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Selling two wheelers in India is more profitable than selling cars

 
Hero Splendor iSmart Review-14 wallpaper front wheel

The car makers also have massive debts to take care of.

In the last financial year, the operating margin of two-wheeler makers in India was almost twice as that of the car makers. The car makers have been lagging behind in terms of profits for all of the last decade, indicating that selling two wheelers in India is way more profitable than selling hatchbacks and SUVs, even though four-wheelers are expensive by manifold.

An analysis conducted by Business-Standard based on audited financial results of listed and unlisted automakers reveal some interesting facts and figures. For this purpose, the publication has selected 7 car makers namely Maruti Suzuki, Tata Motors, Mahindra & Mahindra, Hyundai Motors India, Honda Cars India, Toyota Kirloskar and Ford India. The other OEMs were excluded since they don’t have data for the last 10 years.

2016 Maruti Alto 800 (1)

Maruti is the only car maker in top-6 to remain debt-free throughout the last decade.

The two wheeler makers included in the analysis are Hero Motocorp, Bajaj Auto, Honda Motorcycle & Scooter India, TVS Motor, and Eicher Motors (Royal Enfield). In 2014-15 financial year, the two wheeler makers included in the analysis posted a combined revenue and net profit of INR 81,500 crore and INR 6,900 crore respectively. In comparison, the aforementioned car makers posted a combined revenue and net profit of INR 1.95 lakh crore and INR 3,440 respectively. As you can see, two wheeler makers clearly enjoy better profit margins.

2016 Toyota Innova Crysta

The value of debt of the car makers included in this analysis is around 60% of their net worth.

Also read – Royal Enfield celebrates record sales in FY2015-16

The two wheeler industry also managed to remain almost debt-free and several brands have copious amount of fluid cash in hand. In 2014-15, the aforementioned two wheeler companies had a combined debt of INR 1,082 crore which less than 5% of their net worth. On the other hand, the four wheeler makers included in this analysis have a combined debt of INR 40,300 crore which is around 60% of their net worth! Maruti Suzuki is the only brand to have remained debt-free over the past decade. The company had a cash reserve of INR 12,600 crore as of March 2016.

Via – Business-Standard.com

 

About the author

Nithyanandh Karuppaswamy

Winner of national level automotive quiz competitions, Nithyanandh aka Nithz jumped into the blogosphere right after gaining a degree in Mechanical Engineering. Love for automobiles and an even greater drive to share his knowledge with the automotive community, Nithz is Deputy Editor at RushLane.

Email - nithyanandh@rushlane.com