The Automotive industry in India is one of the largest in the world
and one of the fastest
growing globally. India manufactures over 18 million vehicles
(including 2 wheeled and 4 wheeled) and exports more than 2.3 million
every year. It is the world's second largest
Manufacturer of motorcycles; there are eight key players in the Indian
markets that produced 13.8 million units in 2010-11.
The major players in the 2-wheeler industry are Hero MotoCorp, Bajaj
Auto Ltd (Bajaj Auto), TVS Motor Company Ltd (TVS) and Honda
Motorcycle & Scooter India Private Limited (HMSI) accounting for over
93% of the sale in the domestic two wheeler market. It is noteworthy
that motorbikes segment's share is just below 80% of the total 2W
market in India which is dominated by Hero MotoCorp with a market
share of 59%. Scooter segment's market share is about 18% which is led
by Honda Motorcycle & Scooter India Private Limited (HMSI) with a
market share of 43%.Threefourth of the total exports in the two
wheeler automobile industry are made in the motorcycle segment.
April to September Two Wheelers Sales Reports in India
In Indian domestic market, sales for 2-wheeler player has been Honda
sales – 13.21%, Bajaj Auto sales – 5.39% Yamaha sales – 37.73%, Suzuki
sales - 39% for the period of April to September 2011 as compared to
same period in 2010. In future there will be intense competition
between Honda, Hero MotoCorp, Suzuki and Yamaha. Looking at the
overall scenario in the two wheeler sector in H1,2011 Bajaj Auto seems
struggling has reported only 5.39 % growth compared to average growth
of 20% in this segment.
Company
H1 2011
H1 2010
% Growth Avg % compared to the Industrial growth of 20%
Hero Moto Corp 3073852 2519973 21.98% + 1.98%
Bajaj Auto 1138910 1080632 5.39% - 14.61%
TVS Motors 971824 854536 13.73% - 6.27 %
Honda Motors 922979 815310 13.21% - 6.79 %
Yamaha 231032 172289 37.73% + 17.73 %
Suzuki 172631 125355 39.12% + 19.12 %
FIERCE COMPETITION:
Hero MotoCorp total capacity in its three plants – Dharuhera and
Gurgaon in Haryana and at Haridwar in Uttarakhand – is about 6.2
million units pa. The company will be increasing its production
capacity to 10 million units pa by an addition of two new plants one
in Sanand, (Gujarat project near Ahmadabad) 100% export oriented and
another in Karnataka.
Honda, who has newly emerged in the Indian market, its second plant
built in Tapukara industrial area of Rajasthan in Alwar is producing
capacity of 6 lacs units /annum. The company is now looking to double
the production capacity in that plant to 12 lacs units /annum by March
2012.
Also, Honda (HMSI) company has started building its third plant in
Narsapur Industrial area, 52 Km away from Banglore Karnatak to expand
it's capacity to 40 lakh units by mid 2013, which will help to reduce
the delivery waiting period from 6 to 8 months. Therefore by the end
of the first half of 2013, Honda's total production capacity will be
40 lacs units /annum.
The TVS Motors is pushing well on moped front. It is also bullish on
export front and exploring new opportunities to expand its export
market. Presently producing 25 lacs units /annum and further
increasing its production capacity to 35 lacs units /annum.
Mahindra, an established auto player has newly entered two and three
wheeler market. It is vigorously making a mark in this new segment
with its strong rural hold (it enjoys a good brand image because of
its tractors) and marketing strategies. They are coming up with
capacity of 70000 units per month soon.
Suzuki is all set to rage on the Indian market by increasing its
production capacity to 5.4 lacs units / annum from the current 2.5
lacs units / annum by the year 2012.
While Yamaha currently produces 5 lacs units /annum, it is looking to
raise this production capacity to 10 lacs units / annum by 2013 and
also aims to sell out up to 8,00,000 units in domestic markets
together with 2,00,000 exports.
