TWO WHEELER COMPANIES HAVE IT TOUGH

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More and more people are buying bikes today and sales of two wheeler companies has never been better, and still growing. Bike makers should have been happy. TVS and Bajaj should be elated because they are seeing faster growth and improving their market share and their cash boxes must have been full.

But all is not as well as it seems to be. Increasing competition, rising input costs and commoditisation of 100cc bikes market is eating up the margins of two wheeler companies. See some recent quarterly results.

Hero Honda Q2 net down 9.2%
TVS Motor Q2 net drops 22.28%
Bajaj Auto: Shrinking margins

Bajaj did show a bottomline growth but margins were hit considerably.

Competition has never been more tough. Once upon a time, Bajaj ruled the market with very little competition. When Hero Honda took over market leadership, they too enjoyed their leadership with little threat. TVS was on and off, but they were having a good run for the last few years. Most of the market belonged to these three. While that may remain so for many days to come, other manufacturers are doing their bit to increase the competition and put pressure on pricing and margins. Suzuki and Honda, though do not have a major presence, can still elicit trouble. Competition with the big three puts even more pressure on the prices, resulting in thinner margins.

Rising input costs, especially of steel and transportation, a problem in every maufacturing industry has not escaped two wheeler companies too. And there is also the pressure to keep the prices low.

Besides all this, the primary segment - 100cc bikes have become commodotized, which means that no company or brand can afford to expect a premium from customers willing pay the extra money to buy the best brand.

This is a tough time for two wheeler makers and it does not look like there are good days in near future either. It would take a few years before we can see some change in the equations of two wheeler markets.