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2 Wheeler Automobile Industry

2 Wheeler Automobile Industry

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Published by: Shankey on Apr 23, 2011
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12/16/2012

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2-
Wheeler Automobile Industry
Two-wheeler sale of Indian players is dominated by the domestic market and, within it, bymotorcycles. After growing at a sharp clip from the late 1990s, motorcycle sales witnessed a7.8% drop in volume in 2007-08, due to falling domestic demand as a result of rising interestrates and many private sector banks reducing their retail lending exposures. 2008-09 saw amodest increase in motorcycle sales of 4%, driven largely by growth in cash sales. Even so,sales of motorcycles (both domestic and exports) in 2008-09 has been lower than what it wasin 2006-07, before the slowdown hit thissector. The chart below depicts the datafrom 1998-99.
Motorcycles: DomesticSales for the Industry
The company classifies motorcycles intothree segments, based on consumer categories and approximate price points.These are:a)
Entry segment.
These are typically100 cc motorcycles at a price point in theneighborhood of Rs.35000. b)
Executive segment.
This largelycomprises 100 cc to 135 cc motorcycles, priced between Rs.40000 to Rs.50000.c)
Performance segment.
These are sleek, high performance, with price points in excess of Rs.50000.
()Mark etCap.(Rs.cr.)SalesTurnoverNetProf itTotalAssetsHero Honda
32167.6612319.121281.763879.24
Bajaj Auto
17860.468932.26656.483439.69
TVS Motor
1225.723736.6731.081719.11
MahScooters
182.912.710.87199.46
KineticMotor
45.2141.38-114.82-5.18If the domestic motorcycle market is segregated as above, it becomes clear that industry salesshowed significant ups and downs in 2008-09. Chart B plots the data for the industry as awhole. The industry as a whole was growing at a fairly reasonable rate in the first half of thefiscal year. Average monthly sales during Q1 2008-09 were 3.3% higher than that of 2007-08; and in Q2 2008-09 it was 5.8% greater than the previous quarter. Then came the hit in
 
the third quarter, coinciding with the global financial meltdown and very sharp cutbacks inthe availability of consumer and retail credit. As a result, overall domestic sales of motorcycles fell by over 17% in Q3 2008-09 versus Q2 — from an average of 524,939 units per month to 435,114.The major players in the industry are given in the table which contains the marketcapitalization, sales turnover, net profit and total assets. Hero Honda is the market leader inthe industry and Bajaj is the main competitor to Hero Honda.Hero Honda has a market share of around 57% and Bajaj has a market share of 28%. Other companies taken together have the remaining 15% market share. Other major players in theindustry are TVS and Maharashtra scooter. (Source: www.moneycontrol.com)
RatioHeroHondaBajajAutoTVSMotorMahScootersIndustryAverageDebt Equity Ratio0.0206512
0.9309831.2279480
0.475817Proprietary Ratio0.9797667
0.5178710.4488441.00005
0.748819Net Profit10.405
7.350.831757402.5926
8.877ROI33.041524
20.159751.8907645.449714
12.80473Earning per share64.184276
45.368351.3086320.951006
23.33849Dividend pay outratio31.16028
48.4919653.49099578.2889
50.99147Long Term DebtTo Total CapitalRatio0.0202333
0.4821290.5511560
0.251181Return on NetWorth0.3372387
0.3892810.0421250.054494
0.195867
Annexure 1
Hero Honda
Hero Honda is the market leader of the industry with a market share of about57%. Hero Honda has an objective of expanding and growing aggressively.Recently Hero Honda has started a new plant at Haridwar. This expansion hasincreased the capacity of the company by 4.2 million two wheelers. Thiscapacity has enabled the company to retain its position of the market leader.During the last year 7 new models has been launched by the company. And outof these 4 models were launched in the space of a month.
Comparison with the Industry Average:
To compare the ratios of the firm with that of the industry, we have to find the industryaverage. For that purpose, the market leaders of the industry are taken and the median of their ratios is taken as the industry average. The median has been chosen here as average

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