Yamaha Motor India celebrates Women’s Day

Yamaha Motor India Sales Pvt. Ltd. celebrated International Women’s day in association with ‘Aarohan’, an NGO working for women empowerment, felicitating the women from the lesser privileged sections of the society. Also, on this occasion the company invited Femina Miss Delhi, Ms.Koyal Rana and talked about its association with the coveted FBB Femina Miss India 2014in an endeavour to empower and encourage women power and talent.

Yamaha Motor India Sales Pvt. Ltd tied up with Aarohan, who had invited eminent women to deliver lectures on legal awareness, medical care, education etc. in order to enlighten the women audience present at the event. On this occasion,Femina Miss Delhi, Ms. Koyal Rana shared her experience in order to boost the morale of the women participants at the event. Yamaha also awarded the NGO with a gift cheque of worth Rs.1,00,000.

Trailing Behind

We are downgrading Hero (target price R1,730), Bajaj (TP R1,670) and TVS (TP R70) to Sell. Our ratings reflect the concern that Honda’s sustained market share gains will impact the margins of the Indian two-wheeler companies. Honda has gained 890 bps (basis points) market share over the last 24 months, aided by an aggressive launch pipeline and stronger demand for scooters. Hero, Bajaj and TVS have been unsuccessfully trying to staunch their market share losses through more frequent product launches as well as higher brand spends. We believe such competitive activity will continue, resulting in lower margins due to loss of pricing power and higher selling costs.

Hero: Our negative stance on Hero stems from our concerns about market share losses, a deterioration in pricing power and higher marketing costs. We also highlight the market risk for Hero, as it will now be developing products on its own. We also believe that the cost reduction efforts of the management will not yield significant gains and these will be competed away in the market. Investors are positive on Hero on FY15e as the fixed royalty payable to Honda would end by then, leading to a one-time gain. However, we believe that profit growth from FY16e would taper to lower levels.

Bajaj: We downgrade Bajaj to Sell as we believe that current valuations (15.5xFY15e EPS) do not factor in the sustained market share losses in the domestic market as well as the uncertainties emanating in its exports. Bajaj’s margins have remained higher than peers’, due to richer product mix and currency benefits on its exports. However, we expect Honda’s aggression to hurt Bajaj’s margins going forward. While exports (40% of revenues) have provided a cushion, we highlight that near-term growth may remain below trend level. We understand that demand in Bajaj’s major export destinations (Africa, South Asia, Latin America) continue to be affected by changes in regulations and an increase in import barriers.

TVS: TVS is also likely to be affected by the increase in competitive intensity which would constrain its margin expansion efforts. The pressure could be offset to an extent by its recent product launches and a revival in its higher margin three-wheeler business. However, TVS’s current valuations at 15.7xFY15e EPS (adjusting for Indonesian business) are at a premium to Hero and Bajaj. We believe this is unsustainable as the profitability gap with peers continues to be significantly high.

Our revised forecasts and Tps are below consensus: Our target prices for Hero and Bajaj are 20% below consensus and imply valuations at 13.5x FY15e EPS (lower than the long-term average). TVS’s current valuation is at a premium to Hero and Bajaj, which is untenable. On Hero, consensus is building in margin expansion to factor in the company’s cost reduction efforts. However, we do not see material headroom in Hero’s current cost structure and believe that a large portion of the savings will be competed away. Bajaj’s margins have been cushioned by the currency benefit on exports which should taper in the next few quarters. In the medium term, margins for Hero and Bajaj will reflect the impact of competition and this will act as a key catalyst for underperformance.

High competition during FY04-07 significantly impacted margins: 2W (two-wheeler) margins contracted by 250-500bps during FY04-07 as Hero and Bajaj were competing aggressively to gain leadership in motorcycles. Currently, we have seven players who continue to compete for market share. Moreover, Honda is competing with all companies in their respective niches.

