Who is going to be the winners in 2 wheeler industry? Is it TVS, Bajaj Auto, Hero Motors , Eicher, or Ola ? Or is it going to be someone else -“Who moved my cheese”

With urban consumption continuing to rise and Rural consumption picking up, It is the 2 wheeler industry seems to be leading the charge.

Before we decide to put our money in the 2 wheeler industry, let us try to identify the likely winners. To do that we need to get some flavours from the past which has led to the present status and then predict the future trends.

1955-56

350 CC Bullet was the first 2 wheeler Motor cycle to be made by Enfield india some times in 1955. (now owned by Eicher).Royal Enfield- an Iconic brand is a global leader in the mid-weight motorcycle segment

1970-80, for getting a Bajaj Chetak Scooter, one would have to wait for 5-7 years even more after booking.

Marriages used to get postponed if Chetak was not made available for Dowry- Dahej.

In Moped 50 cc, Kinetics Luna had monopoly business during this period.

1980-90, a new revolution started in 2 wheeler industry.

TVS came with TVS 50 Moped to compete with Luna.
Sooner , TVS had a collaboration with Suzuki to produce TVS suzuki Motorcycles and to compete with TVS Suzuki , Escorts -Yamah was born.
During 1985-86, two more innovative products were born from two different companies.

Hero group in collaboration with Honda came out with a 4-S engine motorcycle CD100- first in India .with ” fill it, shut it and forget it” . 80 kms per litre…It became a big hit in Indian market and was appealing to the middle class bridegrooms.

Piaggio came in collaboration with LML to produce the 1st scooter with engine at rear Vespa XP which also became a hit ( Bajaj scooter had engine in front with imbalance issue)

So all these developments which took place during 1980-90, became a seed for the future- a massive transformation took place thereafter in 2 wheeler industry and the market gradually shifted from scooter dominated to motorcycle dominance.

Sales of Chetak Scooter once a monopoly started dwindling and Bajaj was forced to close down its Chetak Scooter ICE plant in early 2000.

2001, Suzuki after divorcing TVS went on its own to produce Suzuki Motor cycles. ( today Suzuki Motors 2 wheeler is unlisted ). TVS continues on its own as TVS motors as a listed company.

2014- Honda divorced Hero and formed HMSI (Honda motorcycles & Scooters india limited ). Hero is now known as Hero motors corporation – listed entity.

All these.players are still there , but with new Avatars with Motorcycles in entry level , mid weight level and premium level. Eicher bought over Enfield India and they seem to be happy with the premium segment Eicher has no entry level vehicle where the mass market lies. However to eat a Pie out of Premium bike Segment, Bajaj Auto has partnered with Triumph Motorcycles to create a range of premium motorcycles:
Bajaj Auto also has partnerships with KTM and Husqvarna to manufacture higher CC bikes, while Hero MotoCorp to manufacture the Harley Davidson X-440 …so Bajaj and Hero may eat a Pie out of Eicher’s premium segment.

2020-30 …EV was born when emission, climate change, carbon foot print took center stage. Ola electric had the first mover advantage in EV 2 wheelers- started marketing in 2021… As a start up , Ola got all the benefit.

By the time TVS , Bajaj , Hero realised the potential of EV, Ola had already taken the advantage of Fame1/2 subsidy and soon became the market leader.

But it was not too late for the Trimurthy (Bajaj,TVS & Hero ) to snatch away 50% of the EV market share by sept 2024 from Ola.
These traditional ICE players have brand loyalty , strong after sales service set-ups built over last 45-60 years- which is difficult to replicate by any new players.

So whether Ola days are over.? only time could say that. But it would remain a big challenge for Ola to face the onslaught from Trimurthy !

On EV penetration, It is here to stay…But the game would be different now. The 2 wheeler market came from a scooter to motorcycle ( currently 65% motor cycle and 35% scooter) But with EV landscape, the ratios are most likely to change- EV scooters would sell more than EV motorcycles.

Motorcycle EV cost is 2X-3X than EV scooters. 2 wheeler industry is cost sensitive…so all the 2 wheelers are now focussing on EV scooters.

Who will be the winners ?
Still traditional ICE enjoys monopoly, EV is penetrating fast …but not very fast …EV charging infra not there in rural India and customers would still prefer ICE due to simplicity , even cost.

So while Trimurthy focussed on EV, HMSI ( Honda) focussed on ICE . Like Maruti , Honda played safe (Japanese are conservative) . They are here to make money.
They knew , it would take time for EV infra.

So who moved my cheese ? While Trimurthy fought together to snatch away 50% EV market share from Ola , Honda HMSI seems to have snatched away the ICE market share from the Trimurthy if we see the latest data. 1st link.

But Trimurthy with 45-60 years experience in 2 wheeler business will not let it go so easily though HMSI is a Very strong company to fight with.

Bajaj is the 1st company to launch its CNG 2 wheeler in india with ” Fill it, Shut it & Forget it”. The chetak brand was relaunched with CNG version. It is selling like a hot cake in lakhs. It can also run on CBG- a renewable energy source. CGD is expanding in to newer areas. so here lies a lot of scope for CNG 2 wheelers. Till the time others come up, Bajaj Chetak CNG becomes a monopoly. please refer link 3.

Bajaj also has an export base, which TVS and Hero are trying to catch up.

Honda is Formidable. It is the same Honda which revolutionised the Motorcycle market in Indian market by bringing a 4S engine CD100 which gave 80 kms per litre in 1985 – Fill it Shut it Forget it… Now launching its EV 2 wheelers in 2024 with a 3-E concept. Exclusive Factory , Exclusive one EV platform in which various models can be built , EXclusive After sales service workshop. It is aiming at 1/3 of its production of EV by 2030. It appears from link 4 & 5 that HMSI is here in India for the long haul- the biggest mass market in the world . it makes sense for Honda.

please don’t miss link no 4 & 5 if you want to know more about HMSI.

Honda only has about a quarter of the market in India, while in Thailand, Indonesia, Vietnam and Brazil Honda’s number is a monopolistic three-quarters. Scale is an advantage, too: Its combined capital spending and R&D budget last year, for instance, was about 16 times that of TVS, Hero and Bajaj put together.

All the 2 wheeler listed stocks have run up TVS has become expensive, unless you have invested from lower level .The next expensive stock is Bajaj Auto and the last one is Hero motors in listed space at an affordable valuation. HMSI is not listed so also Suzuki motorcycles.

By now, if you have read the above article fully and the articles in the link below, you may be knowing where to make your investment decisions in 2 wheeler industry.

Risk Factors:
(1) Auto Industry is cyclical in nature. In a down turn , the sales may come down which may affect stock performance.
(2) Auto industry reports sales figures every month. Market may react to monthly sales figures leading to stock volatility.
(3) Consumer preference changes very fast and companies may lose market share.
(4) EV carries a lot of govt subsidy.If subsidy is withdrawn, it may affect EV sales
(5) New players may come in which would increase competition among existing players

Discl : i have invested in Bajaj Auto from lower level. no transaction during last 6 months. Have a small position in Hero.
I may be biased . it is not a buy sell recommendation.please do your own assessment before buy sell.

The company had receivables worth 100 CR approx. and abysmal Cashflow from Operations. No questions regarding this topic in the latest concall. Was this issue raised before, any inputs?

Maybe it has to do with their 2 Joint ventures where they are holding 50% → 50% of the profit share.
One of the venture is between Lancia (100% subsidiary) & Mr Chataiwala’s son

We already have a thread on this.