Exports remain key growth driver for three-wheelers
India is the world’s foremost producer, consumer and exporter of three-wheelers with domestic sales of almost 5.13 lakh units and exports of 3.63 lakh units in the financial year ended March 31, 2012.
Three-wheelers 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 domestic demand, India has also emerged as an important export hub for three-wheelers with its presence in some of the South Asian, African and Latin American markets that are replicating the Indian three-wheeler story with rising disposable incomes but inadequate public transport systems. Overall, this industry has witnessed relatively healthy 15 per cent CAGR volume growth over the last decade, driven by moderate domestic growth (10 per cent CAGR) and robust exports growth (38 per cent CAGR).
ICRA Research expects the domestic three-wheeler passenger segment to benefit from product upgradations (2-stroke to 4-stroke, petrol/diesel to CNG, front engie to rear engine vehicles) as well as offering of fresh permits by various State Governments. Despite stiff competition from small commercial vehicles (SCVs), the domestic three-wheeler goods segment continues to benefit from its favorable operating economics for the first-time users (FTUs). Lastly, ICRA expects three-wheeler 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 emerging target markets.
According to Mr. Subrata Ray, Senior Group Vice President, ICRA Research, 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 three-wheeler cargo segment (0.75T and above) has already made way for four-wheeler SCVs that provide higher stability, safety, speed, space and style.
SCVs are increasingly gaining popularity even in the lower tonnage (0.5T) cargo segment with the recent introduction of smaller vehicles by CV OEMs. While the domestic three-wheeler goods segment has de-grown at nine per cent CAGR over the last five years, SCVs have reported robust 21 per cent CAGR growth over the same period. Moreover, slowing economic growth, moderating consumer goods consumption, high inflation, increase in financing costs, rising fuel prices and absence of fresh permits by the State Governments impacted domestic three-wheeler 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 Mr. Ray.