We forecast 2W industry volumes to grow at a CAGR (FY14-16e) of 11%: We expect the growth to be driven by scooters (19% per annum) even as motorcycles continue to lag (8% p.a.). Honda’s dominance of the scooter segment and its gains in motorcycles should result in market share increasing from 23.7% in FY14e to 26.8% in FY16e. Hero and Bajaj would lose share by 100-170 bps.

Honda driving market share through models and distribution: Over the last two years, Honda has introduced motorcycle models in segments in which it wasn’t present. It has nearly doubled its distribution from 1,500 outlets in FY12 to a projected 2,500 by end-FY14. This has been supported by an increase in capacity from 2.2m (FY12) to 4.6m currently, and this will further expand to 5.8m by FY16. As a result, Honda’s volume growth of 32% p.a. over FY12-14e has significantly surpassed industry growth of 5% p.a. Hero/Bajaj/TVS have grown at 0%/-10%/-4% during the same period. 

Car, bikes off the mark, trucks won't budge.

Car sales in February rose for the first time in four months on the back of successful recent launches and excise duty cuts, but the overall auto sector remained a mixed bag with utility vehicle and commercial vehicle (CV) sales in the red.

Vikram Kirloskar, president of the Society of Indian Automobile Manufacturers (Siam) and vice-chairman of Toyota Kirloskar Motors, said that improving car and two-wheeler sales should act as a catalyst for growth in other sectors as well. “We have seen some improvements in inquiry levels after excise duty cuts in the interim Budget last month and so we expect strong sales in March and April on the passenger vehicle (PV) side. We hope it is an indicator of better times ahead.”

He added, “But CVs are on a tough wicket and will not improve unless we see increased goods movement. Many projects are being cleared right now and there have been small improvements in GDP, so it should take about 5-6 months for CV volumes to pick up”.

In February, passenger car sales posted a modest rise of 1.39% (to1.6 lakh units) while utility vehicle sales fell 9% (to 43,507 units), dragging the overall passenger vehicle segment (including cars, utility vehicles and vans) growth down by 3.9% (to 2.17 lakh units). Maruti Suzuki, which has an over 40% share of the PV segment, posted an almost 2% rise in volumes on the back of strong demand for its Celerio small car. Rival Hyundai saw flat sales while M&M and Tata Motors recorded 20% and 33% lower volumes, respectively.

“Car sales are up in the month, but we can't say it is the beginning of a trend just yet. Excise duties are expected to go back to previous levels from July unless the new government continues the incentive, but we hope sales will continue to maintain pace nevertheless,” Vishnu Mathur, director-general of Siam, said.

Two-wheeler volumes in the month were up almost 10%, boosted by a 28% jump in scooter sales at (3.11 lakh units) though bike sales only rose 5.4% (at 8.43 lakh units). Hero MotoCorp recorded just over 1% growth while rival Honda saw a 46% jump in volumes. Bajaj posted a decline of 12.5% in sales while TVS saw 3.35% growth.

CV sales in the month fell a sharp 30%, dragged down by 24% lower sales of medium and heavy CVs (to 16,372 units) and 32.5% fall in light CV demand (to 31,610 units). Market leader Tata Motors saw a 42% drop in CV sales while M&M recorded 4% growth. Ashok Leyland saw volumes drop 28%.

“It seems that government incentives have had some effect on passenger car sales, albeit a rather small effect so far. Commercial vehicle numbers, on the other hand, indicate that the urgent need to fix the basics of India's economic model has not abated. This will be the key task for the incoming government, and decisive action on the part of the new government will lead to an improved situation over the next 12-18 months,” said Dr Wilfried Aulbur, managing partner at Roland Berger Strategy Consultants.

Hero launches new bike Splendor iSmart at Rs 47,250

The i3S technology automatically shuts the engine when idling and turns it on when needed by pressing the clutch, giving more mileage in congested cities
The country's largest two-wheeler maker Hero MotoCorp today launched its all-new Splendor iSmart bike, equipped with stop-and-start i3S technology, priced at Rs 47,250 (ex-showroom Delhi).

