 "Three-wheeler volumes expected to grow 10% in FY17: ICRA report")
After registering a growth of 10.8% in volume terms during FY15, the demand for three-wheelers has been on a declining trend since the beginning of the current fiscal year (i.e. down 2.9% in 10 months FY 2016). However, as per a recent ICRA report, the industry volumes are expected to recover and clock 8-10% growth in FY17.
The fall in demand for three wheelers in the past few months has primarily been due to lack of fresh permits being issued by various Road Transport Authorities (RTAs) unlike in the previous year when fresh permits were issued by states such as Delhi, Maharashtra, Hyderabad and Chandigarh.
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However, a research report on the Indian commercial vehicle industry said by ICRA expects industry volumes to recover and grow by 8-10% in the domestic market in FY17 (estimates).
During the current fiscal, three-wheeler exports from India have grown by 3% to 360,000 units (in 10 months FY16). Given the tight liquidity scenario, ICRA expects three wheeler exports to remain subdued in the near-term. However, over the medium-term, the segment is likely to register healthy growth on back of structurally favorable growth drivers and improving distribution reach of Indian OEMs.
With industry volumes of around 940,000 units in FY15, India is positioned as the largest manufacturer as well as market for three-wheelers, globally. The three-wheeler industry has been clocking a strong 8.9% unit sales growth over the past decade, the report highlighted.
Between 2006 to 2015, the three wheeler industry in India has witnessed a CAGR of 8.9% in unit sales driven by steadily rising exports as well as domestic demand.
Within the overall industry, the domestic three-wheeler market stood at 532,000 units in FY15 and has registered a CAGR of 4.4% over the past ten years. In contrast to domestic demand, exports of three wheelers from India have grown at much higher pace (i.e. 20.4%) during the same period.
As a result of this trend, the share of exports in three wheeler industry volumes has risen from 18% (in FY06) to almost 43% (in 10-months of FY16).
India’s three wheeler exports have grown at a CAGR of 20% over the past decade. With export sales of over 410,000 units in FY15, India ranks amongst the leading exporter of three-wheelers, globally. Over the past decade (i.e. FY 2016-15), India’s three wheeler exports have grown at a CAGR of 20.4% (in unit sales).
As per industry estimates, while countries such as Sri Lanka, Bangladesh (within South Asia) followed by Middle East & Africa account for majority (around 90%) of exports from India, Indian OEMs have also ventured into the relatively developed markets in the ASEAN and Latin American region over the past few years.
Within the exports pie, Bajaj Auto continues to be the largest three-wheeler exporter from India, contributing 70% to the total sales. "However, over the years, OEMs like TVS Motors, Piaggio and M&M have also started making in-roads into international markets. In addition, some of the fringe players are also eyeing export markets on back of new model launches," the report added.
ICRA felt that this trend has been supported primarily by two factors; one a strong demand from international markets on back of rising demand for last-mile connectivity (owing to lack of well developed public transport system) in emerging markets in Africa and South-East Asia and secondly, declining trend in demand for three-wheeler goods carriers in the domestic market due to competition from Small Commercial Vehicles (SCVs).
Actually, the passenger variant of three-wheeler industry accounts for bulk of industry sales. With annual sales volumes of 432,000 units in FY15, the passenger carrier segment accounts for almost 80% of domestic three-wheeler industry sales.
Over the past decade (i.e. FY 2006-15), the passenger carrier segment has witnessed a CAGR of 8.2%.
Coming to the cargo variants of three wheelers, with annual sales volumes of around 100,000 units in FY15, the goods carrier segment accounts for almost one-fifth of domestic three-wheeler industry sales. Unlike the passenger segment, which has grown steadily over the past decade, the demand for goods carriers has actually declined by 4.2% over the same period.
While the Indian three wheeler industry is represented by five large players and numerous un-organised regional players. However, the industry is fairly consolidated with top-3 players contributing 87.3% to industry sales in 10 months of FY16.
ICRA said that Bajaj Auto has been the industry pioneer and has remained the market leader with 46.4% share in the domestic market in 10 months of FY16. Piaggio is the second-largest player with a market share 30.4% (in 10 months of FY16).
