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“We expect a sizeable chunk from rural india”

Issue Date - 22/12/2011
B&E: As far as the passenger car segment is concerned, it has been battling the slowdown in demand for the past many months now, but the two-wheeler segment has largely been insulated from the interest hike pressure due to the high ratio of cash purchases. However, for the month of October, the segment faced turbulence due to falling rural income. How do you see the road ahead for the industry?
Roy Kurian (RK): The two-wheeler segment has started to feel the pressure of macro economic challenges. We expect the industry to file a growth of 8-10% this year and as you mentioned, it is a result of the challenges in the rural parts of the country. There are challenges in urban India as well. As the disposable income of the consumer is shrinking and the cost of money is going up across the country, the consumer is postponing the decision to buy a new two-wheeler. The rising fuel prices and interest rates are not such a big problem for the two-wheeler industry as the finance ratio in two-wheeler segment is just the reverse as compared to passenger cars. Roughly, the ratio between finance and cash purchases for passenger cars is 70:30 but for the two-wheeler industry, it is 30:70. As most purchases in the two-wheeler segment are on cash, the rising interest rates are largely not hampering the growth; it is more about the falling amount of disposable income with the consumer. Currently, the consumer is prioritising the purchase list and is shying away from buying a new pair of wheels.

B&E: As these challenges will continue to disrupt the growth run of the sector in the coming months as well, are you expecting the two-wheeler segment to move into a situation where it may see negative growth?
RK: We are hopeful of a positive growth in this year as well and 8-10% growth in any industry is modest by all means. What I am saying is that it will not be as robust as the last year where we saw the industry growing in strong double digits, but the industry will not see a situation of negative growth in this fiscal. The challenges that the sector is currently facing are temporary and a rebound is expected in the near future. A two-wheeler for the consumer is more of a necessity rather than being a luxury unlike passenger cars. At the end of the day, people have to commute from point A to point B and when it comes to necessity, you really don’t have much of a choice. The consumer may choose to postpone his/her decision to buy a new two-wheeler for now but as time passes, there is no reason that the consumer will not come back. The challenges for the two-wheeler industry cannot be prolonged as the potential for growth in India is huge.

B&E: That is indicative in the long-term bright picture being projected for the Indian two-wheeler market, which has attracted many local and global names to this sector over the past two decades. But for the short-run, do you believe that the falling disposable income will remain a challenge for the sector?
RK: For the year 2011, we are looking at a growth of 10% and for the 150cc segment, which Yamaha heavily focuses on, the growth is expected to be in the range of 15-20%. However, I don’t think that the inflationary pressure is something that will vanish overnight. It is expected that the scenario will continue like this for the coming few months of 2012 as well. The initial few months of the next year will also be challenging as it will have some effect on the overall demand but as mentioned earlier, there is a lot of potential in the Indian two-wheeler market and as soon as this pressure will ease off, you will see the demand coming back to the industry.

B&E: Yamaha, as a manufacturer, has been able to stay ahead of the industry growth for the past few years now.What are your projections individually for this year?
RK: We have been able to stay ahead of industry growth so far and this will continue for this year as well. However, as the industry growth will moderate during this year, we will also not be able to file a growth of say 40%-50% at which we were growing last year. But our growth will stay ahead of the pace at which the industry will grow. Our consumer largely belongs to a middle or upper-middle class family and there has been rise in demand from Tier-II cities apart from the metros, which is a bright sign for the long term. We are in the process of expanding our presence in rural India as we expect a sizeable chunk of our total sales to be coming from these markets in the coming times. We are confident of reaching our milestone of one million units in FY 2013-14 and should close next year with sales of 450,000 units. Apart from motorcycles, Yamaha will also be making a much-awaited foray into the scooters segment very soon.

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