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Anjan Deb Ghosh
+91 22 6114 3407
aghosh@icraindia.com
Contacts:
Subrata Ray
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subrata@icraindia.com
Anupama Arora
+91 124 4545 303
anupama@icraindia.com
Sruthi Thomas
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sruthi.thomas@icraindia.com
Bishwarup Pakrasi
+91 124 4545 346
bishwarup.pakrasi@icraindia.com
March 2018
OVERVIEW
Two-wheeler segment posts healthy growth as both scooter and motorcycle segments grow in double-digits
The two-wheeler industry performance has been strong during FY2018, reporting YoY growth of 14.5% during 11m FY2018 . The year was
characterised by periodic swings in growth rate caused by a confluence of factors, e.g., channel filling by OEMs during April 2017 (post BS
c IV) and July 2017 (post GST rollout), pre festive season dealer stocking during August-September 2017. During the latter half of the fiscal,
the wheeler
ing demand drivers remain strong, in domestic two- growth gained pace,
market supported
during 11m by strong double-digit growth during November 2017-February 2018 partly driven by low base of
previous fiscal and partially benefitting from positive demand sentiments, especially from the rural market. During 11m FY2018, both the
major products segments of scooters and motorcycles contributed to growth, expanding by healthy double-digits over the corresponding
previous. While scooters have reported a YTD growth of 21.2%, the motorcycle segment also reported double-digit YoY growth of 12.7%
during the same period, being the first instance of double-digit growth of the motorcycle segment since FY2012. Although the moped
segment had reported healthy growth of 23% during FY2017, the volumes decreased by 4.8% during 11m FY2018, in absence of new model
launches and shift of consumer preference towards lower displacement motorcycles.
Industry leading growth in scooter segment driven by low base of previous fiscal and positive demand sentiments
The scooter segment has reported positive demand trends during all three quarters of the current fiscal, supported by the underlying
factors that enabled the industry growth. Overall, during 11m FY2018, scooters reported growth of 21.2% with lowest growth of 0.5%
during October 2017 (owing to high base of October 2016), outpacing the industry growth and continuing to gain share in the overall
Scooters continue to outpace domestic two-wheeler mix. Among the three sub-segments, the <90cc sub-segment, which has a single product segment of TVS Scooty
industry growth and expand Pep+, reported growth of 41% during 11m FY2018, albeit over a low base. The largest 90-125cc sub-segment reported 21% growth during
share in domestic two-wheeler pie
11m FY2018, led by Honda Activa, the largest selling two-wheeler in the country. The 125-150cc sub-segment consisting of premium
scooters reported healthy growth of 53% during the period, with growth driven mainly derived from urban areas.
Motorcycles revive gradually on the back of entry-level sub-segment
While demonetisation had marred the growth in the motorcycle segment during the second half of FY2017, the product segment revived
impressively since the beginning of the current fiscal. While channel-filling and dealer-stocking prior to festive season supported the sales
during the first half of the year, the demand recovery and positive sentiment has continued into the second half of the fiscal as well. The
growth has been led by the entry-level 110-cc sub-segment, driven by a general improvement in rural demand sentiment on the back of
near normal monsoon. The executive sub-segment of motorcycles (110-125cc) also contributed to maintaining the growth momentum,
ntry level sub-segment leads
despite volatility in growth trends reported during the course of the fiscal due to production constraints faced by one of the best-selling
rowth in domestic motorcycle volumesevenaspremium
models, Glamour. The 125-150 cc sub-segment continues to be the only sub-segment in motorcycles where volumes have been shrinking,
owing to growing preference for 160-cc and 180-cc offerings of OEMs. The higher displacement premium motorcycles continue to expand
motorcycles continue their
dream run their share in the domestic motorcycle pie and accounted for 7% of the total volumes in 11m FY2018 as against 2% in FY2014. This trend is
expected to continue with the gradual up-trading and premiumisation in the country, supported by improvement in disposable incomes.
OVERVIEW Continued…..
