2-Wheeler – The Road Ahead

Two-wheeler majors’ Feb sales declined c10%Y/Y – motorcycle sales declined 10%, due to subdued demand and a fairly challenging base effect. Hero Honda and Bajaj’s motorcycle declined ~5-8% Y/Y, whilst TVS’ motorcycle sales de-grew ~34%.

The latest launches over 3Q were Hero Honda’s ‘Hunk’ (a 150cc bike that is positioned against Bajaj’s Pulsar and TVS’ Apache). Within the 125cc category, TVS’ Flame and Bajaj’s XCD125 were the key new models.

The recent reduction in excise duties to 12% from 16% on both 2- and 3-wheelers has been passed on to customers – Hero Honda has reduced prices by Rs 1,300-2,400 to pass on the excise benefits to customers. Bajaj Auto has just a while ago informed us that it has reduced Motorbike prices by upto Rs 3,000.

Volume growth should improve over FY09-10E, given a) reduction in product price points due to tax benefits, and b) higher disposable incomes due to lower tax rates. Financing to the sector remains a concern at this juncture, with financiers continuing to shy away.