Automobile sales are growing at the slowest pace in recent years. The development is not due to three-wheelers or commercial vehicles but the motorcycle, biggest segment of the industry by volume.
Data from the Society of Indian Automobile Manufacturers (Siam) shows the Indian motorcycle market has grown by less than six per cent cumulatively since 2013-14. In the same period, the domestic passenger vehicle market expanded by 21 per cent, commercial vehicles by a little over 12 per cent and three-wheelers by six per cent.
The annual domestic volume of motorcycles has remained stuck within the range of 10 to 11 million units a year. While consecutive deficient monsoons (2014 and 2015) were a factor, the larger impact is coming from a shift towards scooters. If we include the latter, the two-wheeler market shows growth of 19 per cent between FY14 and FY17. This implies that all the growth was from scooters.
The domestic scooter market has expanded from 3.6 million units in FY14 to 5.6 million in FY17, thereby, growing 55 per cent. However, motorcycle volumes grew less than six per cent, from 10.48 million to 11.09 million. This is also visible in the sales by the top players. Hero MotoCorp, the country's largest two-wheeler maker, sold 5.42 million motorcycles in FY14 and 5.69 million in FY17, shwoing a cumulative growth of five per cent in domestic volumes.
Bajaj Auto, second biggest in motorcycle segment, sold 2.09 million units in FY14 and 2 million units in FY17. "There has been hardly any growth in motorcycle sales for four years," said the Pune-headquartered company in its FY17 annual report.
The lack of growth to some extent is, as mentioned earlier, an outcome of the deficit monsoons of 2014 and 2015, which impacted sentiment in rural markets that account for almost half of the motorcycle sales in the country. At the same time, there is a shift to scooters in many urban markets, due to convenience.
Scooters have captured more than a third of the domestic two-wheeler market for the first time in a little over a decade. A sustained double-digit growth in yearly sales pushed its share to about 34 per cent in the world's biggest two-wheeler market during this year's June quarter. The motorcycle segment had over 70 per cent share in FY14; it is down to 62 per cent. Mopeds, on the other hand, have a small share of 4 per cent in the two-wheelers segment.
Hero, however, believes the domestic market has a lot of scope for growth. "The current penetration level of two-wheelers remains low. We, therefore, believe the domestic industry has significant scope for consistent growth in the years to come. As the market leader, Hero is very well poised to drive this," said Pawan Munjal, chairman.
However, Hero is also aware that a significant chunk of this growth will come from scooters. "As the market leader, we aim for leadership across all segments, both in motorcycles and scooters. Scooters are also witnessing phenomenal growth and our goal is to aggressively gain market share in this category as well. We will be augmenting our scooter portfolio over the next few quarters, with multiple new launches," said Munjal.