Two-Wheelers Companies Ride high on Fuel Price Hike

The runaway petrol price, which has singed many, has found an unexpected beneficiary in the Indian auto market: motorcycles and scooters. With customers looking for cheaper mobility options over pricier cars, after the steepestever jump in fuel prices, the demand for the more affordable motorcycles and scooters is likely to go up in the coming months. Traditionally, the demand for two-wheelers has been stable in the Indian market, but a spike in fuel prices or interest rates, always bring them into play, in a much bigger way. “With each jump in fuel price, the cost of running a car goes up tremendously. Based on the changing economic scenario, where inflation is already forcing people to curtail spending, customers look for cheaper transport options to manage their budgets,” said a senior executive of Hero MotoCorp, India’s largest two-wheeler company. Petrol now costs a record Rs 73.18 a-litre in New Delhi and Rs 78.57 a-litre in Mumbai after Thursday’s 11% hike of Rs 7.50 by the government. “Demand for motorcycles for personal transportation has been strong in India. But in a grim economic scenario, where both vehicle and fuel prices are shooting up, customers fall back on cheaper mobility options, such as bikes and scooters. As the economy expands, everybody needs mobility and since they can’t afford expensive transport, they stick to affordable options,” said Sageraj Bariya, managing partner of Equitorials, an independent research firm. India’s top-selling bike, the 100-cc Hero Splendor, starts at an exshowroom price of Rs 42,950 in New Delhi, while the cheapest car in the country, Tata’s Nano, is priced at Rs 1,43,284, according to the companies’ websites. Hero Pleasure scooter sells for Rs 41,700 in Delhi and Maruti Suzuki’s lowest-priced car, the M800, sells for about Rs 2,04, 902, as per ex-showroom prices in Delhi. What’s clear is that the difference in basic prices and the total cost of operating them is influencing demand patterns in the Indian market. Motorcycle manufacturers are gaining at the expense of car companies, such as Volkswagen, General Motors, Honda Siel, Tata Motors and Ford Motors, who have posted lower sales in the recent past, as consumers are putting off their plans of buying new cars. The dwindling demand for cars is already forcing carmakers and its apex body, Society of Indian Automobile Manufacturers, to cut its full-year growth forecast of 10-12% for this fiscal. The high interest rates, coupled with rising fuel prices and a jump in car prices, have knocked down car sales to decade’s lowest of 3.4% in April, while the twowheeler segment grew at a fairly healthy pace of 11%, in the same month. “The impact becomes clear as demand for scooters has been consistent and strongest across all segments of passenger vehicles with a visible strong shift in urban centres. While customers were battling high interest rates in times of double-digit inflation, the steepest-ever increase in fuel price should spur demand for fuel-efficient scooters and bikes,” says Atul Gupta, vice-president of Suzuki Motorcycle India.

Big grids likely for National motorcycle championship

With over 200 entries and 10 categories, including three single-make series, the MMSC-SIDVIN Indian National Motorcycle Racing Championship, commencing at the Kari Motor Speedway in Coimbatore Friday, is expected to have big grids. This year’s series sees a few changes, notably the introduction of a manufacturer’s championship while TVS joins Honda and Yamaha in a separate one-make championship. At a media conference here Tuesday, FMSCI president Vicky Chandhok said: “We have had a record number of entries in 2012, with 220 entries already received thus far from all across India.” By way of incentives to the riders, Rs 3,50,000 is being offered as cash awards for each round and the Championship winners going home with Rs.7.75 lakh. A total of Rs.25 lakh is being awarded to the riders through the season. Making its debut in the championship is the 165cc Group C (limited modification) class for the Open category riders and also the start of the manufacturer’s championship for all classes. As in MotoGP, the manufacturer of each competitor will accumulate points as per the finishing order of the bikes in each race. The highest points scoring manufacturer at the end of the season credit themselves with the National title in each racing class. The championship itself is far more structured in 2012 with the 130cc and 165cc Group D (unmodified) classes conducted for the novice riders. These classes serve as an ideal platform for riders progressing to 165cc Group C and Group B (fully modified) classes. The Group A (imported) Superbikes up to 600cc will again be the showpiece of the championship that comprises of five rounds of double-headers for a total of 10 races. In the one-make championship, TVS will run their brand new Apache RTR 180 bikes while Yamaha will be introducing YZF R15 Version 2 that will be fitted with Daytona Race kits while Honda’s CBF Stunner and CBR 150R will be seen in action with a team championship while the novices will be on the Twister (non-championship). The championship schedule is: June 1-3 (Coimbatore), June 29-July 1 (Chennai), Aug 10-12 (Chennai), Sep 7-9 (Chennai) and Sep 28-30 (Chennai).

