Here’s a look at all the important developments of the week in the automotive space
After Eicher, Apollo Tyres and Exide last week it was the turn of bigger automotive companies to announce their fourth quarterly numbers. TVS Motor Company, Bajaj Auto, and Ashok Leyland declared their March results this week.
Chennai-based TVS failed to meet Street estimates despite posting 31 percent growth in net profit during the quarter. The maker Apache and Jupiter models said it would increase capital expenditure to Rs 700 crore this year to be used for new models, capacity enhancements, and preparation for BS-VI.
Both Bajaj Auto and Ashok Leyland surpassed analysts expectations slightly on the back of demand for higher margin vehicles in India and in export markets.
Pune-based Bajaj Auto’s net profit grew by 35 percent on the back of the continued surge in exports as well as a revival in demand in the domestic market. Chennai-based truck and bus maker Ashok Leyland’s net profit grew by 40 percent following robust demand for higher tonnage vehicles.
Two new launches from two Japanese heavyweights also hit headlines this week. Honda launched the all-new compact sedan Amaze (a rival to Maruti Suzuki Dzire) while Toyota launched the mid-size sedan Yaris (a Honda City competitor).
But while inaugurating a dealership somewhere in Chennai this week the India boss of Harley-Davidson stated it was time for the cult bike maker to get into the pre-owned business in the country, a move it hopes will improve its stranglehold on the market.
Though the pre-owned car business is a fledgling one the used bike market is not only underdeveloped but is almost fully unorganised. Several road side shops and online market place double up as selling platforms with many transactions being risky. The stakes, however, run pretty high. Some estimates put the used two-wheeler market in India with yearly volumes of more than 17 million.
Considering an average ticket size of Rs 30,000 per vehicle (conservatively) the entire market is valued at a staggering Rs 50,0000 crore per year. The firsthand two-wheeler market closed at 20 million units last year as per data shared by the Society of India Automobile Manufacturers (SIAM).
Speaking to PTI during the event Peter Mackenzie, Managing Director, Harley Davidson said, “We are currently piloting it in a few dealerships. And, we are very close to rolling out the programme nationally.” The bike maker which is known for its premium range of cruisers has 27 dealerships across the country.
But Harley is not the one to get into this business. Rival Royal Enfield has rolled out a pre-owned store in Chennai under the brand Vintage and has plans to add another nine such store across the country this year. These will deal ‘exclusively in pre-owned, refurbished and restored motorcycles offering hassle free sale and purchase experience to consumers’. Another premium bike maker Triumph is gearing up to enter this segment later in the year.
Even large volume companies such as Hero and Honda (both control more than 70 percent of the domestic market) have entered the market recently. Hero sells refurbished bikes under the retail brand Sure whereas Honda entered the business with the brand Best Deal.
With wafer thin margins and niggling issues with regards to vehicle ownership and vehicle upkeep, why are two-wheeler companies opening used vehicle showrooms even when India remains the biggest two-wheeler market in the world and grew in double-digit last year?
“Our customer base has crossed 30 million in India. We know some who even have five or six of our vehicles in their family. The used two-wheeler industry is very unorganised but gives us a great opportunity for a viable business. We are able to garner the loyalty of the brand and keep the customer in the same family”, said a member of the senior management of one of the top two-wheeler makers.
Cost of new consumer acquisition is expected to go up in the coming years given the high intensity of competition. Therefore two-wheeler makers are left with no choice but to enter the pre-owned space. This also acts as a supplementary business model for the dealers who are at the receiving end during a down cycle.
