Bike Makers Beware - Part 2

For the following discussion Iam considering the holistic view and avoiding the ongoing skyrocketing inflation, crude prices & even the other political factors which might affect the subsequent reasoning.

In the earlier article, I have indicated that the two wheeler market slowdown /stability might not be a temporary phenomenon. To justify that observation, data from a single financial year is not enough. What we have to look for some empirical evidence .

To illustrate the gradual decline, Iam taking the example of a developed economy, Japan .As it is clearly visible , two wheeler sales in Japan have declined from 1.7 million units in 1989-90 to a mere 0.7 million units in 2007-08.

In the same vein, If we can include the data for other major Motorcycle selling countries like Indonesia (3rd largest consumer of two wheelers in world after China & India ) . Overall sales have declined from 3.5 million units to 3.2 million units in 2008.

Lets consider the world’s two wheeler market . Approximately the market is in the tune of 55-60 million units per year. Out of the pie , almost 3/4^th sale comes through 4 major Asian countries .

Apart from China & India , the two wheeler sales growth has plateaud in almost all the other countries . The apparent reason is the population of the mentioned countries and the still-developing stage of growth these countries are in .

Time for a little micro-analysis . Motor cycles mainly have grown in the executive segment ( 100-125 cc) in China & India . This segment doesn’t even exist in most of the countries . This segment of bikes owes their popularity to their extraordinary mileage & easy mobility in traffic . But their sales have stabilized a bit over a past few years after witnessing tremendous growth .

So what next ?

What we have not seen in India is a sub 75 cc bike segment ( eg : Honda Cubs ) especially active in other Asian countries like China & Japan . They could be clutter breaking as they can be more fuel saving & possess better mobility But I guess India has passed through an era of mopeds ( Luna , Hero Puch etc.) & it would take a lot to bring them back there.

There remains the 150 cc + segment which is growing at a good pace but with limited volumes the future doesn’t augur well . Yes , the scooter/scooterette market has revitalized & a certain draw for most companies . But for the Big Three ( Hero Honda , Bajaj & TVS) the testing times have come . And they are already looking through diversification initiatives .

There are several posts/ripostes to the above analysis & the first one comes from me only . I’ve discounted the petrol prices initially , but can I ? Also the shoddy infrastructure of the country which would hinder the 4-wheeler growth which in turn benefits two-wheeler sales atleast for next 5-10 years . Next debatable topic is Mass transport & its evolution in India . What are the impacts of these factors over 2-wheeler sales in future ? .

This merits another discussion & my next post will be dedicated to the same . Your suggestions/queries/brickbats are welcome .

Bike Makers Beware ………………………………

Tremendous buzz is all over surrounding the automobile market . Every day a new entrant worth its salt is making its presence felt in the world’s most dynamic market now . Must have heard of the new Nissan-Suzuki tie-up .Even apna Ratan Bhai Sa… has been included in top 73 brilliant brains in the world due to his pint sized dynamo “nano”.

But suddenly one envisages a paradigm shift in buying patterns of Indian consumers. The shift has resulted in the suffering of the most talked about segment in automobiles for last few years i.e. the “two wheeler market “ especially bikes . Have a look at the following numbers .

Data Source : SIAM Website
It is evident from the above illustration that saturation , even decline has struck the two wheeler segment. Whether this situation is a long term phenomenon that only time has any clue, but certain indicators point to the shift that has made bike makers already concerned.

Lets not jump to any grave-digging yet , but its true that companies like Bajaj Auto have already indicated future forays into passenger cars . They might justify the move as a diversification tactic but deep inside they know that any further consumer shift would hit them hard financially.

Lets talk about the indicators we were earlier talking about .
1.Fluctuation of interest rates which have pushed the sales down tremendously .( 90% of two wheelers are getting financed today)
2.To counter the finance downturn, cos have to reduce costs which would result in further tightening of the belt for bike makers.
3.Incredible interest towards “Tata Nano” , success of which will eat atleast 10-15% of the two-wheelers market . Also that segment is the most profitable one for the cos.
4.Scooters/Gearless scooterettes have a positive growth rate which makes bike’s rate of decline even more alarming.
5,Finally , we are all waiting for that new Pulsaresque bike launch & not whimpers like TVS flame or even Bajaj’s own XCD (even if it’s a moderate success due to delay in Flame launch)

These indicators may just point towards a trend and not a certain doomsday warning. The bike makers can always look towards our ever growing middle class for some inspiration . More on this topic in the next outing . Watch this space for more …………