PEST analysis for Indian two wheeler automobile industry

Abstract

The domestic two-wheeler industry recorded sales volumes of 13.8 million units in 2012-13, a growth of 2.9% over the previous year. This pace of expansion was significantly slower than the 13.7% volume CAGRposted by the industry in the last five years. In the past, India's per capita real GDP growth at 8.6% (CAGR) over the six year period 2005-2011 had contributed substantially towards raising the standard of living of households, which in tum had been one of the key drivers of growth for the country's automobile industry. But over 2011-12 and 2012-13, inflationary conditions, firm interest rates, rising petrol prices as well as weak monsoons adversely impacted disposable incomes causing a consumption squeeze. Over the long term, the trend in rising Two wheeler penetration in households in the addressable income segment (already reached around 80%) is an added concern implying difficulty in sustaining penetration-driven growth over an extended time horizon. For the domestic Two wheeler industry to revert closer to its historical growth trend line any time soon, the pie of total number of target households will need to expand. This in turn would depend on the pace of India's economic growth recovery that could (a) boost personal disposable incomes and resultant consumption growth, (b) pull up the un-penetrated households from a low income segment to the next higher income segment, (c) further enable increase in the number multiple two-wheeler households, enabling penetration supported rise in 2W demand. Even on the exports front, the year 2012-13 was a period of weak growth for the industry with volumes at 2.0 million units declining by 0.7% over the previous year. This paper highlights the Pest analysis of Indian two wheeler Market and to discuss the competitive scenario and the future of the two wheeler market in India.