Problems in the Two Wheeler Industry - Negative Growth
Negative growth is the major problem being faced by companies in the two wheeler industry. The two wheeler industry has been shrinking continuously3. From a peak of over 40% growth in 2002 it is currently facing a growth of -12% in the second quarter of 2008. Exhibit 2 shows the recent trends.
Exhibit 2. De-growth in the industry
Analysis of the different segments leads us to the conclusion that the main reason for negative growth in the two wheeler market is the fall in demand for the 100 cc segment which has traditionally enjoyed the maximum market share as shown in Exhibit3. | FY06| 9M/07| Q4/07| Q1/08| Q2/08|
Motorcycles| 19%| 18%| 4%| -10%| -12%|
100cc| 7%| 14%| -12%| -20%| -23%|
125cc| 121%| 31%| 71%| 10%| 11%|
150cc| 29%| 22%| 43%| 28%| 22%|
Exhibit 3. Segment-wise analysis
Many factors have contributed to this phenomenon. A few of them are discussed ahead. Interest Rates
Interest rates are one of the prime reasons for the sharp fall in demand. Many banks have increased interest rates which make two wheelers costlier. Credit Crunch
Difficulty in availing loans, rising defaults, tightening of loan recovery laws and various other factors have dissuaded consumers from availing loans and led to further problems in credit lending. Oil Prices
Increasing oil prices have deterred many lower middle class families from buying two wheelers. Launch of Low Priced Cars like Tata Nano
Introduction of low priced cars will directly affect the market. The family segment would want to gradually move from two wheelers to four wheelers. The major impact of this phenomenon would be experienced in the 100-125 cc two wheelers whereas the performance segment i.e. > 125cc will continue to grow strongly. Tightening Regulations (Emission Standards)
With the introduction of the Bharat-4 norms, it will be more challenging to meet these stringent norms whilst...