The
Indian Passenger Car And Two Wheeler Industry
ICRA Sectoral Analysis – November 2005
PASSENGER CARS
Operating Performance
During April-September 2005, the passenger car sales in
India at 409,570 units, marked a growth of 6.1% over the
previous year. The growth in the domestic sales of passenger
cars was led by healthy growth in volumes reported by compact
and mid-size segments even as the mini and executive segment
reported a sharp decline in sales during the period under
review.
Sales volumes in the luxury and premium segments were also
healthy (although on a small base). While the share of mini
segment declined to 9.8% in April- September 2005 (from
15.5% in April-September 2004), the share of compact and
mid-size segments increased.
The share of compact segment in the domestic car sales increased
from 59.4% in April-September 2004 to 64.8% in April- September
2005, mid-size from 21.2% to 22.2% and the share of Premium
segment was stagnant at 0.7% while that of executive segment
declined from 3.2% to 2.4% in the first half of 2005-2006
(H12005-2006). The car sales were impacted during April-July
2005 partially on account of floods in Gujarat and Maharashtra
and VAT related issues.
Car exports by Indian passenger car industry (at 87463 units
during April-September 2005) marked a growth of 15% over
the corresponding previous. Car exports of HMIL increased
by 38% and of Tata Motors increased more than five times
while that of Maruti Udyog Limited (MUL) declined by 22%,
in the period under review.
Domestic Passenger Car sales by Companies
| |
July-September |
|
April-September |
|
| |
2004 |
2005 |
%
Growth |
2004-05 |
2005-06 |
%
Growth |
| DaimlerChrysler
India Pvt Ltd |
533 |
410 |
-23.1 |
857 |
825 |
-3.7 |
| Fiat
India Automobiles Pvt Ltd |
1742 |
322 |
-81.5 |
3485 |
757 |
-78.3 |
| Ford
India Ltd |
6090 |
4095 |
-32.8 |
11226 |
8461 |
-24.6 |
| General
Motors India Ltd |
4496 |
4384 |
-2.5 |
9009 |
6598 |
-26.8 |
| Hindustan
Motors Ltd |
3678 |
3461 |
-5.9 |
6790 |
6879 |
1.3 |
| Honda
Siel Cars India Ltd |
9054 |
10773 |
19.0 |
92 |
31 |
24.9 |
| Hyundai
Motor India Ltd |
34479 |
39688 |
15.1 |
60002 |
77423 |
29 |
| Maruti
Udyog Ltd |
101429 |
110469 |
8.9 |
196579 |
209653 |
6.7 |
| Skoda
Auto India Ltd |
1984 |
2188 |
10.3 |
3696 |
4348 |
17.6 |
| Tata
Motors Ltd |
37515 |
34711 |
-7.5 |
71622 |
68559 |
-4.3 |
| Toyota
Kirloskar Motor Ltd |
2958 |
2159 |
-27.0 |
5582 |
4800 |
-14 |
| Total
Passenger Car |
203958 |
212660 |
4.3 |
385877 |
409570 |
6.1 |
Other Developments
| ▪ |
H12005-2006
Performance of MUL: A growth of 3.5% in total sales
volumes led by a 6% growth in domestic volumes and
a decline of 22% in exports resulted in 11% growth
in net sales during H1 2005-2006. The company was
able to contain increase in the material cost (as
percentage of net sales) but higher other expenses
led to 50 basis points decline in operating profit
margin (OPM) during H1 2005-2006. Despite a decline
in OPM, the NPM of MUL increased from 3.7% in H1
2004-05 to 5% in H1 2005-2006 on account of higher
other income and lower depreciation that also absorbed
higher tax outgo. |
| |
|
| ▪ |
Fiat
S.p.A and Tata Motors signed an Memorandum of Understanding
to analyse feasibility of cooperation, across markets,
in the area of passenger cars that would encompass
development, manufacturing, sourcing and distribution
of products, aggregates and components. |
| |
|
| ▪ |
Ford
India plans to launch its mid-size car Fiesta in
India during November 2005. |
| |
|
| ▪ |
Tata
Motors launched Indica V2 Turbo in two variants
during October 2005 priced at Rs 0.41 million (DLG
model) and Rs 0.43 million (DLX model) ex-showroom
Delhi. |
| |
|
| ▪ |
General
Motors India launched Chevrolet Optra Royale, a
new variant priced at Rs. 0.899 million. |
Outlook
The growth in passenger car sales volumes was lower during
H1 2005-2006 partially on account of floods in Western India,
especially Gujarat, and VAT related issues till July 2005.
