Power- Pack

2-Wheelers

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• Industry Overview :3

• Motor cycles :8

• Scooters and Mopeds : 14

• Exports : 16

•Realizations : 21

•Costs and Margins : 25

•Future Growth Outlook : 31

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 Between 2010-11 to 2016-17, motorcycle sales increased at a modest 6%
compound annual growth rate (CAGR), scooter sales accelerated at a
strong 20% CAGR.
Scooters
INDUSTRY GROWTH TRENDS

Motor-Cycles

Mopeds

• Size of 2-wheeler market in 2016-17

•By Value: Rs. 848 bn
•By Volume: 17.59 mn units
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 FACTORS INFLUENCING GROWTH
Motor cycles
•Rural demand constitute 46-48% of the
motorcycles sales.
•Two consecutive years of El-Nino for FY
15 and FY 16, resulting into back-to-back
drought situation in rural areas which
affected Motorcycles growth
• Growth picked up in 2016-17 due to:
•Good Rainfall
•Improvement in MSP of both Kharif
and Rabi
•Increase demand in urban areas due
to pay commission pay-outs
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Why Scooters are growing fast?
• Improved road network in Tier 2 and
Tier 3 cities and lack of public
transport
•Reducing mileage gap between
motorcycles and scooters
•Gender-neutral positioning
•Launch of new models
•Steady expansion in players'
dealership network
•Capacity expansion by leading
players
 FACTORS INFLUENCING GROWTH

MOPEDS
• Demand for mopeds mainly comes from small businessmen, shopkeepers and
farmers in rural and semi-urban areas.
• Geographically, AP and TN contribute the highest sales.
• Over the last few years, Kinetic Engineering, Majestic Auto etc have shut their
moped businesses and as a result, TVS Motors is the only player in the segment
• There was a decline in moped sales in the last 2-3 years as erratic rainfall led to
poor farm income.
• But in 2016-17, TVS launched its new four stroke XL 100.This model has been
very well received in the market. The newly launched model is also being well
received in the northern states
• In 2016-17, Moped sales accelerated 23% over a low base in 2015-16 as a result of
improved rural demand and a well-received new model launch.
 The share of motor- cycles sales has dropped from 76.6% in 2010-11 to
63% in 2016-17. In contrast, the share of scooters has increased from
17.5% to 31.65% in the same period

SEGMENTAL MIX CHANGE

Source: Crisil Research

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OVERALL MARKET SHARE

Player Market Share

2010-11 2016-17
Hero 44.8% 36%

HMSI 13.2% 29%

Bajaj Auto 20.5% 10%

TVS 13% 14%

Royal Enfield 1% 4%
Others 7% 7%

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 Motor-Cycle review

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 HMSI has been gaining market share at the expense of Honda and
Bajaj.

MOTORCYCLES : DOMESTIC MARKET SHARE

Source: SIAM, Crisil Research

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MOTORCYCLE SUBSEGMENTS
•Motorcycles are classified as

economy, executive and

premium, depending on their

launch price and engine

capacity.

• Executive sub-segment

dominate the motorcycles

with 54% share.

Source: SIAM, CMIE
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 Though Hero leads with 55 % share, Bajaj increased the share from 29%
to 32.5% post the CT-100 launch in 2015.

MOTORCYCLES SUB-SEGMENTS •Hero continues to dominate the

ECONOMY economy sub-segment with its CD
Dawn range of models.
•Bajaj Auto, which had gradually lost
its market share to Hero, now
accounts for 32.5% of the economy
sub-segment, post the launch of CT-
100 in February 2015.
•In the absence of new models, TVS
Motors too, lost its market share in
the segment from 25% in 2011-12 to

Source: SIAM, Crisil Research 12.5% in 2016-17.

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 Hero is the undisputed market leader in the Executive sub-segment

MOTORCYCLES SUB-SEGMENTS
EXECUTIVE • Hero is the undisputed market

leader with 2 top-selling models –

Splendour and Passion.

• HMSI increased the share through

primarily due to Honda Shine.

•Bajaj lost considerable market share

despite launching several models of

the Discover series

Source: SIAM, Crisil Research

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 Though Bajaj is the market leader in the premium segment, it’s market
share has dropped to 33% while Royal Enfield’s share has increased to
26%

MOTORCYCLES SUB-SEGMENTS • Bajaj is the market leader

PREMIUM with top-selling models like

Pulsar and Avenger variants
• Enfiled is the second largest
player
• Yamaha captured 3rd
position through different
26%
variants of FZ series.
8.1
• TVS increased it’s share
through Apache
Royal Enfield
• Hero did not have any
successful model after Karizma
Source: SIAM, Crisil Research
13 ZMR and CBZ Extreme
 Scooters and Mopeds

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 HMSI has 57% share in the scooters segment.

