BOMBAY, 7 July 2003 — This week we take a look at the performance of the Indian two-wheeler sector. Two wheelers are highly popular in the villages and if sales are up, then naturally it is an harbinger of the good tidings.

The four major two wheeler companies in India are Bajaj Auto, Hero Honda, TVS Motors and LML Vespa. Bajaj Auto has recorded a 20.7 percent growth in bike sales in June, up 83,239 units from 68,965 units last June. Hero Honda recorded sales of 1,60,889 motorcycles in June, up 14.9 percent from a year earlier. Its share in the motorcycle market continues to remain strong at 45 percent. However, TVS found it bumpy going.

Its sales were up a mere 4.6 percent from 53,965 units in June, 2002. Kanpur based LML reported a surge of over 6 times in June 2003 due to strong demand of the 110cc motorcycle “Freedom” which has crossed 180,000 units within a year of its launch, thus making it the fastest growing motorcycle in the deluxe commuter segment.

The sub-110cc entry segment reported a 24 percent growth, which was lower than 28 percent growth in motorcycle sales during 2002-03.

The 125-150cc category raised its market share from 7 percent in 2001-02 to 11 percent in 2002-03. Incidentally, growth in this segment was powered by the 150cc Bajaj Pulsar. It now leads the segment with 43 percent market share followed by Yamaha Motors India with 27 percent share.

For the first two months of the current fiscal (April-May), the two-wheelers had lost their growth momentum, recording a marginal 1.5 percent rise in sales. A total of 8.20 lakh two-wheelers were sold in the country during April-May 2003 against 8.08 lakh units in the same period last year, the data showed. Replacement demand now constitutes 30 percent of total two wheeler sales, which is expected to grow to 50 percent this year as compared to around 10 percent a few years back. After a 17 percent growth in FY02 and FY03, demand in the two-wheeler industry is expected to taper off 8-10 percent this year. Fewer launches and lower growth in the entry level motorcycle segment are being thrown up as the main reasons for lower demand.

Yet, the two wheeler majors do not agree. They opine that the deteriorating public transport system and easy availability of credit will aid growth in the long term. And this is evident from the various new product launches that many of them have planned.

While TVS recently relaunched its 150cc Fiero with an upgraded engine and styling, Hero Honda has indicated it will relaunch its 133cc Ambition with a new styling. Bajaj Auto meanwhile is working on launching a new 125cc motorbike, known as “World Bike”, has been developed jointly with Kawasaki, Japan and is expected to be on the streets by July-end. Besides the top end players, LML has scheduled its launch of two mobikes in the category this fiscal. Kinetic Motors is raring to roll out three new products over the next four months including two motorcycles and one hybrid bike (a cross between a scooter and motorcycle).

Despite this line of argument, analysts stick to their point of view and reiterate that the two-wheeler growth rates are tapering off. The two wheeler industry witnessed a 17 percent growth in volumes in FY03, which was a seven-year high. After a higher growth rate in two consecutive years in FY02 and FY03, auto analysts insist that this high base effect is likely to lower the FY04 demand growth at 8-10 percent. Two wheeler majors expect a lower growth this quarter with growth expected to pick up in September.

Industry experts insist that there is a change in the entire mindset of the two wheeler buyers. Till now, fuel efficiency was the primary concern. But now consumers have started looking at power and styling. A general price fall in the region of Rs.5,000-Rs.7,000 in the segment has also helped expand the market. This fiscal it is expected to see some high voltage action with all major players planning new launches or upgradation of their existing portfolio.