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 3/4th 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 .
1 comment:
Hi Pranav,
Interesting presentation!!!!
However i feel the blip in the vehicle sales will be for the reasons you have not considered or mentioned at the fag end of the article. The reasons are Financing sector is once-bitten-twice-shy mode, inflation and mother-of-all issues OIL.
One inteeresting thing to observe will the adaptation of public transport by middle class in urban areas.
Also my opinion is that Two wheleer mfgs in India are more short-term planners than visionaries and have just benefited from the cant-afford-car-so-lets-buy-bike wave.
My two cents....
Cheers,
Shameek
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