Indian Motorcycle Sales Growth May Slow, Trucks To Recover

BOMBAY, Oct 14 Suresh Seshadri writing for Reuters reported that India's top two motorcycle makers face a bumpy road as tougher competition slows the frenetic pace of growth in the world's second-largest market after China, analysts said on Monday.

But truck makers, led by Tata Engineering and Locomotive Co Ltd (TELCO), are expected to do well as demand for moving goods by road picks up.

A Reuters poll of 12 brokerages expected Hero Honda Motors Ltd and Bajaj Auto Ltd, the top two bike makers, to post lower earnings and sales in the past quarter compared with the preceding three months.

The poll showed earnings of Hero Honda, 26 percent-owned by Japan's Honda Motor Co, falling 3.8 percent to 1.34 billion rupees ($27.7 million) in July-September from the previous quarter, as sales shrank 3.9 percent to 12.25 billion.

Bajaj Auto's earnings were projected to slide six percent on quarter to 1.15 billion rupees as sales dropped 3.7 percent to 10.2 billion.

Analysts forecast growth would slow further.

Volumes of bike sales rose 36.8 percent to 2.9 million in the year to March.

Sales volume jumped 47 percent on year in the April-July period, before a severe drought hit many parts of India, hurting farm output. Nearly 70 percent of India's billion-plus people depend on agriculture or related income.

"We see a slowdown in motorcycle sales from October onwards as the impact of the poor monsoon takes its toll on rural demand," Kalpesh Parekh, an analyst with Sushil Finance said.

COMPETITION HEATS UP

Analysts say companies are trying to hold market share by offering new models and price discounts.

"With 12 new launches slated for the second-half, we see competition really hotting up as the number of models goes up to 40. As a result, we see year-on-year growth in volumes easing to 16 to 18 percent in the second-half," Parekh said.

Hero Honda, with a market share of about 45 percent, was likely to suffer the most from the slowing growth, analysts said.

TVS Motors Ltd , the third-largest motorcycle producer, is forecast to be the only gainer in the segment, with profits seen growing by nearly a fifth on quarter to 321 million rupees, on a 10.3 percent jump in sales to 6.95 billion.

"We expect TVS to continue to do well and maintain it as our best stock pick in the sector," said Satish Ramanathan, vice president of research at ICICI Securities.

The firm, which ended a tie-up with Japan's Suzuki Motor Co last year, has outperformed its peers in the past six months with its successful 100cc bike Victor.

TRUCKS BOOST TELCO

The poll estimated TELCO, also India's third-largest car maker, would post a 152 percent jump in net profit to 706 million rupees in the past quarter from the preceding three months.

The firm is on a recovery after losses till the last quarter of 2001. Revenue is forecast to rise 30 percent on quarter to 22.7 billion rupees.

Analysts said TELCO will continue to benefit from a shift in goods haulage to the road sector from railways.

"The construction of the Golden Quadrilateral (a network of expressways connecting India's four major cities in the north, south, east and west) and other roads has made road transport competitive with the railways, thus sustaining a recovery," said Imran Contractor, an analyst with Stratcap Securities.