 |
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Home | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Automotive ICRA in November 2004 ICRA's Sectoral Perspectives - November 2004 |
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Passenger Car Industry During April-September 2004, the passenger car sales in India at 385,859 units, marked a growth of 20.8% over the previous year. The growth in the domestic sales of passenger cars was led by strong growth in volumes reported by compact and mid-size segments even as the mini segment reported a sharp decline in sales during the quarter under review. Sales volumes in the executive and luxury segment were also strong and the sales in the premium segment were healthy. While the share of mini segment declined to 15.5% in April-September 2004 (from 25.9% in April-September 2003), the share of other segments increased. The share of compact segment in the domestic car sales increased from 52.4% in April-September 2003 to 59.4% in April-September 2004, mid-size from 19.2% to 21.2%, executive from 1.8% to 3.2%. The share of premium segment was stagnant at 0.7% in the period under study. New model as well as variant launches, easy availability of finance at relatively lower interest rates and price discounts offered by players continued to drive the volume sales. Car exports by Indian passenger car industry (at 76,076 units during April-September 2004) marked a growth of 41.2% over the corresponding previous. Car exports of HMIL increased by 133% while that of Maruti Udyog Limited (MUL) increased marginally. Tata Motors and Ford India Limited witnessed a decline in car exports in the quarter under review. |
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
During the quarter under review, growth in sales volumes in the two large segments i.e. Compact and Mid-size segments was strong. Sales in the Executive and luxury segments also marked a strong growth during Jul-Sep'04 vis-a-vis the corresponding previous. Sales volumes in mini and Premium segments declined in the quarter under review. Although, the volume sales of Maruti 800 declined in the quarter under review, the company's sales in Compact segment were strong. Demand for cars in the mid-size segment continued to be high on the strength of introduction of new cars as well as variants of existing models, besides stripped down versions of some cars. Honda's sales volumes continued to be strong as they increased by 172% during the quarter under review on the strength of higher volumes of its City. Sales growth of Ford India Limited continued to be healthy led by its Ikon model. Higher sales of Indica and Indigo enabled Tata Motors improve its market share in the domestic passenger car market from 17.1 % during July-September 2003 to 18.4% in July-September 2004. Sales volumes of HMIL in the domestic market improved marginally during July-September quarter. Exports of HMIL continued to be buyonant on the strength of higher exports of Santro. New Product Launches
Other Developments
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Outlook Sales incentives, introduction of new cars as well as variants coupled with easy availability of low cost finance with longer tenures continued to drive growth in the passenger car sales during the quarter under review. However, an increase in the interest rates, impact of delayed monsoons, both of which can affect the demand for passenger cars and increase in the input costs such as steel prices are key concerns for the players in the industry. As the players continue to introduce new models as well as variants of existing models, the competition may intensify further. Given the increasing competitive intensity and increase in prices of some inputs, the ability of players to control cost as well as improve productivity will be critical for improvement in financial performance. Two- Wheelers Two-wheeler Sales during April-September 2004 During April-September 2004, two-wheelers sales in domestic market marked a healthy growth of 13.2% over the corresponding previous. This growth was achieved on the strength of 14.3% increase in motorcycle sales and a 10.4% and 6.5% increase in the scooter and moped sales respectively, during the period under study. For the period April-September 2004, the growth in scooter sales volumes was led by strong sales growth reported by Honda Motorcycle and Scooter India Pvt Ltd (HMSI) and TVS Motor Co Ltd (TVS) even as the scooter sales volumes of all other manufacturers declined. HMSI continued to be the largest scooter player and increased its share from 32% during April-September 2003 to 46% in April-September 2004 on the strength of 57% growth in scooter sales volumes. HMSI was followed by TVS and Bajaj Auto, with market share of 24% and 16% respectively. Motorcycle sales of Hero Honda Motors Ltd (HHML) and Bajaj Auto marked a strong growth over the corresponding previous. Sales volumes of Yamaha and Royal Enfield Motors Ltd (REL) were healthy while that of Kinetic Engg Ltd (KEL) was stagnant and motorcycle volumes of LML Ltd and TVS declined. Growth in sales volumes of the three moped players, i.e. TVS, Majestic Auto and KEL ranged between 5-8% during April-September 2004 over the corresponding previous. |
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
For the quarter July-September 2004, motorcycle sales of major players, viz, Hero Honda Motors Ltd (HHML) and Bajaj Auto, in India increased by 37.7% and 31.8% respectively. Among the other players, motorcycle sales of REL increased by 6% during July-September 2004 over the corresponding previous while that of KEL, LML, TVS and Yamaha declined. HHML strengthened its market share in motorcycle volumes from 44% during July-September 2003 to 51 % in July-September 2004. The market share of Bajaj Auto also improved during July-September 2004 over the corresponding previous while the market share of TVS declined to 13% (as against 18% in the corresponding previous). The following table presents the trend in the market share of key players for July-September 2003 and July-September 2004.
