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India’s two-wheeler market could experience “the long-tail phenomenonâ€, where niche segments collectively make up a market share that rivals or exceeds the few blockbusters. The niche segments seem to be the only area within the two-wheeler market that will continue to grow this year.
During April-May 2007, growth was visible in motorcycles with engine capacities between 125 cc and 250 cc. This segment, which includes Bajaj Pulsar and Discover and Hero Honda CBZ, grew 13% to reach 2.18 lakh units. In the overall two-wheeler segment, the sub-75 cc segment, which includes TVS’ Scooty Pep, grew 21% on a cumulative basis for April-May with 67,235 units.
But this segment accounts for just 20% of the market and a growth here will not be enough to keep the industry in the growth track in the long term. Nevertheless, the growth in these two segments would come as a relief to the industry, which is seeing a drop in volumes after years of rapid growth.
Going by the latest numbers, there is a chance that the industry will experience a slowdown in FY08 for the first time in six years. Data available from the Society of Indian Automobile Manufacturers (SIAM) show two-wheeler sales are down 17% for April- May 2007. Just a year ago, the industry had seen a 30% growth for the same period. Says S Sridhar, vice-president (marketing) at Bajaj Auto
“The person buying at the entry level is hit mainly due to the kind of documentary evidence that he has to provide to the financier. This includes a combination of proof of salary and family income, which he can’t always provide.†The niche segments, especially the higher-end bikes, attract a certain kind of buyers who are not stopped by the higher cost. “The higher-level users undergo hesitation due to the slightly higher rates, but there is never denial in buying,†says Mr Sridhar.
In comparison, passenger car sales are up 10% for April-May 2007, mainly because auto makers and banks have come together to offer deals which give buyers lower interest rates. “Interest rates will actually have little effect on two-wheeler purchases. At the most people will postpone their purchases. This industry has experienced high growth levels on a larger base for a long time. Now there will be a slowdown in growth. This should not be interpreted something very negative.
India is a larger country and growth in two-wheelers, because of its utility value will be happening in some part or the other,†says Rajan Shah, chief investment officer at Angel Broking. TVS has seen high growth in the sub-75 cc segment due to aggressive financing.
During the six years from FY01, the two-wheeler industry has shown an uptrend in sales without a single year of glitch. It has shown an annual sales growth of 13% over the past six years and if one ignores the 1% fall in FY01, the industry has actually grown since FY95, when sales hit 2.2 million units. For FY07, the same number is at 7.8 million units, an annual growth of 11%. Says an auto analyst:
“The addressable population is currently 100 million and the total bike sales are already in excess of 50 million. The target audience will continue to reduce and the industry can’t sustain the high growth it had seen in the past.â€
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