An analysis of 2-Wheeler Industry in India: The second highest populated country in the world, India, comprises of a lot of middle and lower class segment. With transportation still being a challenge in India, a lot of people in these segments look forwards to the 2-Wheeler Industry in India. This industry includes various vehicles like Motorbikes, scooters, and mopeds, which come in a varied range from affordable to classy bikes.
In today’s article of Market Forensics by Trade Brains, we’ll be discussing the 2-Wheeler Industry in India and will also look into the different investment options in this industry for people planning to become a stock investor along with the consumer. Let’s get started.
History of 2-Wheeler Industry in India
The 2-Wheeler Industry in India entered the manufacturing course in the early 1950s when Automobile Products of India (API) started manufacturing scooters in India. In 1948, Bajaj Auto began importing Vespa scooters in India. In 1960, Bajaj started a shop to manufacture scooters in India in collaboration with Piaggio of Italy. The collaboration ended in 1971.
Even the motorcycles segment also started with three manufacturers viz Enfield, Ideal Jawa, and Escorts. In the ’80s the market for two-wheeler motorbikes opened up and it buzzed the market by storm. It resulted in the expansion in the market where TVS Suzuki and Hero Honda occupied the top two spots in the Indian motorcycles segment. Since then throughout the last four decades, we have seen splendid growth in the Indian two-wheeler segment year on year basis. Moving forward from starting in the 1950s to the current time, India is the largest market for the two-wheeler segment right now.
Few Factsheet on the Global and Indian 2-Wheeler Industry
Before we move forward, here are a few interesting facts on the Global and 2-Wheeler Industry in India:
- The total sales volume of two-wheelers in India in 2025 was 21.2 million units and it is expected to grow to about 25 million units by 2025.
- The total number of Motorcycles, scooters, and mopeds are expected to increase to 63 million units by 2025 and at a CAGR growth of 3.7%.
- China is the second-largest two-wheeler market and it is expected to grow at a CAGR of 5.8%. Currently, the annual consumption (16.3 million units) in China and is second only to India (19 million units)
- The US two-wheeler market is expected to maintain a growth rate of 2.9 percent by 2025.
- By 2025, Japan is likely to experience decent growth in the two-wheeler segment and, its market is expected to have a volume of 3.9 million units by 2025.
- During the times of Pandemic (COVID-19), the global market has seen a decline in the overall production and sales, and the ripple effect of the same in the coming few quarters cannot be discounted.
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Current Scenario of 2-Wheeler Industry in India
Pic Credits: 2-wheeler market share in 2020 (courtesy: www.statista.com)
The rise of the two-wheeler segment in India has been a growth story in itself. The increase in the purchasing power of both the urban and semi-urban markets and to add to that, the low cost of ownership of two-wheelers have been the major growth drivers for this segment.
The sales of the Indian two-wheeler industry experienced a decline of 18% over the previous year in FY 2020. The overall sales volume was 17.5 million units. However, with the easing in the wrath of the Pandemic (COVID-19) and also with an increase in the manufacturing PMI, to an all-time high level in the past decade, the worst seems to be behind us. And this can also be judged from the fact that the overall increase in the volume of sales of two and three-wheeler vehicles has been on a rise. Here are a few other facts:
- The top Motorcycle sellers for the year so far have been Hero MotoCorp (sold 4.4 million units), Honda (2.79 million units), TVS (1.63 million units), and Bajaj (1.47 million units).
- The first two quarters of this year saw a massive contraction in overall sales.Q1 reported a decrease in sales by over 24% and Q2 reported a decline in sales by more than 72%.
Government Initiatives to boost 2-Wheeler Industry in India
Amma Bikes Scheme, the government initiative to entail working women in Tamil Nadu, a subsidy of 50% (up to Rs. 25,000) on the purchase of a two-wheeler. And owing to this the two-wheeler sale in the state has gone up considerably.
However, the initiative to convert all the bikes under 150cc (approx. 88% market share of overall two-wheeler production) into electric bikes has faced a lot of dissent and criticism. The aim is to convert all the bikes to electric by 2025. This transition is expected to have bearing on the business of the companies manufacturing two-wheelers.
(Source: FADA research)
Impact of BS-VI on 2-wheeler industry
Before ending this article, let us also look at the impact of the BS-VI introduction on the 2-wheeler industry in India.
Significant changes have been made in BS-VI norms effective from April 1, 2020. Owing to this and the COVID-19, the overall production has declined to nearly half. The following points highlight the impact:
- The cost of insurance has gone up owing to an increase in the price of owing two-wheeler
- The increased cost of manufacturing the vehicles has been passed on to the consumers and which has led to an increase in the price of two-wheelers. The prices have gone up nearly 20%.
- The production has also taken a hit because of the transition in the norm from BS-IV to BS-VI.
(Image: Major Shares in 2-Wheeler Industry in India | Source: Portal)
The increase or decline in the sales of the two-wheeler segment gives us an impression of the overall health of the economy. The Indian two-wheeler segment has been on a decline over the last couple of years. Anyways, with the current pandemic situation coming under control and various initiatives introduced by the government, there is only one way up for this industry. With India getting back on its feet and with an increase in the population of millennials, this industry has more reasons to go up.
That’s all for today’s Market Forensics. We’ll be back tomorrow with another interesting market news and analysis. Till then, Take care and Happy investing!!
Hitesh Singhi is an active derivative trader with over +10 years of experience of trading in Futures and Options in Indian Equity market and International energy products like Brent Crude, WTI Crude, RBOB, Gasoline etc. He has traded on BSE, NSE, ICE Exchange & NYMEX Exchange. By qualification, Hitesh has a graduate degree in Business Management and an MBA in Finance. Connect with Hitesh over Twitter here!