Nevertheless expectations of healthy growth in GDP, increasing
disposable incomes and the resultant migration of households
to higher income groups coupled with ease of financing cost
indicate a positive outlook for the growth in passenger
car sales in the short to medium term. However, hardening
of interest rates and increase in the oil prices, are the
key risk factors that may affect the sales growth in car
industry.
TWO-WHEELERS
Two wheeler sales during April-September 2005
During April-September 2005, two-wheeler sales in the domestic
market increased by 14.7% over the corresponding previous.
This growth was achieved on the strength of 20.5% increase
in motorcycle sales during H1 2005-2006 even as the scooter
and moped sales declined in the same period. Motorcycle
accounted for 81.8% of the domestic two-wheeler sales followed
by scooters (13.3%) and mopeds (4.9%) in the period under
study. Among the players, Hero Honda Motors Limited (HHML)
was the market leader with 41.7% market share followed by
Bajaj Auto Limited or Bajaj Auto (26.2%) and TVS Motor Company
Limited or TVS (17.9%). Honda Motorcycle and Scooters India
Pvt Limited (HMSI) with a market share of 7.5% ranked fourth
in domestic two wheeler sales in H1 2005-2006 and all the
other players accounted for the balance 6.7%.
Domestic Sales
| Two-wheelers |
April-September |
July-September |
| Segment |
2005 |
2004 |
%
Growth |
2005 |
2004 |
%
Growth |
| Scooters |
440131 |
474617 |
-7.3 |
221919 |
255934 |
-13.3 |
| Motorcycles |
2704418 |
2244596 |
20.5 |
1169706 |
1393979 |
19.2 |
| Mopeds |
158125 |
160520 |
-1.5 |
85540 |
79060 |
-7.6 |
| 2-wheelers |
3302674 |
2879733 |
14.7 |
1511180 |
1694958 |
12.2 |
Scooter sales of all the players with the exception of TVS
declined in H1 2005-2006. While HMSI continued to be the
market leader with 45.4% market share, TVS was able to strengthen
its market share in the domestic two-wheelers market from
24.5% in H1 2004-2005 to 28.3% in H1 2005-2006.
A strong growth in motorcycle sales enabled Bajaj Auto to
improve its market share from 25.3% in H1 2004-2005 to 29.6%
in H1 2005-2006. The growth rate for HHML's motorcycle sales
were lower than that reported by overall motorcycle sales
in the domestic market, which resulted in a decline in market
share for HHML. Decline in sales of Kinetic Engineering
(KEL) and LML Ltd (LML) resulted in lower market share for
these players in H1 2005-2006 vis-à-vis corresponding previous.
In the mopeds segment, sales of TVS and KEL were marginally
higher while that of Majestic Auto declined during Apr-Sep'05
over the corresponding previous.
Motorcycles
Sales (Domestic) of Select Players
| Company |
Apr-Sep'05 |
Apr-Sep'04 |
%
change
in sales |
| |
Units |
Market
Share (%) |
Units |
Market
Share (%) |
|
| Hero
Honda Motors |
1377118 |
50.9 |
1197191 |
53.3 |
15.0 |
| Bajaj
Auto |
800017 |
29.6 |
568030 |
25.3 |
40.8 |
| TVS
Motor Co |
335643 |
12.4 |
280382 |
12.5 |
19.7 |
| Motorcycles
sales |
2704418 |
100 |
2244596 |
100 |
20.5 |
Q2 2005-2006 Performance of key players
In the Indian two-wheeler industry, the three players -
HHML, Bajaj Auto and TVS accounted for over 85% of the industry
sales in volume terms during April-September 2005-2006.
Thus, their financial performance is considered representative
for the industry.
The net sales of the three prominent two-wheeler players
marked a growth of 22% during Q2 2005-2006 over the corresponding
previous led by healthy to strong growth in sales volumes
reported by the three players HHML Bajaj Auto and TVS. Marginal
increase in the material cost was offset by lower other
expenses and higher other income thereby allowing the aggregate
to maintain the PBDIT/Total Income during Q2 2005-2006 at
the same level as corresponding previous. The NPM of the
aggregate in Q2 2005-2006 was higher than the corresponding
previous.
