A plethora of new products and a series of price cuts have put the two-wheeler industry in top gear.
The segment has several factors going in its favour, including a strong demand for new vehicles and a growth in margins.
The sector was hit hard on apprehensions that the failure of the monsoons would lead to a slowdown in the growth in sales of motorcycles -- the star performers in the auto sector for the last two years.
However, much to the relief of the market watchers and the companies in the sector, the growth in motorcycle sales has continued, with industry majors like Hero Honda and Bajaj showing an over 20 per cent growth.
TVS Motors has done exceedingly well, recording a 69 per cent growth in vehicle sales on a year on year basis, fuelled primarily by the success of the TVS Victor.
Operating profit margins of these companies have also improved despite the spate of price cuts undertaken to retain market share. For instance, the operating profit margin of Bajaj Auto has increased from 17.7 per cent to 18.4 per cent.
The year 2003 promises to be better for auto companies -- especially Bajaj Auto. The company has already achieved a significant growth on the back of the success of its Passion model -- it has already garnered a 25 per cent of the market share in motorcycles.
The aggressive advertising being followed should enable Bajaj to increase its market share further, analysts said. Additionally, export volumes have increased by 189 per cent this year.
The substantial cost-cutting measures initiated have enabled Bajaj to improve its bottomline despite the severe price competition.
TVS Motor has done well on the back of the runaway success of the Victor.
With this single product the company has seized a 19 per cent market share. Sales of the Victor have enabled TVS to stay afloat despite the fall in volumes of mopeds.
With the imminent relaunch of the Fiero later this year, the company should match its performance in the coming year.
However, market leader Hero Honda is concerned about its falling market share. The firm still has a dominant 45 per cent share.
At a time when TVS has shown a 69 per cent growth in volumes, the company has shown just a 20.1 per cent growth in volumes.
There have been reports that the company has a huge stockpile of unsold inventory of approximately 160,000 motorcycles.
However, some analysts expect a decline in the growth rate of the industry in the coming years. The firms in the sector have been showing a growth rate of over 20 per cent as compared to the single digit growth rate for the economy as a whole.
Thus, there is a potential for a slow down in the growth in sales. The poor monsoon is said to be showing its effect in the unsold inventory of Hero Honda. A further cause for concern is the competition from Chinese imports.
Although they may be inferior in quality, they may attract the price sensitive Indian consumers, hitting the toplines of the Indian firms in the sector.