The two-wheeler (2W) sector is witnessing a positive shift after facing challenges for the past few years. Hero MotoCorp Limited (HMCL), a pure play in the domestic 2W industry, is known for its core strength in the 100cc motorcycle segment, with scooters contributing only 8% of its volumes.
The demand recovery in the 2W industry is expected to continue, supported by increasing rural demand and a rebound in exports. Recent launches of 400cc motorcycles by global brands like Harley Davidson (HD) and Triumph have stirred up excitement in the Indian market, offering aspirational brands at competitive prices and attractive features.
Google Trends data reveals that the launches of HD X440 and Triumph 400 are generating significant interest, comparable to the response received during Royal Enfield's (RE) Hunter launch. Moreover, the search trends for HD and Triumph have outperformed past launches like Honda CB350 (H’ness) and Jawa motorcycles.
In key RE markets, HD enjoys a 44% search share in the first fortnight after launch, followed by Triumph with 36%. Urban-centric areas have seen more searches for new brands, with HD and Triumph accounting for 43% and 41% shares, respectively.
The rise of HD and Triumph in the super-premium motorcycle (>250cc) segment may impact RE's 350cc portfolio's growth, though they are expected to expand the overall segment.
For Hero MotoCorp, a sustained recovery in domestic 2W demand is projected in July 2023, with expected retail growth of 8-10% YoY. HMCL's Passion model is performing well, and inventory levels at most 2W dealers are healthy, with HMCL carrying the highest at 60 days.
While RE has an inventory of 2-3 weeks, overall, a volume Compound Annual Growth Rate (CAGR) of 9-11% is anticipated for 2Ws. In the auto ancillary sector, Endurance Technology stands out as a favorable proxy to the 2W industry.
With HMCL's positive outlook and Endurance Technology's promising potential, both companies are considered as plays on the thriving auto space.
