Jefferies Optimistic On Indian Two-Wheeler Makers Despite Growth Moderation

Jefferies Research is optimistic on Indian two-wheeler companies despite some moderation in growth this year — with firms seeing divergent growth. The brokerage also is cautious on Ola Electric Ltd., given the losses in market share.

The growth of Indian two-wheeler registrations moderated to 4-5% in January and the first half of February, after a strong growth during fiscal 2022-24, Jefferies said. Despite this, it remains "optimistic", given a favorable base and potential demand tailwinds from the recent income tax cuts.

Jefferies expects 13% industry CAGR over fiscal 2024-27, which still implies a modest 3% CAGR over fiscal 2019-27.

The domestic industry is seeing divergent growth among companies, with TVS Motor Co. outperforming with double-digit growth and registration market share rise, Jefferies said. "Hero MotoCorp Ltd. and Bajaj Auto Ltd., conversely, are lagging in domestic two-wheeler growth," it said.

Meanwhile, Ola Electric will remain under pressure with electric vehicle penetration stagnating for the 4-7% range for the last two years, Jefferies said. This is despite the launch of lower-priced vehicles by OEMs. "This indicates that attractive cost of ownership alone is insufficient for widespread adoption, and build-up of consumer confidence in product reliability, longevity, and resale value are key."

Ola Electric is losing market share in elective two-wheelers, down from 49% in the June quarter to 17% in the first half of February, Jefferies said. Bajaj and TVS are leading among incumbents with 22-26% market share in January-February, the report said.

• India's two-wheeler registration growth has moderated from 12% in April-August to 9% in September-December and 4-5% in January-first half of February.

• TVS is outperforming with double-digit growth and is gaining market share.

• Eicher lagged in April-August but has outperformed with 14% growth in September-January.

• Hero Moto and Bajaj Auto, conversely, are lagging in domestic two-wheeler growth.

• Electric vehicle penetration in two-wheelers remains in the 4-7% range, with Ola facing volume and margin pressures.

• TVS and Eicher are preferred two-wheeler buys.