Financial Performance of Key Players in Q2 2005-2006
| |
Hero
Honda |
Bajaj
Auto |
TVS
Motor |
Aggregate |
| |
2005-06 |
2004-05 |
2005-06 |
2004-05 |
2005-06 |
2004-05 |
2005-06 |
2004-05 |
| Net
Sales (Rs. Million) |
21662.7 |
17571.6 |
18669.5 |
14482.5 |
7892.3 |
7428.7 |
48224.5 |
39482.8 |
| Material
Cost/Total Income (%) |
68.2 |
67.1 |
64.8 |
64.9 |
69.2 |
65.8 |
67.0 |
66.0 |
| Staff
Costs/Total Income (%) |
3.7 |
3.5 |
3.3 |
3.9 |
4.9 |
4.9 |
3.7 |
3.9 |
| Total
Expenditure/Total Income (%) |
83.0 |
82.4 |
77.4 |
78.7 |
91.2 |
91.9 |
82.0 |
82.4 |
| PBDIT
(Rs. Million) |
3766.5 |
3160.1 |
4518.4 |
3277.4 |
720.5 |
760.6 |
9005.4 |
7198.1 |
| PBDIT/Total
Income (%) |
17.0 |
17.6 |
22.6 |
21.3 |
8.8 |
10.1 |
17.9 |
17.6 |
| Interest
(Rs. Million) |
-8.3 |
-2.6 |
0.5 |
0.6 |
26.8 |
7.5 |
19 |
5.5 |
| Depreciation
(Rs. Million) |
266.9 |
208.2 |
489.8 |
464.2 |
230.7 |
222.9 |
987.4 |
895.3 |
| PBT
(Rs. Million) |
3507.9 |
2954.5 |
4028.1 |
2649.2 |
463 |
530.2 |
7999 |
6133.9 |
| PBT/Total
Income (%) |
15.9 |
16.4 |
20.1 |
17.2 |
5.7 |
7.1 |
15.9 |
15.0 |
| Provision
for Tax (Rs. Million) |
1128.7 |
1010.9 |
1120 |
850 |
143.5 |
187.8 |
2392.2 |
2048.7 |
| Profit
After Tax (Rs. Million) |
2379.2 |
1943.6 |
2908.1 |
1799.2 |
319.5 |
342.4 |
5606.8 |
4085.2 |
| PAT/Net
Sales (%) |
11.0 |
11.0 |
15.6 |
12.4 |
4.0 |
4.6 |
11.6 |
10.3 |
PBDIT
- Profit before depreciation, interest and taxes
PBT - Profit before tax
PAT - Profit after tax (after adjustments for exceptional
and prior period items)
Compiled by INGRES |
Bajaj Auto Limited
A 29% increase in the net sales of the company was led by
30.5% growth in the motorcycles during Q2 2005-2006 even
as other two-wheeler sales and three-wheeler sales of the
company marked a modest increase in the period under study.
Lower other expenses and employee costs coupled with higher
other income led to an expansion in PBDIT/Total Income of
the company. Higher PBDIT/Total income coupled with lower
depreciation resulted in 320 basis points expansion in NPM
in Q2 2005-2006 over the corresponding previous. In absolute
terms, the PAT (before prior period items) of the company
increased by 62% during Q2 2005-2006 vis-a-vis corresponding
previous.
Hero Honda Motors Limited
A 21 % increase in the motorcycle sales volumes during Q2
2005-2006 over the corresponding previous led to a 23% increase
in the net sales of HHML in the same period. The increase
in the raw material cost of the company continued during
Q2 2005-06 and this could not be offset by decline in other
expenditure thereby leading to a marginally lower PBDIT/Total
Income during Q2 2005-2006 over the corresponding previous.
The PBDIT of the company increased by 19.2%. Despite a lower
PBDIT/Total Income, the NPM of the company imp roved in
Q2 2005-2006 on account of lower tax outgo.
TVS Motor Company Limited
A 17% increase in the motorcycle sales, 7% increase in the
scooter sales and flat moped sales led to around 6% increase
in the net sales of TVS Motor Company during Q2 2005-2006.
The PBDIT/Total Income of TVS declined marginally following
an increase in the material cost despite lower other expenses
and higher other income during Q2 2005-2006. In absolute
terms, PBDIT was 5.3% lower in Q2 2005-2006 vis-à-vis the
corresponding previous. The PAT was 6.6% lower in Q2 2005-2006
that resulted in a decline in net profit margin from 4.6%
in Q2 2004-05 to 4.0% in Q2 2005-06.
Outlook
The growth in two-wheeler sales during Q2 2005-2006 was
led by motorcycles and the moped as well as scooter volumes
declined. Apart from increasing income, access to finance
and increasing availability of fuel-efficient two-wheelers
at lower prices are expected to drive healthy growth in
two-wheeler volumes in domestic market in the short to medium
term. Also, a sharper focus on exports may have a positive
effect on the overall growth of the two-wheeler sector.
With intense competition in the domestic market, export
thrust of the players may enable them diversify revenue
stream and enhance their profitability. |
| |
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