India's two wheeler market has been growing at a brisk pace over the past few years. Between 2008 and 2013, the industry grew at a CAGR of 14 per cent, which is much higher than the global average of just around 3 per cent. In the quarter ending June 2014, the two wheeler segment grew by 13 per cent year on year and the month of July marked 12 successive months of sales acceleration for the segment.
Faced with such growth prospects, players are realising the need to ramp up aggressively on market share. Honda Motorcycles & Scooters India Ltd (HMSI) plans to establish the world’s largest scooter manufacturing facility in Gujarat, which will have a capacity of around 1.2 million units per annum and a projected investment of Rs 11 billion. HMSI is visibly enthused by the manner in which scooters are outgrowing the overall two wheeler market with a growth rate of 23 per cent in the quarter ending June 2014. Automatic scooters have emerged as a rage because of their unisex appeal and their distinct advantages in the hustle and bustle of everyday city traffic.
Similar enthusiasm is palpable across the sector. India Yamaha Motor Pvt Ltd has announced that its Chennai plant is expected to be operational by December this year with an initial capacity of 4.5 lakh units per annum. Hero Motocorp plans to increase its manufacturing capacity to 9.2 million vehicles in the next two years from 7.65 million vehicles currently. Suzuki Motorcycles India plans to launch six new two wheelers by the end of 2014 and four of them are expected to be scooters. TVS Motor has set a target to launch at least one new product every four months for the next three years. Even Mahindra Two Wheelers is stepping on the gas with a goal of introducing nine new models in 2014 and 2015 across segments of scooters and motorcycles.
The growth trend in the two wheeler segment in India looks quite sustainable, driven by several factors including prospects of accelerated economic growth, favourable demographic profile, relatively low penetration, rising urbanisation and healthy replacement demand. Strategic expansion plans being undertaken by players at this juncture are expected to hold them in good stead for the future.