Scooters steadily stealing bike market share

The humble scooter is making a comeback—thanks to greater female mobility as well as the availability of gearless vehicles across the country. Many had written off the scooter. Even Bajaj Auto Ltd, maker of the iconic Bajaj Chetak, decided in December 2009 to flick the switch off its scooter production lines. Bajaj may continue to bank on motorcycles, but sales trends over the last six years indicate that scooters sales are back on track. From the highs of 83.5% in 2006-07, for instance, the share of motorcycles in the two-wheeler market slipped to 75.1% in 2011-12. A lower compounded annual growth rate of 9% for motorcycles over the last five years, compared with 22% and 17% for the scooters and mopeds, clipped the share of motorcycles, according to a recent Icra report on two wheelers. The trend continues: motorcycles have ceded further ground to scooters in recent months. In the six-month period from November 2011 to April 2012, motorcycle sales, albeit on a larger base, expanded 9% to 5,053,200 units compared with a year-ago period, according to the Society of Indian Automobile Manufacturers (Siam). Whereas the scooters—the humble means of personal transportation—expanded 29% to 1,395,401 units in the same period. The lower growth percentage of motorcycles which have a greater weightage—as much as 72% in the total two-wheeler space—dragged down overall volumes, limiting the total two-wheeler expansion to 12% in the six months to April against 20% plus growth a year ago. Icra expects the scooters segment to continue to increase its share in the domestic two-wheeler market from 19.1% in 2011-12 to 27% by fiscal 2016-17. With this, the volumes in the domestic scooters market are estimated to double from the current levels. The faster volume growth of scooters has primarily been driven by a greater acceptability of gearless scooters, particularly by women, rising urbanization and increasing proportion of working women coupled with expanding product offerings in the scooters segment and a comparatively lower base. Sensing the untapped opportunity in scooters, two-wheeler makers—led by scooter market leader Honda Motorcycle and Scooter India Pvt. Ltd, Hero MotoCorp Ltd and Suzuki Motorcycle India Pvt. Ltd— have augmented capacities, and India Yamaha Motor Pvt. Ltd, which has yet to claim its stake in the segment, is planning to enter the fray during the festive season this year with its Ray brand of gearless scooters, said Roy Kurian, national business head, sales and marketing at India Yamaha. Kurian expects the share of scooters in the two-wheeler market to move up to 35% in another two years. Yamaha has outlined an investment of Rs.750 crore at its plant in Faridabad in Haryana to create capacity of a million units by 2014. Honda, which is credited with creating the gearless scooter segment in 1999 with its flagship Activa, and which sells one out of every two scooters sold, has also been scaling up capacity. The cumulative capacity from its existing three plants will reach four million units by the first half of next year, the company said at the launch of its 110cc motorcycle Yuga in Delhi earlier this month. Scooters account for 60% of the company’s total two-wheeler volumes. To be sure, others have also been scaling up their presence. Rival Hero MotoCorp, which sells the Pleasure and Maestro brand of scooters, has a capacity to make 50,000 units per month, said Anil Dua, senior vice-president, sales and marketing, during a 2 May earning calls with the analysts. Dua remains optimistic of the demand potential for scooters. “Half of the population in this country does not have the power of two wheels. This is the segment (scooter brand) Pleasure is addressing.” There are some dissenting voices, though. Atul Gupta, senior vice-president, sales and marketing, at Suzuki Motorcycle India, cautions that the growth seen in the last five years has reached a plateau. He believes the share of scooters in the overall market will not exceed 23-24%. Suzuki, which sells the Access brand of gearless scooters, sells 30,000 units per annum. But his pessimism ought to be seen in a larger context of slower growth in the overall two-wheeler industry. According to Siam, the industry is not expected to post a double-digit growth in May. “With whatever conversations we are having with companies so far, it seems two-wheeler sales are going to be flat this month,” said Vishnu Mathur, director-general, Siam. In an 8 May report, Mahantesh Sabarad and Vijay Nara, analysts at Fortune Equity Brokers Ltd, wrote, “We expect the strong sales momentum push to have been expended with excise duty having been raised to 12%.” Moreover, they also cite rising fuel costs as a factor in impeding sales. According to them, purchase decisions may suffer even more as receding tax sops offered to manufacturing units in Uttarakhand further escalate costs that may eventually get passed on to buyers, slowing the annual growth in two wheelers to be restricted to 8%. “There has been a slowdown from November onwards. It’s just that manufacturers have acknowledged it now and have started correcting the stock levels,” said K. Srinivas, president, motorcycles, at Bajaj Auto. He attributed the sluggishness to a slowing demand in urban as well as rural markets and delayed marriage season in Uttar Pradesh, Rajasthan and Madhya Pradesh. Srinivas, however, expects sales to turn the corner after the monsoons.