Honda consolidates position in both product segments and inches closer to Hero for market leadership position
Hero MotoCorp Limited (Hero): Recovery in rural demand translated into healthy growth in Hero’s strong hold entry sub-
segment of motorcycles, which accounts for close to 60% of the total segment. The OEM continued to maintain its
dominance in the domestic motorcycle segment with a YTD market share of 51.2% during 11m FY2018. However, due to
relatively weak presence in the fast-expanding scooter segment, its overall share in the two-wheeler market has been
steadily declining and contracted further to 36% during 11m FY2018, from 37% during the previous year. Going forward,
improving its presence in the two fastest growing segments of scooter and premium motorcycles would remain critical to
improving its leadership position in the domestic two-wheeler market.
Bajaj Auto Limited (Bajaj): During the current fiscal, although Bajaj remained the second largest motorcycle manufacturer
Motorcycle and scooter segments in the country, its market share dropped to 16% during 11m FY2018, from 18% during FY2017. Honda has significantly
continue to be dominated by Hero bridged the gap with Bajaj, with a volume difference of ~14,200 units during 11m FY2018, as against 4.65 lakh units in
FY2017. Coupled with Bajaj’s absence from the fast-growing scooter segment, its share in the overall domestic two-wheeler
and Honda respectively
market declined to 10% during the current fiscal, almost half of its share just 6 years ago.
Honda Motorcycle and Scooter India (Honda): Honda has achieved impressive market share gains in both the motorcycle
and scooter segments, thereby expanding its share in the overall two-wheeler pie and inching closer to the largest player,
Hero. Scooters remain its strong forte, with a market share of 57%, supported by continued strong demand for its Activa
model. Increasing acceptance of scooters in the market and additional capacities that came on-stream in Gujarat (scooter
only) helped growth. In the motorcycle segment also, Honda gained share in the all the lower displacement motorcycle
categories (upto 150-cc) and has almost closed the gap with the second largest player, Bajaj. Overall, the OEM expanded its
market share in the domestic two-wheeler market from 27% during FY2017 to 29% in 11m FY2018, benefitting from its
market share gains in both segments.
TVS Motor Company Limited (TVS): TVS has reported fairly stable market share trends, maintaining its position as third-
largest two-wheeler player during 11m FY2018, supported by its presence across product segments. The OEM displaced
Hero MotoCorp from its position as second-largest scooter manufacturer during FY2017 and has further strengthened its
position during the current fiscal to 16% market share. In the motorcycle segment, TVS remains the fourth largest player
with a market share of 7%, similar to the previous fiscal.
Outlook
ICRA expects two-wheeler domestic volumes to grow at 8-10% during FY2019 driven by strong rural demand as well as
Two-wheeler industry expected to expanding urban consumption. The demand recovery from rural households in recent quarters drew strength from improved
grow by 8-10% in FY2019 farm sentiments as well as cash flows following two seasons of near normal monsoons and resultant healthy crop output. This
optimism is being complemented by Government’s policies to achieve the vision to double farmers’ income by 2022 driving
consumption demand from rural sector as well as an expectation of normal monsoon precipitation supported by developing la
nina conditions. Moreover, pay revision by 3-9 state governments should support urban demand. Additionally, the recovery in oil
prices has resulted in higher demand from select international markets, which coupled with new markets explored by OEMs
would drive exports in the current fiscal.
Please contact ICRA to get a copy of the full report
Branches: Mumbai: Tel.: + (91 22) 24331046/53/62/74/86/87, Fax: + (91 22) 2433 1390 Chennai: Tel + (91 44) 2434 0043/9659/8080, 2433 0724/ 3293/3294,
Fax + (91 44) 2434 3663 Kolkata: Tel + (91 33) 2287 8839 /2287 6617/ 2283 1411/ 2280 0008, Fax + (91 33) 2287 0728 Bangalore: Tel + (91 80) 2559
7401/4049 Fax + (91 80) 559 4065 Ahmedabad: Tel + (91 79) 2658 4924/5049/2008, Fax + (91 79) 2658 4924 Hyderabad: Tel +(91 40) 2373 5061/7251, Fax +
(91 40) 2373 5152 Pune: Tel + (91 20) 2552 0194/95/96, Fax + (91 20) 553 9231