The Splendor iSmart, which was showcased at the recently held Auto Expo, aims at further consolidating Hero MotoCorp's leadership position in the 100cc segment, the company said in a statement.

The i3S technology automatically shuts the engine when idling and turns it on when needed by pressing the clutch, giving more mileage in congested cities.

The Splendor iSmart is powered by a 100-cc air-cooled, 4 stroke single cylinder engine.

Hero MotoCorp Senior Vice President (Marketing & Sales) Anil Dua said: "We have applied for a patent for this technology which may be later extended to several other models."

At the recent Auto Expo, Hero MotoCorp had showcased new platforms, including the 150cc diesel two-wheeler RNT, electric motorcycle SimplEcity, 'iON' and the 620cc Hastur.

It also unveiled the new 250cc sports bike HX 250R and hybrid scooter Leap along with new scooters such as the 150cc Zir in two variants, 125cc Dare and the 110cc scooter Dash.

"We have been receiving encouraging customer queries on launch schedules of the various models. We plan to roll out four other models - the newer versions of Pleasure, Xtreme, Karizma and ZMR - later this month," Dua added.

Hero MotoCorp also said it has forayed into Turkey in partnership with Asya Makina (Asya Dis ticaretvemakina san ltd sti), a part of the diversified Soysal Group. The company has started its operations in the country with as many as 50 outlets.

LML to launch 5 new scooters over next year

Back in the 1980s, LML Vespa was the face of the upwardly mobile in the country and boasted of long waiting periods that would run into months. A decade-and-a-half later and now without the backing of Vespa, LML is trying to make a comeback.

Within the next 12 months, the company will launch five scooters targeting men and it is banking on the classic design of the LML Vespa. Having exported the scooters to Europe in good numbers since 2007, the firm, which brought down its workforce from 7,500 to just 750 to stay afloat, is now confident of making a comeback in the Indian market.

"We want to bring the real scooter for men back into the market. Companies have launched scooters centred around men in the recent past but they are basically women's scooters with cosmetic changes," said PS Choudhary, head of sales and marketing, LML Ltd.

At present, Honda is the market leader followed by Hero MotoCorp, Yamaha and Suzuki. With its torrid past when a labour strike and poor financial management saw the firm slide into the red 10 years ago, LML does not want to compete with them and has set realistic targets.

"Our research suggests a significant portion of scooter buyers are male and 70% of them use it individually. They buy the scooters for the convenience and do not have too many options," Choudhary added. "It's a big gap, we think with our lineage can fill. Our scooter is not in competition with the ‘male' scooters from Yamaha, Suzuki or Hero."

The comeback may be a little too late and nobody can bet LML will ever retain its position as the second-largest scooter maker but a successful turnaround would be nothing short of a fairytale.

Bajaj Auto launches new Discover 125

Bajaj Auto today announced the national launch of its new Discover 125 motorbike in the market.

K Srinivas, President-Motorcycle Business, said the new Discover delivers best in class power, pickup and drivability.

He said many consumers are tired of the regular commuter bikes which offer only around 8 Ps Power and they would ideally wish to upgrade to sportier, attractive bikes with superior technology and features.

"However barriers such as price and mileage deter them to move on to the 125 cc segment. The all new Discover 125 offers equivalent mileage of a 100cc and comes with exciting performance and features, all at an attractive price. We want the Indian commuter to live life to the fullest and 'Jiyo Dana-Dan'," Srinivas told reporters during the launch.

The new Discover 125 is strong and sporty with a chiseled-muscular tank and equipped with petal disc brake and stylish alloy wheels. It also offers unparalleled comfort through Nitrox suspension, Srinivas explained.

The Discover 125 (Drum Version) will be priced at Rs. 49,075 (ex-showroom Hyderabad). It will be available in six colours -  Electron Blue, Wine Red, Charcoal Magenta, Charcoal Green, Silver Blue, and Silver Gold.