Two-wheeler companies may miss annual sales target

The ongoing credit squeeze in the sluggish two- and three-wheeler markets may affect the March sales targets of the three leading domestic players in the country.

Taking the cue from a buoyant FY07 where the two-wheeler industry grew by a healthy 11.42 per cent, companies such as Hero Honda, TVS Motors and Bajaj Auto were hoping to surpass the FY07 target of 7.8 million units this year.

Marred by a lack of credit availability, spiralling lending rates and lack of product excitement, two-wheeler companies have already suffered a setback in the first seven months with no respite in sight.

The industry recorded a combined fall of 8.46 per cent in sales during the seven-month period, with Bajaj Auto leading the decline chart with a fall of 21 per cent, followed by TVS Motors at 19.90 per cent and Hero Honda at 0.33 per cent.

Ashutosh Goel, auto analyst, Edelwiess Securities, said, "The sales trend so far has been negative due to external as well as internal factors. Finance companies had tightened the outflow of liquidity into the markets even as interest rates climbed higher. In addition, product availability was a matter of concern due to scaling down of production."

According to auto analysts, Hero Honda, the country's leading two-wheeler manufacturer, had set a target of 3.5 million units in sales this year, a projected growth of about 10 per cent over 3.2 million units last year.

The company has managed to sell just 2.16 million units so far with the average monthly sales being 2.70 lakh units during the period. If the current trend in sales continue, there will be a shortfall of 2.6 lakh units by the end of March 2008. India's number two motorcycle manufacturer, Bajaj Auto, had also set a target of of about 3 million units for the year.

So far, the company has sold little over 1.29 million a units, with average sales being 1.61 lakh per month. The company may see a deficit of more than 7 lakh units by the year-end.

Executives from the Chennai-based TVS Motors were not available for comment on the company's annual sales target. But the company has seen a disappointing year primarily due to the lack of new products.

All the three launches the company made this year were upgrades of existing bike models.

TVS has suffered a fall of 18 per cent in the financial period, selling just 8 lakh units as against 9.83 lakh units of the same period last year. The delay in the launch of Flame, a 125cc segment model that was expected to generate sizeable numbers, has also affected the company.

Besides falling sales, margins too have been under pressure for all the companies this season. Hero Honda's net profit for the second quarter of this year dipped by 5.4 per cent. Bajaj Auto's net fared better only because of better margins earned from bigger bikes.

All three companies may get some respite from models recently launched like Hero Honda Hunk and Bajaj XCD 125 but analysts said it would be insufficient to achieve the set target as the growth so far has been negative to flat.

A company official from Bajaj Auto said, "We are targeting to produce 75,000 units this month of the XCD 125, which will change things as the demand for the bike has been quite strong since its launch."

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Leading player Bajaj Auto has set a target of 3 million units for the year

Hero Honda, the country's leading two-wheeler manufacturer, eyes 3.5 million units in sales this year

The industry recorded a combined fall of 8.46 per cent in sales during the seven-month period