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Indian Two-wheeler Manufacturers to Face Dark Future
Dec 11, 2008

Sales of two-wheelers in India are expected to decline by 10% in 2009 due to gloomy economic conditions, rising material costs, inflation and lack of credit.

The two-wheeler industry of India is likely to suffer a 10% decline in sales figure in 2009, due to tough market conditions and slow economy, reported theeconomictimes.

In October 2008, sales of TVS Motor came down to 117,101 Units from 129,614 Units in October 2007. Bajaj Auto Limited also witnessed a decrease of 34% in the sales of two-wheelers in October 2008 on a YOY basis. The industrial body, Society of Indian Automobile Manufacturers (SIAM), revealed that during 2007-2008, a total of 7,248,589 two-wheelers were sold in India.

The Indian two-wheeler sector is witnessing a decline in sales due to the worldwide financial turmoil and concerns regarding the global slowdown. Also, factors like rising costs of raw material, inflation and inadequacy of retail finance are shaking the sector.

Further, the economic uncertainty in the market, during this festive season, triggered the higher rates of interest and credit crunch, thereby ceiling the sales.

It is estimated that the Indian two-wheeler sector will check the cost of material as prices of commodities have weakened slightly in October 2008. Also, interest rates are likely to decline, but even then, the market conditions are not expected to get better before January 2010.

Moreover, the coming future is not going to be easy, with economic growth likely to remain below expectations. Also, the limited credit availability and the inflation factor could prove to be decisive.

Coming times are going to be very difficult, with the main focus remaining on conserving cash and cutting costs. Thus, the two-wheeler sector has to tighten its control over the capex. Also, the rising input costs and the usual inflation trends are adversely affecting the sales of the concerned industry and the situation is going to be worse in this economically uncertain period.

According to a Research Analyst at RNCOS, “Coming times will prove more difficult for the Indian two-wheeler companies as the economic growth is likely to remain below expectations. Further, the lack of credit and usual inflation trends will restrict the consumers to buy new two-wheelers. Thus, sales of the companies will remain low in near future.”

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