Two-wheeler industry to grow 6-8 % in FY20; we will outpace it: TVS Motor

Company foresees some challenges due to migration to BSVI norms in 2020 and due to international trade environment

Auto major TVS Motor expects two-wheeler industry to grow 6-8 per cent in 2019-20, an improvement over the growth of around 5 per cent over 2018-19.

In a communication to shareholders the company said higher year-end inventory across trade, higher product costs due to escalated commodity prices of last year and advanced safety regulation implementation from April 2019 can impact the industry growth in the initial part of the year.

From April 1, 2020, the industry will undertake a significant change in migrating from BSIV to BSVI emission norms. Hence, in second half of 2019-20, BSVI transition will pose some challenges and the company is gearing itself to meet the same.

Changing trade policies of USA, Brexit and unforeseen challenges in Chinese economy can lead to escalation of uncertainty in global economic growth. Crude prices are expected to remain at the increased level of Q4 2018-19 during 2019-20 and may lead to higher costs for customers and Original Equipment Manufacturers (OEMs).

The trend of increased crude prices and improved exchange to local currency is expected to aid export market growth especially in oil dependent economies.

Consequently, the growth in two-wheeler industry during 2019-20 is expected to be around 6-8 per cent over 2018-19.

The domestic two-wheeler industry sales grew by around 5 per cent in 2018-19 at 212 lakh units, compared to 202 lakh units during the previous year. 

Good monsoon aids growth in domestic two-wheeler demand due to a significant share from rural markets. Any negative deviation from normal monsoon is a cause of concern. Effect of price increase due to safety norms implemented from April 1, 2019 in domestic two-wheelers above 125cc will be seen only in first half of 2019-20. 

Uncertainty of demand due to upcoming emission regulation will be high in second half of 2019-20. In order to leapfrog from BSIV to BSVI emission norms in domestic market from April 1, 2020, product readiness, supply chain readiness and dealership readiness will be crucial, said the company.

In recent times, competitive pressures including pricing discounts have become prevalent and this is expected to heighten until BSVI changeover on April 1, 2020. The Company will be well prepared through competitive products and actions that create sustained value, it said. It is also continuously evaluating and capturing opportunities in international markets. Company's revenues from international sales have been on consistent growth on the back of successful product launches, robust partners and entry into new international markets.

Strong presence of the company in all segments of two wheeler industry, planned new launches and expanded network of dealers will help it to consolidate its gain further and grow ahead of the industry in the coming years, added the management.