Nov 26, 2010

7 Profits that Indian 2 Wheeler Makers made in 2010-11, Q2

Want to know how much profit our "desi" two wheeler makers make..??

Foreword: I am waiting to see how many blogs come up with similar stories after this post..

The sole existence of any business is to earn profits. There have been examples in the past of two wheeler makers which had to shut shop because they were not operating profitably. Memory of LML (Lohia Motors Limited) which had to shut down in 2006 due to financial bankruptcy is still fresh in my mind.

the big picture emerges only when one gives a glance at the "Profit" that these three companies make..

Currently the top 3 two wheeler makers of India by sales volume are Hero Honda, Bajaj Auto Ltd., and TVS Motor. One can analyze their monthly sales numbers as posted regularly on this blog. But what about the profits that these companies make?

Posted below is a graph indicating the Sales and Profits (in Crore Rupees) of the top 3 two wheeler makers, for the 2nd quarter (July-September) for the financial year 2010-11.

As can be clearly seen from the numbers, despite selling about a lakh (100,000) more two wheelers every month than Bajaj Auto, the sales in Rupees of Hero Honda is almost at the same level to that of Bajaj Auto..!!

If you are wondering how that is possible, it is because Bajaj dominates the more profitable category of 150 cc and above bikes with its Pulsar range of bikes. On the other hand Hero Honda dominates the economically priced 100 cc segment with its Splendor and Passion models.

Moreover Bajaj has come back very strongly in the 100 cc category with its Discover range (which is also similarly priced as the Splendor) and has become the second largest selling brand after the Splendor in a very short time of just a year.


But the big picture emerges only when one gives a glance at the Profit graph of these three companies. Compared to last financial year, Bajaj Auto has been by far the most profitable company at 682 Crores during the months of Jul-Aug-Sep 2010. Although at 506 Crores, the profit figure of Hero Honda is respectable, but when compared to the same period of last year, it has shown a decline.

Comparatively at 55 Crores, the profit figure of TVS Motor is modest at best. But then compared to last year, the profit of TVS Motor has increased more than 100%.

So what’s in it for "desi" bike enthusiasts?

Hopefully more spends on R&D and advanced and more exciting offerings.. Not just from Bajaj and TVS but also from Hero, since it’s imminent that Honda will be parting ways with Hero very soon.


P.S: Why have I not published the sales and profit numbers of Honda (HMSI), Suzuki, Yamaha..??

Because, these companies do not publish their profits and sales numbers as shares of these companies are not traded in BSE or NSE

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This is to remind that the Views or Opinions in the blog are entirely mine unless explicitly stated. The Views and Opinions published in this blog should in no way be related to any other person or organization associated -- directly or indirectly -- with me.


Anonymous said...

Dear Payeng,

You can't say bajaj is making more profit and equaling sales although selling more than 1 lakh bike less every month compare to Hero Honda. Bajaj is also doing three wheeler business, profit of which is included in the figure. The same is true for TVS motors which is rapidly expanding its three wheeler business.

Actually bajaj is profitable due to higher sale of pulsar, less advertisement expenses, better three wheeler margin, better realization per bike. You will wonder to know that Bajaj Boxer is also giving EBITA of 20%. Another thing you will see surprise in quarter three earnings as Hero Honda has sold 5 lakhs bikes in the very first month. Lets see what no it can give in second month. The second or third month will show the sustainable demand as October and November figure will largely be driven by festive seasons plus the sales are dispatches they have nothing to do with dealer sale it may be more or less. So wait for second and third month figure of the third quarter.

Thanks for posting.


Mahavir Kothari

Payeng said...

@Mahavir, your deductions are true. Bajaj also earn from the 3 wheeler business and also from "Exports". In fact Bajaj is the largest 2/3 wheeler exporter from India.

Lets see what's in store for the 3rd quarter.

Gautam said...

Bajaj did not need to pay hepthy "Royalty" to any other entity, as HH need to pay Honda Motors, Japan. It may be a big reason of HH's lower profit/bike. (Dear Payeng, I remember ur article about HH paid Rs 500 cr royalty to Honda. Correct me if I m wrong.)

If Hero & Honda will get separate, I think innitially Hero will enjoy the financial position, as it do not need to pay any fees. (Afterwards, only God knows what happen. Its interesting to see Hero survive like Bajaj did from Bajaj+Kawasaki alliance or get destruct like Kinetic...)

Anonymous said...

Dear Gautam,

Even if Honda will seprate Hero honda needs to pay royalty. Because they are using thier name and engine developed by them. Just like Bajaj which is still paying royalty for Boxer and platina (Wind 125) to Kawasaki.

The deal is going to happen within a month time. We have to see if splendour and passion can survive in long run without their parent brand Hero Honda.



Mahavir Kothari

Payeng said...


Lets wait till the final details regarding the Hero and Honda relationship/break up becomes final and made public. Lets not jump to conclusions.

Also Bajaj pays NO royalty to anybody, for any product.

The Wind 125 is no longer in production and the current boxer (for export markets and not sold in India) has no Kawasaki contribution on it.

Anonymous said...

Dear Payeng,

I will mail you details about the same. I never say anything without back up. Bajaj still pays royalty and hero honda needs to pay royalty other wise it will not be able to use Honda engine and name. The technical agreement will expire in 2014 which does not have to do anything with stake sell unless Honda terminate the technical agreement before the term. Termination of contract and stake sale is a different term.



Mahavir Kothari

santosa said...

Great to see new innovative posts in this blog
Thanks payang.

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