Two Wheelers : Market Share Battles in Low Growth Phase

October 16, 2019

It has been 12 months since IL&FS crisis hit the headlines that led to complete and silent removal of risk in financial sector. This change of trend resulted in large drop in sales of automobile industry that had a high growth phase which lasted 34 months. Within this period the highest growing segment was Two Wheelers whether Motorcycles or Scooters. 

 

We analyse how the low growth phase that started since Q2FY2019 has changed the segment in terms of domestic and exports along with if any changes in Top 6 companies market share. 

 

 

Total Two Wheeler Market : 

  • The total sales of two wheeler in Q2 FY20 was 55,91,213 resulting in de-growth 17.25% from Q2 FY19 and 5.22% from Q1 FY20. 

  • Top 6 companies contributed 96.49% of total sales as compared to 96.31% in Q2 FY20.

  • Hero MotoCorp was the only company to loose market share during the period to an extent of 1.33% 

  • Bajaj Auto was the largest beneficiary as it gained market share during the period to an extent of 0.93% and was followed by Suzuki that gained 0.87%.

Domestic Two Wheeler Market : 

  • The domestic sales of two wheeler in Q2 FY20 was 46,82,662 resulting in de-growth 20.53% from Q2 FY19 and 6.61% from Q1 FY20. 

  • Top 6 companies contributed 96.26% of total sales as compared to 96.07% in Q2 FY20.

  • Hero MotoCorp , Bajaj Auto and TVS Motors lost market share during this period to an extent of 0.28% , 0.63% and 0.70% respectively.

  • Honda Motorcycle & Scooters India and Suzuki Motorcycle gained market share during this period to an extent of 1.28% and 0.99% respectively. 

Export Two Wheeler Market : 

  • The domestic sales of two wheeler in Q2 FY20 was 9,08,551 resulting in growth 5.07% from Q2 FY19 and 2.62% from Q1 FY20. 

  • Top 6 companies contributed 97.61% of total sales as compared to 98.04% in Q2 FY20.

  • Hero MotoCorp, Bajaj Auto , Honda and TVS lost market shares while Suzuki and Yamaha gained market share.

 

There has been a monthly fall in total sales of two wheelers from past 11 months except September 2019 as there was a slight uptick due to festival buying , deep discounts and easier financing norms. Within this period there has be changes inn markets shares in domestic and export categories. 

 

Hero MotoCorp has seen the most negative impact of current slowdown as it lost market share in all categories except domestic motorcycle segment where it has gained market share in mid-premium segment. But there has been large market share loss in Scooter segment and base segment of motorcycles that is cash cow for the company. This would result in more advertising and promotion spends to regain the market share inn future and in result impacting the cashflows and margins when pricing power is not present.

 

Bajaj Auto has seen the most positive impact of current slowdown as it gained market share in all segments except domestic motorcycle segment where it lost market in mid-premium segment and gained in base segment. Mid-premium segment is cash cow for the company but there was loss of market share as management was conservative in inventory build up at dealer level. But the company aggressively advertised and marketed in base segment to gain market share that impacted margins in last 4 quarters. This would now ease off as the company will reduce the spends on market share in next couple of quarters as the market share gain become more sustainable.

 

TVS Motor has seen negative impact of the current slowdown as it lost market share in all motorcycle segments in domestic or export markets but gained in domestic scooter segment. The biggest drop was in domestic market segment that was led by mid-premium segment as the company delayed its BS VI models in the main segments and financing activity was low at dealerships. Gain in domestic scooter market is positive as it helps gain pricing power in the segment helping in better margins as it is low margin segment.

 

We expect these market and market share changes to sustain and move in the same direction for coming 2-3 quarters at least irrespective of any revival in sales. And the sequential growth will improve for automobile sector in October which will be led by Two wheelers.

 

Our Top Pick in Two Wheeler Segment is Bajaj Auto.

 

 

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