India forerunner where 3 wheeler auto production is concerned

India forerunner where 3 wheeler auto production is concerned

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Three wheeler manufacturers in India comprise of Bajaj Auto, Mahindra and Mahindra and Italy based Piaggio. India is foremost producer, consumer and exporter of three wheelers in the world. Sales for financial year April 2011 to March 2012 stood at 5.13 lakh units while exports reached 3.63 lakh figures. These three wheelers are widely used both for passenger carriage and for goods transportation over short to medium distances. They are affordable and convenient while at the same time versatile for transportation of all types of merchandise.

Bajaj Auto has a range of models for passenger three wheeler carriages. M&M has got Champion range of three wheelers. Champion pick up, Champion delivery vans and Champion Passenger carriers are seen more in western parts of India. Alfa three wheeler carriages of M&M are also in great demand. Piaggio of Italy manufactures Ape 50 with a 150cc engine together with Bajaj Auto. TVS Motors recently entered the three wheeler segment as well.

Emergence of three wheeler as an effective means of transportation has helped millions of commuters. These are used not only by passengers but also as luggage and cargo carriers and runs on diesel and petrol. However, of late CNG runs three wheelers are also being introduced in large quantities. State Governments of India are supporting operation of CNG run three wheelers and three wheelers with four stroke engines which produce less harmful emissions. These three wheelers have a mileage of 34 to 36 km per liter. ICRA expects 3 wheeler exports to be a major growth driver for the industry due to increased disposable incomes, improved road conditions, poor public transport system and increased demand for transportation in recent months.

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New release: ICRA: An update on the Indian Three-Wheeler Industry
3W Cargo sales eclipsed by SCVs; Exports remain a key long-term growth driver

Highlights

· ICRA Research expects the domestic 3W passenger segment to benefit from product up-gradations (2-stroke to 4-stroke, Petrol/Diesel to CNG, front engie to rear engine vehicles) as well as opening of fresh permits by various state governments.

· Despite stiff competition from 4W Small Commercial Vehicles (SCVs), the domestic 3W goods segment continues to benefit from its favorable operating economics for First Time Users (FTUs).

· Lastly, ICRA expects 3W exports to remain the main growth driver for the industry due to rising disposable incomes, evolving travel & consumption patterns, improving road infrastructure, increasing demand for motorized transportation and inadequate public transport systems in the target emerging markets

India is the world’s foremost producer, consumer and exporter of three-wheelers (3Ws) with domestic sales of ~5.13 lakh units and exports of ~3.63 lakh units in the financial year ending March 31, 2012 (Source: SIAM). 3Ws are widely used in India as an affordable means of short-to-medium distance public transportation and last mile connectivity for goods transportation. Apart from the domestic demand, India has also emerged as important export hub for 3Ws with presence in some of the South Asian, African and Latin American markets that are replicating Indian 3W story with rising disposable incomes but inadequate public transport systems. Overall, the 3W industry has witnessed relatively healthy 15% CAGR volume growth over the last decade driven by moderate domestic growth (~10% CAGR) and robust exports growth (~38% CAGR).

ICRA Research expects the domestic 3W passenger segment to benefit from product up-gradations (2-stroke to 4-stroke, Petrol/Diesel to CNG, front engie to rear engine vehicles) as well as opening of fresh permits by various state governments. Despite stiff competition from 4W Small Commercial Vehicles (SCVs), the domestic 3W goods segment continues to benefit from its favorable operating economics for First Time Users (FTUs). Lastly, ICRA expects 3W exports to remain the main growth driver for the industry due to rising disposable incomes, evolving travel & consumption patterns, improving road infrastructure, increasing demand for motorized transportation and inadequate public transport systems in the target emerging markets.

According to Mr. Subrata Ray, Senior Group Vice President, ICRA Research, However, the successful launch of four-wheeled Small Commercial Vehicles (mainly Tata ACE in 2005-06) has altered the industry dynamics considerably over the last five years. The high tonnage 3W cargo segment (0.75T and above) has already made way for 4W SCVs that provide higher stability, safety, speed, space and style.

The SCVs are increasingly gaining popularity even in the lower tonnage (0.5T) Cargo segments with the introduction of smaller vehicles by CV OEMs recently. While the domestic 3W goods segment has de-grown at 9% CAGR over the last five years, SCVs have reported robust 21% CAGR growth over the same period. Moreover, slowing economic growth, moderating consumer goods consumption, high inflation, increase in financing costs, rising fuel prices, absence of fresh permits by the state governments and overall high base has impacted domestic 3W sales in FY12.

“Despite the near-term headwinds, we expect the 3W industry to report a moderate volume CAGR of 7-8% over the next five years. We expect the long-term sales growth to be the highest in the exports segment, followed by that in the passenger carrier segment and the lowest in the goods carrier segment due to intense competition from the four-wheeler small commercial vehicles” says Subrata Ray, Senior Group Vice President, ICRA Research.