Two-wheeler exports to decline by 18-21% in FY21, says India Ratings

Ratings agency India Ratings and Research (Ind-Ra) said it expects the two-wheeler (2W) exports decline for FY21 to be in line with that of the domestic industry at 18-21 per cent. It added that since two-wheeler exports only accounted for 16-18 per cent of the total two-wheeler sales for Indian OEMs, this was not likely to be substantial enough to compensate for the domestic volumes during the same period. Two-wheeler export volumes are likely to increase by mid-teens in FY22, the ratings agency said.

The Ind-Ra report said that India’s two-wheeler exports would see sustained growth in the second half of next fiscal year after witnessing temporary hurdles in the first half this year due to the Covid-19 pandemic and weakened crude oil prices, hurting the economies of key exporting destinations. This coupled with the nationwide lockdown, supply-chain and logistics disruptions impacted export sales significantly. 
 

Since then India’s two-wheeler exports have moved in line with growth in domestic markets, with September and October 2020 recording the highest monthly sales in FY20 - OctoberFY21.

"Export momentum is expected to continue in the remaining part of FY21 and FY22, primarily driven by the exporting countries’ lower penetration level, demand for usage as commercial fleet, stability in crude prices, lack of public infrastructure, and aversion to public transport in the midst of the Covid-19 pandemic," said in the report.

The report noted that the monthly recovery in two-wheeler export volumes, which declined by 29% yoy during April-October 2020, was lower than the overall auto exports sales (excluding CV) decline of 33% during the same period.

The monthly sales volume recorded during September-October 2020 was the highest in the past two fiscals. This is primarily backed by a gradual recovery in key markets, and stable crude oil and forex prices. Most of the key exporting markets in Latin America, Africa and Asia have recovered to 80%-90% of pre-Ccovid export levels.

Two-wheeler exports grew at a CAGR of 9.7% during FY11-FY20 compared to 4.5% growth in the domestic markets as major OEMs started looking at export markets to diversify their presence to mitigate intensified competition in domestic markets. Even in FY20, exports grew at 7% compared to domestic two-wheeler sales volume decline of 18%.

India exported two-wheelers mostly to African, Asian and Latin American countries, constituting 37.5%, 22.9% and 21.4%, respectively, during 1HFY21. Within this, Nigeria, Colombia, Nepal, Bangladesh and Philippines together accounted for around 50% of the total exports in FY20 (in terms of value). The demand in these countries is majorly driven by a lower penetration level, rising middle class and disposable income, as well as limited infrastructure for public transport. Two-wheeler penetration in countries such as Nepal and Bangladesh remain below 5%. In some major African countries such as Nigeria, Uganda and Kenya, demand is driven by the commercial use of two-wheelers either as ‘motorbike taxis’ or as delivery transport option for online shopping.

Amid an increasing preference for personal mobility and lower affordability of two-wheelers than that for passenger vehicles, Ind-Ra expects a continued medium-term demand for 2Ws from the low-income South Asian countries. While demand for motorbike taxis could decline in the near term in the African region due to Covid-19, Ind-Ra expects the increasing use of public transport and other commercial activities in this region to sustain over the medium term.