2-wheeler industry to grow 8-9% in FY15; 1-2% next fiscal:ICRA

Domestic two-wheeler industry is estimated to log 8-9 per cent growth for 2014-15, but it will decelerate to 1-3 per cent in the next financial year because of limited flow of first time buyers, rating agency ICRA said.
It will be driven by increasing penetration of scooters even as the larger segment of motorcycles continues to post modest growth supported mainly by replacement demand, ICRA said in its report.
Notwithstanding the strong revival witnessed early in FY15, volume growth in the Indian two-wheeler industry has reported deceleration over the last few months dragged by declining volumes of motorcycles segment, it said.

ICRA expects two wheeler demand growth to decelerate from this level in 2015-16 to around 1-3 per cent in view of limited flow of first-time buyers whose disposable incomes are unlikely to expand till India's economic growth turns more reassuring.
Over the medium term, this industry is expected to report a volume CAGR of 8-9 per cent to reach a size of 22-23 million units in both domestic and exports by 2016-17.
ICRA said that various structural positives associated with the domestic two wheeler industry include favourable demographic profile; moderate two wheeler penetration levels (in relation to several other emerging markets), under developed public transport system, growing urbanization, strong replacement demand and moderate share of financed purchases remain intact.

Besides, there is large opportunity available to grow presence in overseas markets, mainly Africa and Latin America.
ICRA said the motorcycle volumes faltered after a positive first half of 2014-15 and OEMs lined up new models to woo customers. Accounting for over 65 per cent of two-wheeler industry volumes, performance of motorcycles has a significant bearing on the overall volumes of the industry.
Consequently, with sluggish volumes in the segment, the overall industry volume growth was also dragged down during the last four months despite continued strong performance of scooters. Though the segment grew by 11.6 per cent YoY during H1 FY15, growth faltered during Q3 FY15 with motorcycle volumes posting a decline of 5.4 per cent YoY and 6 per cent YoY in January 2015.