Festive season is definitely over, this can be gauged from the wholesale and retail 2-wheeler numbers of December 2022. While Hero MotoCorp (HMCL) reported flat YoY wholesale volume growth, Bajaj Auto (BAL) and TVS Motors wholesale volumes contracted 2% and 3% respectively in December 2022.
.The overall wholesale volumes for top three listed two-wheeler manufacturers were also lackluster in the December 2022 quarter.
Bajaj Auto volumes were mainly impacted by fall in exports in Q3FY23. Exports constituted 46% of its total wholesale volumes and fell 25% in the December 2022 quarter. Slowing global economy, dented by high inflation has impacted BAL’s export growth. Africa, Latin America and ASEAN countries are major export markets for BAL. On the other hand, HMCL and TVS Motors have higher reliance on the domestic market. While TVS Motors exports constituted 25% of its total two-wheeler wholesale volumes, HMCL was much lower at just 3% in Q3FY23. Thus Hero MotoCorp (HMCL) volumes fell 4% YoY and TVS Motors volumes were flat compared to 19% YoY volume contraction for BAL in Q3FY23.
According to the Federation of Automobile Dealers Associations (FADA) press release retail volumes fell 11% YoY in December 2022, after strong performance in October and November 2022 period with volumes rising 51% YoY and 23% YoY respectively. HMCL, Bajaj Auto and TVS Motors too reported YoY volume fall after strong YoY retail volume growth in October-November 2022 period.
Two-wheeler auto companies maintain 25-30 days inventory with auto dealers. October-November period witnessed strong festive fervor after two years post Covid-19 onset. While all other auto segments ranging from three-wheeler, tractor, passenger vehicle and commercial vehicle witnessed positive volume growth, two-wheelers moved into negative territory. Commenting on two-wheeler lower volumes, FADA President, Mr. Manish Raj Singhania said, “There are reasons like rise in inflation, increased cost of ownership, rural market yet to pick up fully and increased EV sales, the ICE 2-wheeler segment is yet to see any green shoots.” So what does 2023 hold for the top three two-wheeler manufacturers. HMCL is highly dependent on the entry level segment (100-110cc) mainly catering to rural and semi urban India. Entry level segment contributes 70% of HMCL’s revenue. Thus, inflation impact is going to hit HMCL volumes more compared to BAL and TVS Motors. BAL is the market leader in the premium segment with 50% market share. TVS Motors owns 20% premium market share in India. HMCL market share in the premium two wheeler segment is low at just 4%.
TVS Motors is in better shape compared to the other two peers on the volume front. The only top three listed company to report positive wholesale growth every month in the December 2022 quarter. TVS Motors also, the least retail volume contraction in the month of December 2022. The reason behind better volume growth performance is strong market share in both premium and entry level segments and lower export dependence (25% of total two wheeler volumes). But the growth vector which is attracting investor interest is TVS Motors electric vehicle (EV) business with its popular brand, TVS iQube, growing leaps and bounds. BAL and HMCL too have electric scooters in their product portfolio, but only TVS Motors has been able to compete with Ola Electric, Hero Electric and Ather. TVS Motors has roughly 15% market share in the electric two-wheeler market, second only to Ola Electric at 28-30%. While HMCL and BAL stock price has moved 4-5%, TVS Motors stock price gained 57% over the past one year. But on the revenue front, BAL is the highest revenue generator among the top three listed two-wheeler manufacturers mainly because of its strong premium market presence in India with popular brands, Pulsar, Avenger, Dominar and KTM. BAL’s product range’s average selling price (ASP) is the highest compared to HMCL and TVS Motors. But the company needs to re-strategize its domestic market in the wake of current macroeconomic uncertainties. And the world’s favourite Indian will hopefully not disappoint investors. For HMCL, low market share in the premium two-wheeler segment and low export revenue contribution is a concern area. And not to forget the dismal electric scooter debut