Piaggio is penetrating in the two wheeler industry in India in an
ambitious way by setting up an assembly plant in Baramati near Pune
where the inputs will be 80% imported. They have already appointed 70
dealers throughout India. They are coming up with attractive
variations of bikes in January 2012.
Bajaj is not in any process of increasing its capacity. They are
facing constraints to sell off their current capacity to the fullest
and there is no news of any other new plant as the competitors.
In three wheeler, Mahindra & Mahindra, Piaggio, TVS are capturing
market firmly. TVS is tripling its capacity to 8000 units / month for
three wheelers. Italian based Piaggio is increasing its capacity to
40000 units / month.
MARKET RESEARCH ON TWO WHEELER SECTOR IN INDIA:-
According to market research performed on consumers, the most
preferred brand of two-wheelers is Honda, followed by Hero MotoCorp,
Yamaha and then followed by Bajaj and TVS. This signifies the market
share of Bajaj to be 16.5% in domestic market. Bajaj's market share
has been decreasing tremendously over the years and picturing the
current scenario, it is further expected to fall to 15% in next 6
months and less than 10% in one year due to doubling production
capacity of Honda, Yamaha and Suzuki.
OPM & POLICY PRESSURES TO INCREASE SEQUENTIALLY :-
Input costs have increased recently following the spurt in steel,
rubber and aluminum prices. Thus, Margins of Auto universe is expected
to contract sequentially to reflect higher input costs. This will
result in very high operating margin pressure.
With Government withdrawing DEPB (Duty Entitlement Passbook Scheme)
benefit scheme for exporters, Bajaj auto leading exporter will face
severe problems in terms of their fall in export profit margin by 8%.
Rajiv Bajaj, MD, Bajaj Auto stated his concern regarding the fall in
export to take place due to withdrawing of DEPB scheme and increasing
competition from China market in exports. He also shared his worry
about further slowdown expected in two wheelers in India.
VALUATION:-
In recent years, the Indian two-wheeler (2W) industry has shown a
strong volume growth
over the last two-years, having grown by 25% in 2009-10 and 27% in
2010-11 to reach 13.3 million units. This strong double-digit growth
has been driven by multiple factors.
Currently, India's increasing per capita disposable income which is
expected to
rise by 106% by 2015 and growth in exports is playing a major role in
the rise and
competitiveness of the industry.
CONCLUSION:
With an expanding market and entry of new players over the last few
years, the Indian two wheeler industry is now approaching a stage of
maturity.
Indian player getting affected due to entry of Foreign player:-
Just like in Television Industry, Onida, an Indian player got affected
due to entry of foreign player like LG, Sony and Samsung and in Fridge
Industry, Godrej, Kelvinator and Voltas got affected because of
Whirlpool, Samsung and LG or in Air conditioner Industry, Voltas and
Carrier got affected because of Hitachi, Daikin and OGENERAL and in 4
- Wheeler Industry, Fiat and Ambassador got affected because of
Suzuki, Hyundai and Chevrolet. In the same way in 2 - Wheeler segment
Bajaj and TVS is getting affected due to entry of foreign player like
Honda, Suzuki, Yamaha and Piaggio.
Looking at the overall scenario, it seems that the golden period for
the Indian 2- wheeler segment has ended and it may grow at double
digit but the growth rate will be around 10-12% or may be even less
for the rest of the financial year.
DISCLAIMER: - Smart Profit has taken due care and caution in
compilation of data for its reports. The market view and investment
tips expressed on Smart Profit are in no way a guarantee either
express or implied. However, Smart Profit does not guarantee the
accuracy, adequacy or completeness of any information and is not
responsible for any errors or omissions or for the results obtained
from the use of such information. CEO, Directors and staff may have a
position in the recommended stock.
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SUMAN JAIN
(CEO)
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Email: sumanjain@smartprofit.in
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Email: ankita@smartprofit.in
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(Research Analyst)
+919820260291
Email: dipak.mangela@smartprofit.in
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(Sr. Executive)
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Email: mansingh.rai@smartprofit.in
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Email: shailesh.gowda@smartprofit.in
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