2-wheeler firms may zip ahead this fiscal

Sector growth seen at 15%; motorcycles to be the largest contributor

The domestic two-wheeler industry is expected to ride in top gear in the current fiscal on back of the substantial gains recorded last year.

Analysts tracking the sector say the industry will grow at an estimated 13-15 per cent this year, with the largest contribution coming from the motorcycle segment.

This segment is expected to grow by 16 per cent. But the scooter segment, which is growing at 7 per cent per annum, will continue to remain sluggish. The biggest case for concern for the industry is of course the slowdown in the moped segment.

According to a domestic brokerage firm, the key drivers for growth in the two-wheeler segment are a buoyant economy, a spurt in rural incomes, higher replacement demand, availability of cheap financing on the plus side, and enhanced penetration leading to rising competition on the negative side.

Pramod Amte, automobile sector analyst with Prabhudas Liiladher, a domestic brokerage, said, "I expect the two-wheeler industry to register a growth of around 15 per cent per annum, of which the motorcycle segment will remain the biggest contributor. With stiff competition from new players such as Suzuki and Honda, the growing motorcycle segment is expected to expand further with better technology, pricing options, value-added features and services, resulting into a wider choice to the consumer."

The research head at a private client group with a domestic broking firm said, "The automobile sector is back in favour among the investors as it is an export-oriented sector, and therefore not influenced by political developments. Exports are expected to grow significantly this year, mainly in the motorcycle segment."

Impressive sales numbers in May 2004, released this week, have already led to a recovery in automobile scrips.

Most two-wheeler stocks have recovered from their recent lows on the back of strong buying support over the past two weeks. Two-wheeler major Bajaj Auto has recovered from a low of Rs 844.70 on May 17 to Thursday's close of Rs 890.

The stock had fallen nearly 3 per cent from a high of Rs 913.85 on April 1, 2004. TVS Motors, which had crashed 24.5 per cent from Rs 90.95 on April 1 to Rs 65.59 on May 17, has seen a recovery in the past few days.

The stock on Thursday closed at Rs 69 on the Bombay Stock Exchange. Others such as LML and Hero Honda, which have lost 4.6 per cent and 2.5 per cent respectively between April 1 and May 17, have now recovered from their lows. Hero Honda closed at Rs 473.45 in Thursday's trading.

Even others such as car major Maruti Udyog, Mahindra & Mahindra, Tata Motors and Ashok Leyland have registered smart gains over the past two weeks after the companies announced impressive sales figures for May.

Tata Motors, which had lost 16.7 per cent between April 1 and May 17, has now recovered all the losses and is currently trading at Rs 405.45.

Even Maruti Udyog, M&M and Ashok Leyland have recouped all their losses and are trading above their respective prices of May 17 2004.