TVS Motor sales down 5% in May 12

TVS Motor Company witnessed a 5.33% drop in total sales for the month 2012 to 176,012 units in comparison with 185,930 units recorded in May 2011. The company`s cumulative sales for the period April 2012 to May 2012 stood at 350,467 units against 353,674 units recorded in the previous comparable period, witnessing a marginal decline. Total two wheeler sales were at 173,092 units in May 2012 in comparison with 181,891 units recorded in May 2011, witnessing a 4.83% decline. Domestic sales of the company were recorded at 151,980 units in May 2012 against 158,829 units registered in May 2011, witnessing a 4% decline. The company`s scooter sales stood at 38,833 units in May 2012 against 38,168 units in the same month of the previous year. Motorcycles sales accounted for 64,134 units in May 2012 against 75,619 units in May 2011. Exports registered total sales of 22,817 units in May 2012 against 26,168 units in the same month of the previous year. The company`s two wheeler exports stood at 21,112 units in May 2012 in comparison with 23,062 units in May 2011. The company sold 2,920 units of three wheelers in May 2012 against 4,039 units in the same month of the previous year. Shares of the company declined Rs 0.1, or 0.29%, to trade at Rs 33.90. The total volume of shares traded was 181,903 at the BSE (12.10 p.m., Friday).

Hero MotoCorp sales jump 11% in May

The country's largest two-wheeler maker Hero MotoCorp today reported its highest ever monthly sales at 5,56,644 units in May, registering a growth of 11.28%. The company had sold 5,00,234 units in May 2011, Hero MotoCorp said in a statement. "The company's sales in May this year surpassed its previous highest of 5,51,557, recorded only last month -- April, 2012," it added. Commenting on its numbers, Hero MotoCorp Senior Vice President (Marketing and Sales) Anil Dua said: "We have been setting new industry benchmarks month after month which is an indication not only of our progress in our journey, but also the trust of our valued customers." The company is cautiously optimistic that the expected normal monsoon and the consequent good harvest should perk up the sentiment in the coming months, he added. "The first two consecutive months of the new fiscal recording highest-ever sales for the company has clearly been a great start for us," Dua said

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.

Yamaha to scale up R&D ops cheapest bike on the cards

Japanese two-wheeler maker Yamaha Motor Co Ltd is looking at scaling up research and development (R&D) operations in India, with an aim to designing the country’s cheapest motorcycle indigenously and shoring up volumes in the fast-growing domestic market. “Until this year, basic development of products was being done by Yamaha at our headquarters in Japan. We have an R&D centre to make minor changes on models in India. In future, our R&D team should be independent and capable of developing a new motorcycle in the commuter segment,” said Hiroyuki Suzuki, chief executive officer and managing director of India Yamaha Motor. The company is working out the investment required for stepping up R&D activities in the country. Yamaha’s new low-cost bike is expected to be priced at around $500 (Rs 27,500), cheaper than the entry-level motorcycle ‘Crux’, tagged at Rs 38,365. Market leader Hero MotoCorp Ltd’s ‘CD Dawn’ is the cheapest product in the category, starting at Rs 36,300 (ex-showroom, Delhi). Yamaha, at present, has marginal share in the low-cost commuter segment with the ‘YBR110’ and ‘Crux’, which together sells 5000-odd units every month. The move to develop a low-cost motorcycle comes close on the heels of compatriot Honda Motor Co Ltd (HMC) launching its cheapest motorcycle, the 110 cc ‘Dream Yuga’, in India. Priced at Rs 44,642 (ex-showroom, Delhi), the bike is expected to shore up Honda’s market share in the seven-million strong commuter segment in the country. “We will have production volume of two million units in 2016. Scooters will contribute 30 per cent to our overall sales, the 150 cc models will account for 40 per cent and the remaining numbers will come in from entry-level motorcycles,” Suzuki said. Overall, the company is eyeing a 10 per cent share in the Indian two-wheeler market by 2016. Yamaha recently announced plans to invest around Rs 1,500 crore to set up a new plant in Tamil Nadu and enhance capacity across its existing units. The new low-cost bike will be manufactured at Chennai and exported to markets in Africa

Bajaj, Yamaha, Honda spar over scooters

The fast-growing scooter segment in the world’s second-largest two-wheeler market after China has become a bone of contention. Scooter sales growth has outpaced motorcycles in India for the last 5 years, a far cry from 2006-07 when its share had dropped to just 13% of two-wheeler sales. It has also helped Japanese auto major Honda edge closer to Bajaj — once the king of scooters in India which is now dismissive of the segment. “It is irrational to talk of marketshare without looking at profitability,” said Rajiv Bajaj, MD, Bajaj Auto. “I’d love to know how much money is being made on scooters. We are a publicly listed company and are judged by our profitability. We are not HMSI (Honda) or Yamaha where nobody knows what kind of money they are making.” Yamaha, which is looking to launch its first scooter in India in a couple of months, said scooter sales will grow faster than the market at least till 2020. “This year, scooters accounted for 20% of domestic two-wheeler sales in the country,” said Hiroyuki Suzuki, CEO and MD, India Yamaha Motor. “Our forecast is, it will grow to over 30% by 2016 and over 40% by 2020... obviously it is profitable. We are in fact late and want to launch our products as soon as possible,” said Suzuki. Honda, India’s largest scooter-maker and in direct combat with Bajaj for the number 2 slot, also reacted strongly. “Of course we are profitable. Where do you think our salaries come from?” said Yadvinder S Guleria, vice-president, sales and marketing, HMSI. Bajaj, the only company without a scooter in its portfolio, is unfazed. “We are very focussed and want to be the best motorcycle maker in the world,” said Bajaj. “We do not want to distract ourselves with scooters. Companies that distract themselves can never make the kind of things we do.”