INDIAN TWO-WHEELER INDUSTRY

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INDIAN TWO-WHEELER INDUSTRY

(AN INSIGHT & ITS FUTURE)

 

In India two-wheeler is the most convenient & economic means for people to move. Commuters, students, working ladies or housewives, milk men, e-commerce delivery person or a courier delivery man, everywhere we find drastic use of two-wheeler in our country. Two wheelers form an integral part of Indian roads, making India the largest two wheeler market in the world. We have witnessed double digit phenomenal growth in the two-wheeler industry from 2004 to 2017. Indian two-wheeler sector, the largest in the world is likely to see a constant growth in medium term. Unquestionably, the Indian Two-Wheeler Industry registered 14% de-growth in FY 2019-20 compared to previous year. The Motorcycle segment became an underachiever and dropped to 13%, while the Scooter segment to 16%. The rural demand was put under pressure in 2019. 


Economy’s sluggish growth, lower income, employment issue and other negative factors of the market were the main reasons of de growth. Now impacted by Covid-19, people may assume that the recovery remains elusive in the near terms. However, owing to the Covid-19 effect and mentality of social distancing, people would prefer to move away from public transportation. People are likely to choose some form of personal mobility. Obviously, two wheelers would be highly preferred being a suitable option due to lower cost. I believe that post covid-19 two-wheeler segment will play a pivotal role in elevating the automobile sector of our country.  The sale figures for the month of June are evident to support this trend. Therefore, the Indian two-wheeler sector which has been experiencing a slow down since 2018 is likely to come out from recessionary trend over a period of time.

 The long-term forecast made earlier for CAGR of 7.33% now seems to be achievable, once again we might see a double-digit growth in the sector. The volume is likely to increase by a significant number. Value wise probably it will cross $25 billion mark by 2024. Positive structural factors like favourable demographic profile; growing income in rural sector, low two-wheeler penetration, participation of women in workforce and rapid urbanization will facilitate the faster growth. Improvement of financial services would also support the volume growth.

 In addition, the export potential is also looking very promising.

 

EXPORT POTENTIAL

During FY 2019 export volume of two wheelers from India stood at around 3.2 million units. The export sector had witnessed a double-digit growth in the recent years. India ranks 4th in terms of highest dollar value worth of motorcycle Exports – Around motorcycles worth $2.1 billion were exported from Indian in 2018!

Further, potential two-wheeler rental services will most likely boost the demand.

 

TWO-WHEELER HIRING

Two-wheeler sharing service is a low-priced convenient solution for commuting, and therefore, its adaption is increasing rapidly in India. People are no more required to spend money on the purchase of two-wheelers and bear various costs, such as maintenance costs, insurance costs, parking arrangements, and other similar costs and responsibilities.  Motorcycle/scooter sharing service is found to be approximately 25–40% cheaper than cab bookings. The Indian two-wheeler sharing market stood at $31.1 million in 2019, which is expected to reach $94.0 million by 2025, with a CAGR of 20.2% during the forecast period (2020–2025).

 

ELECTRIC TWO-WHEELER PROSPECTS

The future of electric two-wheeler market in India is looking very encouraging as the government has been insisting for more use of EVs keeping in mind the environmental issues. As such, demand for electric vehicles is expected to grow at a CAGR of over 44% during the period 2019-25.  The e-scooter and motorcycle market has grown significantly in the last three years on account of government subsidies and initiatives. Battery-powered scooters and motorcycles are spearheading the e-revolution in India. Although electric scooters and motorcycles make up only a small fraction of the total two-wheeler market currently, the demand is expected to pick up during the forecast period. Scooters, as well as motorcycles, can be charged fast and easily via existing plug-in points at homes. By the year 2030, the sale of electric scooters is expected to exceed 2 million.

The automotive sector is not only an integral part of every house hold but it contributes to a great extent in Indian GDP as well.  Auto sector directly gives employment to approximately 20 million people while directly plus indirectly it gives employment to around 40 million people in the country. It contributes to almost 8% of Indian GDP.  The share of two wheelers in auto industry is about 81% as per the data of year 2019.

We foresee that this segment will continue to contribute greatly in Indian GDP and the entire two-wheeler industry will be generating decent profits! The valuations of this sector as a whole is available at a reasonable level and we can expect a decent ROI at the current valuations.

~Rajendra Jhanwar





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