Changing contours of the two-wheeler market

A 20% compound annual growth rate in domestic scooter sales over the past five years makes it the best among two-wheelers. What’s more, since 2010, the share of scooters in the two-wheeler market has doubled to 30.5%.

India Ratings and Research Pvt. Ltd forecasts that domestic scooter sales growth will continue to outpace that of motorcycles and mopeds, though the higher base effect might temper growth. Fiscal year 2016 bears testimony to this—annual scooter sales grew by 12%, that of motorcycles were flat and mopeds came down by 1%.

“Suitability for male and female members of the family and urbanization will ensure a 10-13% growth in fiscal (year) 2017,” explains the report.

Another reason scooters raced past other segments in the past few years is the aggressive strategies adopted by companies like Honda Motorcycle and Scooter India Pvt. Ltd. The firm controls half the scooter market. Firms like Hero MotoCorp Ltd and TVS Motor Co. Ltd, from the listed universe, also gained from the expanding scooter market.

On the other hand, two consecutive years of monsoon deficit affected motorcycle and moped sales. Fortunately, with their strong brand equity in international markets, motorcycle manufacturers made good the loss in domestic sales through higher exports. About 90% of two-wheeler exports comprise motorcycles, with Bajaj Auto Ltd leading the pack.

In the medium term too, motorcycle exports from India may continue to rule the roost. But lower interest rates and improving affordability in urban areas will fuel domestic scooter sales. The fate of the other two segments on the home turf depends on the monsoon, as a large part of the sales comes from rural areas.