Scooters Market Share • HMSI is the market leader

with Activa with a huge lead
over others. They have
expanded capacities to
Haryana, Rajasthan,
Karnataka and Gujarat.
•TVS gained market share
after 2013-14 with the launch
of Jupiter, Scooty and Zest
•Hero is the third player with
models like Maestro, Pleasure
and Duet
•Yamaha has become the 4th
player with models like Ray,
Source: SIAM, CRISIL Research
Alpha and Fascino
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 EXPORTS

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 After a period of slow or negative growth, exports picked up in 2017-
18.

EXPORTS - PAST GROWTH

Source: SIAM
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 Share of Latin America and Europe in India’s exports have gone up
between 20164 to 2017.

EXPORTS DESTINATION
2014 2017

Source: UN Comtrade, Crisil Research

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 Exports have been shifting from Africa to Latin America due to their
better economy and currency appreciation.

EXPORTS SHIFT
 Exports to Latin America will continue their growth momentum due to better
economic growth and appreciation of Latin American currencies (the Mexican peso
appreciated 6% and the Argentine peso climbed 3%, while the Colombian peso rose
1% in January-May 2017).

 Recent expansion in the Latin American market by Hero and TVS will support
growth in demand for exports.

 Exports to African countries have been suffering post the slump in oil prices.

 Although oil prices have stabilised, shortage of foreign exchange is expected to

keep exports muted.

Moreover, the Nigerian naira which depreciated 53% in 2016, is still under pressure
and19depreciated a further 6% in January-May 2017.
 Bajaj’s market share in exports has dropped due to over exposure to
African markets and dependence on motorcycles.

EXPORTS : PRODUCT MIX AND MARKET SHARE

Exports: Product Mix Exports: Market share

Source: SIAM
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 REALIZATIONS

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 Realizations increased due to the combination of price hikes and
increased share of premium segment.

MOTORCYCLES: NET REALIZATION TRENDS

SEGMENTAL SHIFT NET REALIZATIONS IN RS. 000s

Source: crisil research

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 Bajaj has the highest realization in Motorcycles due to it’s dominant
position in the premium segment.

MOTORCYCLES: PLAYER-WISE REALIZATION TRENDS

• Bajaj Auto Ltd's realisation is

higher than other players, due

to a larger presence in the

premium segment as well as

higher exposure to exports.

• Growth in realisation was

supported by rupee

depreciation.
Source: crisil research
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 Despite having lower market share, Bajaj is the highest profit
making 2-wheeler company due to it’s premium bikes and exports.

HERO HONDA VS BAJAJ AUTO : FINANCIAL COMPARISON

March 2017 Bajaj Hero Eicher

Market Share 10% 36% 4%

Net Sales (Rs. 213,735 285,850 70,334
mn)
Profit after Tax 40,795 35,463 16,671
(Rs. mn)
Net Profit 19.1% 12.4% 23.7%
Margin
Exports to Sales 45.1% 2.7%
77,180
M.Cap (Rs. cr) as 79,544 70,807
on 29th March
2018
24 Source: Company reports
 COSTS AND MARGINS

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 Raw material costs constitute 80 to 85% of the total costs.

COST BREAK-UP

Type of Costs Percentage of Total Costs

Raw Material Costs 80 to 85%
Selling and Distribution 7 to 9%
Costs
Employee Costs 5. 8%
R & D Costs 2 to 3%

Source: Company Reports

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 Steel , Aluminium and Rubber constitute the bulk of the Raw
material for motorcycle manufacturers.

RAW MATERIAL COMPOSITION ( MOTOR CYCLES)

Source: Crisil research

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 Sales and Distribution costs have almost doubled in the last 5-6
years.

NON RAW MATERIAL COSTS

• S & D costs almost doubled in the

last 5 – 6 years due:

 Expansion of distributive

network

 Building brand of new

models

Source: Company Reports

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 Margins and Profitability have increased in 2015-16 due to drop in
Raw material prices.

MARGINS AND PROFITABILITY

•Margins are estimated to have expanded 200 bps to about 16% levels in 2015-

16, aided by 12% drop in basic raw material costs.

• Companies' return on capital employed (RoCE) has increased to 40% in

2015-16, driven by expansion in margins due to decline in raw material costs.

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 Capacity Utilization typically has improved after bottoming out in
2015-16.

CAPACITY UTILIZATION TRENDS

Source: SIAM
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 Future Growth Outlook

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Estimated long term volumes and growth rates by two wheeler segment

Source: crisil research

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Scooters' share to cross one-third

• Scooters' growth has been continuously outpacing that of motorcycles. Led by the
structural factors, scooters are estimated to grow at a faster pace in the next five years.
• The share of scooters in the two-wheeler industry is estimated to reach ~36% in 2021-22
from a mere 19% in 2011-12.

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Scooters eating into motorcycles' share

Source: Industry , CMIE

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