ICRA expects 2-wheeler growth at 8-9% by 2016-2017

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ICRA expects 2-wheeler growth at 8-9% by 2016-2017
Credit rating agency ICRA has said that it expects the 2-wheeler industry to grow at 8-9 per cent until 2016-2017.

"Overall, ICRA expects the domestic 2W industry to report a moderate volume growth of 4-5% in 2012-13 as demand slowdown as well as base effect catches up with the industry that has demonstrated a strong volume expansion over the last three years at cumulative annual growth rate (CAGR) of 21.8%, " the firm has stated.

Over the medium term, the 2W industry is expected to report a volume CAGR of 8-9% to reach a size of 22-23 million units (domestic + exports) by 2016-17 (our longer-term growth forecast remains at 9-11%).

"We believe the various structural positives associated with the domestic 2W industry including favourable demographic profile, moderate 2W 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; as also the large opportunity available to grow presence in overseas markets, mainly Africa and Latin America," the firm has stated.

With domestic volume growth of 3.9% YoY and exports volume growth of minus (-) 1.1% YoY in 11m 2012-13, the Indian two-wheeler (2W) is currently amidst a slowdown phase last experienced in 2007-08/ 2008-09.

"Several factors including high inflation, firm interest rates, rising petrol prices, besides weak monsoons have been dampening demand in the domestic market over last several quarters. At the same time, overseas sales have been adversely impacted by increase in interest rates in several target countries, increase in import duty in Sri Lanka, trade restrictions imposed by Argentina and dollar sales embargo with Iran," ICRA has stated.

India is now the largest 2W market in the world with sales volumes of 13.8 million units (domestic), having overtaken China at 12.6 million units. In fact, while 2W sales volumes in India grew by 5.8% in CY2012 over the previous year, the domestic demand in both China and Indonesia (the second and third largest 2W markets, respectively) shrunk by 10.0% and 9.2%, respectively.


Read more about: icra
Story first published: Saturday, March 30, 2013, 11:24 [IST]
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