Ind-Ra expects Indian two-wheeler exports to see sustained growth in H2FY22

The rating agency, India Ratings & Research (Ind-Ra) in its latest report has stated that India's two-wheeler exports will see sustained growth in the second half of the next fiscal (H2FY22) after observing temporary obstacles in the first half this year due to COVID-19 and declining crude oil prices thereby, hurting the economies of the key exporting destinations.

It also mentioned that the exports would continue gaining their momentum in H2FY21 and FY22E, determined by lower penetration of the exporting countries, firm crude oil prices, unsafe public transport, and infrastructure amid the pandemic situation.

As per the report, India exports two-wheelers to the major countries of Africa, Asia, and Latin America, which comprises of 37.5 per cent, 22.9 per cent and 21.4 per cent, respectively, to the total export during H1FYFY21. Within this, Nigeria, Colombia, Nepal, Bangladesh, and the Philippines together contributed nearly 50 per cent of the total exports in FY20 in value terms.

Indian OEMs will continue to gain power for their key contribution supported by their solid market position and robust distribution network. Indian two-wheeler manufacturers like Bajaj Auto and TVS Motor will be beneficial as they are working on an export-oriented business model. Also, Bajaj Auto and TVS Motor derive sales volume of around nearly 49 per cent and 26 per cent, respectively from the exports during H1FY21.

However, the agency noted that Indian OEMs face heavy competition, mainly from Japanese OEMs that have a strong market share worldwide. Though Chinese OEMs have a higher market share than Indian OEMs in the global markets, the competition is fragmented and Indian OEMs have greater quality.

Ind-Ra said it expects the two-wheeler exports will be weak for FY21 with an expected decline of the overall domestic industry by 18-21 per cent. Two-wheeler export volumes are likely to surge by mid-teens in FY22. The industry faced temporary interruptions in the first quarter of FY21 on account of the COVID-19 spread as well as declining crude oil prices, damaging the economies of key exporting destinations for India.