The current slump in the domestic two-wheeler market has not stopped India motorbikes and scooters from doing brisk business overseas. In Africa, Latin America and parts of Asia, ?made-in-India? bikes are fast becoming popular as demand for two-wheelers in these developing regions grow. What puts Indian bikes in pole position is their superior quality and competitive prices.
So, it?s no surprise that the export of two-wheelers from India went up 21.03% during April-February 2007-08 to 11,20,103 units against 9,25,464 units during the same period last year. This, despite the fact that the rupee has appreciated over 13% to the dollar since January 2007.
?Indian bikes are quite competitive when pitted against Japanese products, both in terms of quality and pricing. Hence, there is a huge demand for made-in-India two-wheelers, and this is expected to go up significantly over the next three to five years when these markets become more structured in terms of distribution,? says HS Goindi, senior vice-president, international business, TVS Motors.
Huge margins due to a lower marketing spend and wider acceptability of two-wheelers from India have driven India?s top bike makers to zero-in with their machines aggressively on overseas markets. This has led to a phenomenal increase in their exports vis-?-vis total sales.
?Major two-wheeler exporters from India do not spend any significant amount of money on marketing activities in developing countries in Africa, Latin America and Asia. As a result, their profit margins are as high as 20-30% in these countries compared with the market back home,? says an industry expert. The existence of unorganised players in these markets in a big way is another reason for the success of Indian manufacturers, he adds.
The exports of Bajaj Auto Ltd, the largest from India, has gone up 40.50% to 5,67,306 units during this period. Chennai-based TVS Motors has witnessed 31.15% growth in exports at 1,23,942 units and Honda Motorcycle and Scooter India Ltd (HMSI) registered growth of 42.37% at 32,592 units during April-February 2007-08.
According to Goindi, TVS?s bike exports have shot from 7% last year to 10-12% of its total sales this year, and the company hopes to increase it to 35-50% next year. ?In fact, if the demand continues to grow at this pace, we hope to increase our total exports five times in the next five years,? says Goindi.
This is a distinct possibility for all bike makers, says an expert. ?With no more capacity constraints after major players like Bajaj Auto, Hero Honda and TVS Motors expanded their facilities or set up new units, there is scope for more production and hence, more exports,? says the expert.
Agrees NK Rattan, vice-president (sales and marketing), HMSI. ?With a huge production line in place and a continuous slump in the domestic market, it is obvious that all manufacturers will explore opportunities in markets abroad and wherever there is scope to recover margins that have been under pressure in India due to unavailability of retail finance and high interest rates.? The company exported around 25,000 units in 2006-07 and expects to close this financial year with around 35,000 units being exported to overseas marketss.
?Unlike countries in Europe and North America, developing nations have similar needs of mobility like India?s. Therefore, Indian products are well suited there. This is contrary to developed nations where product demand is absolutely different and hence, such markets do not offer the kind of opportunity that is there in Africa and Latin America,? explains Goindi. There is no denying the fact that the global markets are offering big opportunities to Indian two-wheeler makers.
?Bajaj?s fast penetration into developing markets has been possible because the company has created a huge business scale with production capacities that are too big to meet the domestic demand. As such, the company is aggressively entering into joint ventures or adopting the traditional dealership route to sell products. However, for TVS Motors, apart from the fact that the company has also enhanced capacity, it is losing out in the domestic market due to unavailability of products across all categories. No wonder the company is betting big on international markets,? adds an analyst.
But, with a 4% reduction in excise duty on two-wheelers, the domestic market may look up once again, but this will not mean that the bike makers will apply the brakes on exports, feels Rattan of HMSI.
?Even if the market back home revives, the exports will not slow down. Instead, domestic players will continue to reach out to newer markets as it would help them innovate and then use these innovations in India,? he says.
Another analyst feels, ?The excise on two-wheelers might have been brought down, but with basic factors like high interest rates and unavailability of retail finance?especially in the semi-urban and rural areas?continuing, it is unlikely that the trend will be reversed.?
