Overview of the Indian Two-Wheeler Automobile Manufacturing Industry

The Indian automobile industry has historically been a good indicator of how well the economy is doing, as the automobile sector plays a key role in both macroeconomic expansion and technological advancement. The two-wheelers segment dominates the market in terms of volume, owing to a growing middle class and a huge percentage of India’s population being young. Moreover, the growing interest of companies in exploring the rural markets further aided the growth of the sector. The rising logistics and passenger transportation industries are driving up demand for commercial vehicles. Future market growth is anticipated to be fueled by new trends including the electrification of vehicles, particularly two-wheelers.

Market Size

This growth demonstrates a rebound in the two-wheeler market, reflecting a recovering economy and an increasing consumer demand for personal mobility solutions. The projections for 2024 indicate a further increase to 17,843,445 units, hinting at a continued upward trend. This positive momentum is likely driven by a combination of factors, including urbanization, the need for affordable transportation, and a growing young population.

From 2024 to 2030, the Indian two-wheeler market is projected to witness consistent growth, with sales hitting 22,764,730 units by 2030.

Source: https://www.mordorintelligence.com/industry-reports/india-two-wheeler-market

Peer Comparison

The India Two-Wheeler Market is fairly consolidated, with the top five companies occupying over 92%.

Following the list of top 5 market leaders

• Hero MotoCorp Ltd.
• Honda Motorcycle & Scooter India Pvt. Ltd.
• TVS Motor Company Limited
• Bajaj Auto Ltd
• Eicher Motors ( Royal Enfield)

1) Monthly Two-wheelers Total Sale Volumes from Jan to May 2024

* Eicher motors only Two-wheeler unit ( Royal Enfield) sales figures are considered.

2) Key Figures at a Glance

3) Shareholding Pledged and Change in Promoters and Mutual Funds Holdings

4) 5 Years Average of Key Operational Metrics

Definitions –

• Cash Conversion Cycle is a term that refers to days required to get back cash spent on inventory to get back into cash from sales, therefore, the lower Average Cash Conversion Cycle is better for the entity as the possibility of cash crunch is lesser, also resulting in lower working capital finance cost.
  • Hero Motocorp and Bajaj Auto have much lower cash conversion cycle period compared to TVS Motors and Eicher Motors.
• Interest Coverage Ratio refers to the number of times the Earning Before Interest and Tax (EBIT) cover the Interest expense, higher the better is the ratio for the company. TVS has much lower interest coverage ratio making it vulnerable to default if EBIT falls.
• Operating Profit Margin refers to operating profit i.e all directly attributable expense reduced from revenue. Higher operating margin indicate efficient manufacturing capabilities resulting in better profits Eicher has higher margin at 28.57% compared with peers
• The debt-to-equity ratio (D/E ratio) depicts how much debt a company has compared to its assets. It is calculated by dividing a company’s total debt by total shareholder equity. Bajaj Auto is debt free hence is has ‘zero’ Debt to Equity while TVS has ratio of 3.38 representing high debt
• The compound annual growth rate (CAGR) is the annualized average rate of net profit growth between given years, assuming growth takes place at an exponentially compounded rate.
• The term “return on assets” (ROA) refers to a financial ratio that indicates how profitable a company is in relation to its total assets. Corporate management, analysts, and investors can use ROA to determine how efficiently a company uses its assets to generate a profit.

5) Company wise Market Shares

Hero MotoCorp Ltd

Overview: Hero MotoCorp, formerly known as Hero Honda, is the largest two-wheeler manufacturer in the world in terms of unit volume sales in a calendar year. It is based in New Delhi, India.

History:

• Founded: 1984 as Hero Honda, a joint venture between Hero Cycles of India and Honda of Japan.
• Renamed: In 2010, after the Hero Group and Honda ended their joint venture, the company was rebranded as Hero MotoCorp.

Key Products:

• Motorcycles: Splendor, Passion, Glamour, Xtreme, and more.
• Scooters: Pleasure, Maestro Edge, Duet, among others.

Market Position: Hero MotoCorp dominates the Indian market, particularly in the commuter motorcycle segment, known for its fuel-efficient and reliable products.

TVS Motor Company

Overview: TVS Motor Company is the third-largest two-wheeler manufacturer in India, based in Chennai, Tamil Nadu. It is part of the larger TVS Group.

History:

• Founded: 1978, with a collaboration with Suzuki Motor Corporation, which ended in 2001.
• Growth: Since then, TVS has grown independently, expanding its product range and market presence.

Key Products:

• Motorcycles: Apache series, Star City, Radeon, Sport.
• Scooters: Jupiter, Ntorq, Scooty Zest, and Pep+.
• Mopeds: TVS XL100, a popular model in rural areas.

Market Position: TVS is known for its innovation and variety, catering to a broad segment of the market from commuter bikes to performance-oriented motorcycles and scooters.

Eicher Motors

Overview: Eicher Motors is an Indian multinational automotive company, and its flagship brand in the two-wheeler segment is Royal Enfield. Royal Enfield is one of the oldest motorcycle brands in continuous production.

History:

• Founded: Royal Enfield’s history dates back to 1901 in England. Eicher Motors acquired the Indian operations of Royal Enfield in 1994.
• Turnaround: Under Eicher, Royal Enfield was transformed from a struggling brand into a premium, global motorcycle brand.

Key Products:

• Motorcycles: Classic 350, Bullet, Himalayan, Interceptor 650, and Continental GT 650.

Market Position: Royal Enfield is known for its classic and retro-styled motorcycles, appealing to both Indian and international customers looking for leisure and lifestyle motorcycles.

Bajaj Auto Ltd

Overview: Bajaj Auto is a major Indian two-wheeler and three-wheeler manufacturing company headquartered in Pune, Maharashtra. It is the world’s third-largest manufacturer of motorcycles and the second-largest in India.

History:

• Founded: 1945, initially importing and selling two-wheelers.
• Major Transformation: In the 1980s and 1990s, Bajaj transformed into a motorcycle manufacturer.

Key Products:

• Motorcycles: Pulsar, Dominar, Avenger, Platina, and Discover.
• Three-Wheelers: RE series, which is a major player in the auto-rickshaw segment.

Market Position: Bajaj is known for its performance-oriented motorcycles and has a significant presence in the international market, particularly in Africa and Latin America.

Road Ahead…!

The transition to alternative fuels in the Indian two-wheeler market is driven by government incentives, rising fuel prices, and increasing environmental awareness. These companies are expected to expand their electric vehicle portfolios, invest in new technologies, and enhance their production capabilities. The future will likely see a mix of electric, hybrid, and alternative fuel (like ethanol and hydrogen) two-wheelers becoming mainstream, supported by improved charging infrastructure and technological advancements.

The companies that can innovate and adapt quickly will be at the forefront of this transformative shift, tapping into the growing demand for sustainable and efficient transportation solutions.

Hero Motocorp has introduced its electric scooter, the Hero Electric, and is heavily investing in EV technology and infrastructure.

TVS Motor has been proactive in the alternative fuel transition, with the launch of the iQube Electric scooter.

Eicher ( Royal Enfield ) is gradually stepping into the EV market, focusing on research and development to create electric versions of its iconic motorcycles.

Bajaj Auto has launched the electric scooter, Chetak, which has received a positive market response. Bajaj’s partnership with KTM and their investments in electric vehicle (EV) technology signal a strong commitment to this transition.

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Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet, and is subject to changes. Please consult an expert before making related decisions.