The Indian three-wheeler industry, that has been clocking a 20 per cent growth in exports over the past decade, has now seen a reverse trend in the first quarter of this fiscal, when exports have dipped by 46.22 per cent.
With industry volumes of around 940,000 units in FY15, India is positioned as the largest manufacturer as well as market for three wheelers globally. As per an ICRA report in March, over the past decade, FY2006 to FY2015, the Indian three wheeler industry has witnessed a compounded annual growth rate (CAGR) of 8.9 per cent driven by steadily rising exports as well as domestic demand.
Within the overall industry, the domestic three-wheeler market stood at 532,000 units in FY2015 and has registered a CAGR of 4.4 per cent over the past ten years. In contrast to domestic demand, exports of three from India have grown at much higher pace (i.e. 20.4 per cent) during the same period.
Exports were driven by a confluence of factors including rising demand for last-mile transportation from developing countries with relatively under-developed public transport system and growing focus of Indian OEMs on markets within South Asia, Africa and Latin America.
However, exports have witnessed some down-trend since the start of this fiscal. During the first three months of the financial year, India exported 65,832 units of three wheelers, down 46.22 per cent from 122,410 units in the same period previous year.
Rakesh Sharma, president of international business at Bajaj Auto said that a combination of factors were actually responsible for this decline. "A host of regulatory moves by countries like Sri Lanka and Bangladesh including duties, operative requirement etc have impacted the volumes. Sri Lanka increased duties consistently for some time, and therefore the end price of the vehicle is now not as attractive to consumers there as before," he said adding that the devaluation of the Nigerian currency (another key export market) too dented demand.
Bangladesh is a key market for three wheeler exports in South Asia. "We had a market share of 53 per cent in diesel three-wheeler category. Currently, the three wheeler industry in Bangladesh is seeing a decline due to changes in regulation at the local level (as per the new regulation, three wheelers are not allowed to operate on highways)," said Pravin Shah, president & chief executive (automotive), M&M. The company had, in fact, exported only nine units in May, a year-on-year dip of 96.56 per cent.
The situation is unlikely to improve in the near future.
Shah added, "We do not expect any major changes in the three-wheeler industry in near future. As far as Sri Lanka is concerned, it is the largest market for three wheelers and mostly petrol driven. Frequent changes in duties has affected the three wheeler industry. In November 2015, duties increased from 105 per cent of cost insurance and freight (CIF) to Sri Lankan rupee 1500 per cc and further increased to Sri Lankan Rupee 1600 per cc in May'16 for petrol driven three wheelers. Sri Lanka being primarily a petrol small three wheeler market, Mahindra does not have any presence there".
As per industry estimates, while countries such as Sri Lanka, Bangladesh (within South Asia) followed by Middle East & Africa account for majority (around 90 per cent) of exports from India, Indian OEMs have also ventured into the relatively developed markets in the ASEAN and Latin American region over the past few years. Within the exports pie, Bajaj Auto continues to be the largest three-wheeler exporter from India, contributing 70 per cent to the total sales, ICRA said. However, over the years, OEMs like TVS Motor, Piaggio and M&M have also started making in-roads into international markets.