity utilization.
REASON FOR FALLING CAPACITY UTILIZATION

During 2010-11 and 2011-12, demand recorded a healthy CAGR of 20%, which
boosted the utilisation rate to 90%.

In 2012-13, the utilisation rate declined to 81% because of sizeable capacity

expansions and slower growth in production (1-2%).

The rate dipped to 78% in 2013-14, despite 7% growth in production, as players

ramped up capacities further, anticipating double-digit growth and an evolving
export market.

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FUTURE OUTLOOK

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FUTURE DEMAND OUTLOOK

Scooters to steer industry growth over long term

Over the next five years, domestic two wheeler sales to record 8-10% CAGR.
The payout of the 7th Pay Commission is expected to boost two wheeler sales

over 2016-18.
Scooters - the fastest growing segment is likely to record 14-16% CAGR.
Here, manufacturers focus on urban markets, expansion in distribution

network in semi-urban and rural areas, model launches and better product
positioning would drive up volumes.
Motorcycle sales are likely to register 6-8% CAGR, backed by robust rural

sales.
Mopeds, which account for 5% of domestic two wheeler sales, are expected to
grow at 4-6% CAGR.