2-wheelers may switch to slow lane next fiscal

Written by Ronojoy Banerjee | Ronojoy Banerjee | New Delhi | Updated: Feb 11 2012, 06:14am hrs
Even when car companies took a knock on higher prices, fuel costs and interest rates, two-wheeler sales remained the bright spot, soaring 25% in 2009-10 and 2010-11. That may be about to change.

Leading two-wheeler makers Hero MotoCorp, Bajaj Auto and TVS Motor have sharply reduced their sales growth forecast for the fiscal on high base effect, finance costs and tepid crop growth in some places. Since two-wheelers make up three-fourths of the countrys automobile market, any drop in growth will bring down aggregate auto sales and have a direct impact on manufacturing as a whole.

Even when car sales fell 2.28% in April-December the worst in over three years rural markets buoyed two-wheelers. Motorcycle, moped and scooter sales grew 15% during the period to nearly 10 million units against 8.6 million units in the corresponding previous period.

However, in December and January, sales growth fell on a sequential basis, setting off alarm bells at

the three two-wheeler manufacturers.

Bajaj Auto, Indias second largest two-wheeler maker, feels January-March growth could be just 5%.

At an analysts meet last month after announcing the companys third-quarter results, Kevin Dsa, president (finance) at Bajaj Auto, the countrys second-largest two-wheeler maker, had pointed to the industrys flat December sales and estimated a fourth-quarter growth of just 5%. The 5% growth in the fourth quarter is not going to become 12% from April 1, he quipped. He, however, added that over the long term, ie, three to five years, the industry could clock a growth of 12%.

TVS Motor chairman Venu Srinivasan told FE that a combination of factors the slowdown in agricultural growth, high fiscal deficit and cost of finance would drag two-wheeler sales growth to a single digit or low double digits in the next two years. Interest rates may have peaked, but if you take the high fiscal deficit into account, it will have an impact on two-wheeler sales, he added.

Hero MotoCorp painted a more optimistic picture, projecting 10-12% growth for the fourth quarter from 17-18% in the previous two quarters and almost 25% over the previous two years.

Senior vice-president (sales & marketing) Anil Dua recently told analysts that while his company's sales grew 20% in the festive season, December had seen some deceleration for the broader industry. Industry growth for December quarter has come down to 11% from 17-18% in the last two quarters, Dua said.

Honda Motorcycles and Scooters India sounded the most bullish. Vice-president (sales & marketing), NK Rattan said the company's outlook for Q4 remains unchanged. He expects HMSI sales to grow 40% in the ongoing quarter with total sales of 21 lakh units in the fiscal.

Vaishali Jajoo of Aegon Religare Life Insurance who tracks the automobile sector said: The two-wheeler sector could be under some

pressure due to factors like inflation, which is eating

into disposable incomes, higher cost of financing

and lower crop growth in certain areas.