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
On the exports front, scooter exports during July-September 2004 were stagnant. Motorcycle exports at 58,937 units during July-September 2004 marked a growth of 31 % over the corresponding previous. While motorcycle exports of most of the players increased, Yamaha and KEL were exceptions. Q2 2004-2005 Performance of Key Players In the Indian two-wheeler industry, the three players HHML, Bajaj Auto and TVS accounted for over 80% of the industry sales in volume terms during July-September 2004-2005. Thus, their financial performance is representative for the industry. The net sales of the three prominent two-wheeler players marked a growth of 20.6% during Q2 2004-2005 over the corresponding previous led by strong sales growth reported by HHML and healthy sales growth by Bajaj Auto even as the net sales of TVS declined. Increase in the material cost were partly offset by the decline in the employee costs and other expenses (as percentage of total income) further translating into a decline in PBDIT/Total income during Q2 2004-2005. This coupled with decline in other income resulted in decline in the net profit margin for the aggregate. |
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Bajaj Auto Limited Strong growth in the sales volumes of motorcycles and healthy growth in three-wheeler sales volumes despite a decline in the scooter and step-thru sales of the company led to a 16% in the net sales of Bajaj Auto during Q2 2004-2005. Higher material cost on account of increase in prices of certain raw materials, such as, steel, aluminium, plastic, etc could not be offset by the decline in overheads and employee expenses of the company (as percentage of total income) thereby leading to a decline in the PBDIT/Total income of the company. Lower PBDIT/ Total income coupled with lower other income could not be offset by marginal decline in depreciation and tax provisions (as percentage of total income) leading to a decline in PAT/Total income during Q2 2004-2005 over the corresponding previous. In absolute terms, the PAT of the company was 7% lower vis-a-vis corresponding previous. Hero Honda Motors Limited A 38% increase in the motorcycle sales volumes during Q2 2004-2005 over the corresponding previous led to a 39% increase in the net sales of HHML in the same period. The increase in the raw material cost of the company on account of increase in the prices of input, such as, metals, plastics, etc and higher other expenditure was partly offset by decline in the employee costs leading to a decline in PBDIT/Total Income during Q2 2004-2005 over the corresponding previous. The PBDIT of the company increased by 27%. Decline in PBDIT/Total Income further resulted in the decline in the NPM of the company in Q2 2004-2005. TVS Motor Company Limited A 13 % decline in the motorcycle sales, despite a 17% increase in the scooter sales and 5% increase in the moped sales of the company, led to around 2 % decline in the net sales of TVS during Q2 2004-2005. Although, the company was able to contain its material cost (as percentage of total income) during Q2 2004-2005 and its employee costs (as percentage of total Income) Increased, TVS was able to maintain its PBDIT/Total income in Q2 2004-2005 over the corresponding previous. In absolute terms, PBDIT was 2% lower in Q2 2004-2005 vis-a-vis the corresponding previous. The PAT was 7% lower in Q2 2004-2005. New Launches
Outlook Although, the three segments of the two-wheelers market reported positive growth during Q2 2004-2005, the growth in sales continued to be led by motorcycles. Two-wheeler sales volumes are expected to be healthy in the short term. However, increase in interest rates, impact of delayed monsoons that may affect the rural demand, and thus the growth rate of two-wheelers market, and increasing fuel prices are the key risk factors. Given the intense competition and price wars in the domestic market, the ability of the players to contain their costs assumes importance in the backdrop of rising raw material costs. With intense competition in the domestic market, export thrust of the players may enable them diversify revenue stream and enhance their profitability. |
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||