Key Earning
Drivers
Government
policy impact on petrol prices: Petrol prices determine
the running cost of two/three wheelers expressed in Rupees per
kilometer. Petrol prices are the highest in India as GOI subsidises
kerosene and diesel. But with the recent change in GOI policy to
reduce the subsidy, the prices of petrol will remain constant at
the current prices. This will have a positive effect on purchases
on two/three wheelers.
Improvement
in disposable income: With the increase in salary levels,
due to entry of multinationals following liberalization process and
fifth pay commission, the disposable income has improved
exponentially over the years. This will have multiplier effect on
demand for consumer durables including two-wheelers. This is
already witnessed in improved demand for 2-wheelers in FY99
compared to a meager growth in FY98.
Changes in
prices of second hand cars: The second hand car prices of
small cars have come down sharply in the recent past. This will
shift the demand from higher end two-wheelers to cars and affect
the demand for two-wheelers negatively. A further drop in second
hand car prices will lead to pressure on the two-wheeler majors who
plan to release higher end scooters and motorcycles.
Implementation of mass transport system:
Many states have planned to implement mass transport systems in
state capitals in the future. This will have negative impact on
demand for two-wheelers in the long-run. But taking into account
the delays involved in implementation of such large infrastructure
projects, we expect the demand to be affected only five to seven
years down the line.
Availability
of credit for vehicle purchase: The availability and cost
of finance affects the demand for two and three-wheelers as the
trend for increased credit purchases for consumer durables has
increased over the years. Therefore any change with respect to any
of these two parameters as a result of change in RBI policy has to
be closely watched to assess the demand for two and three
wheelers.
