Published on 24/04/2019 2:56:40 PM | Source: Motilal Oswal Securities Ltd

Auto Sector - Scooter sales decline for the first time in FY19 By Motilal Oswal

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Scooter sales decline for the first time in FY19

125cc segment sales grew ~48% in FY19, while 110cc declines for the first time

We analyzed the brand-wise data of the domestic 2W industry; we learnt that the 2W industry in India grew at 4.9% in FY19. For the first time in many years, motorcycle growth at 7.8% outpaced scooter sales, which declined 0.3% in FY19. This led to a decline in share of scooters by 160bp to 31.6%. Growth of 7.8% in motorcycle sales was led by the economy segment, which grew ~23% for the second consecutive year, whereas the premium segment grew 8.8%.

* In FY19, for the first time, motorcycle sales growth at 7.8% outpaced sales of the scooter segment, which declined 0.3%, leading to share of scooter declining to 31.5% (v/s 33.1% in FY18). The exit month scooter share also declined to 26.7%.

* The decline in the scooter industry was restricted by the 125cc category, which is estimated to have grown ~47% in FY19 (~25% contribution to scooters), whereas the 110cc category witnessed a decline for the first time of ~10%.

* Rural recovery and price actions by Bajaj drove healthy growth in the economy segments, which grew ~23% in FY19 (+23% in FY18). While the premium segment grew ~9% (premium ex-RE grew ~12%), the executive segment was flat.

* BJAUT gained significant share in the economy segment (+670bp), but it came at the expense of TVSL (-310bp) and HMCL (-360bp).

* Unlike previous years, the growth in the premium segment at 8.8% in FY19 was driven by growth in non-RE brands, which grew by 11.3% (led by Apache, Pulsar and Xblade). RE grew 14.8% during the same period.

* 2W market share: BJAUT/TVSL gained market share by 220bp/60bp to 12%/14.8% in FY19, whereas HMCL (-70bp) and HMSI (-250bp) saw market share contraction.

* HMCL/HMSI/TVSL cut Mar’19 production by 20%/ 67%/6% while BJAUT’s production grew 21%. Production cuts should last in 1QFY20 as demand is expected to remain tepid.


Motorcycle growth outpaces scooter growth in FY19

* Strong pick-up in rural demand (especially in 1HFY19) resulted in motorcycle sales growing 7.8% in FY19. For the first time, motorcycle sales outpaced scooter sales, which declined 0.3%.

* The economy segment in motorcycles showed significant growth of 22.7% v/s the motorcycle industry for the second consecutive year, helped by rural recovery and pricing actions by BJAUT in its CT100 (spoke wheel) category.

* The executive segment remained flat in FY19. Within this segment, Executive 100 witnessed a better growth of 4.7% v/s decline of 10.1% in Executive 125.

* BJAUT made a comeback in the Executive 100cc segment in Jan’18 with Discover 110; its wholesales averaged 6.2k units in FY19.

* HMSI’s Shine continued gaining share from HMCL’s Glamour and BJAUT’s V and Discover in the executive 125cc segment. Consequently, the market share gap between HMSI and HMCL has widened, with HMSI achieving rank-1 spot with 53.5% market share in FY19 (+560bp YoY). HMCL’s share stood at 40.8%.

* Moped sales increased 2.4% YoY to 880k units, although its contribution in the 2W sales mix declined to 4.2% in FY19 from 5.7% in FY13.


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