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3Ws show resilience despite entry of e-rickshaws, SCVs
In response to investor concerns over the rising share of e-rickshaws
(est. addition of ~150-175k units in NCR alone in the past 2 years)
potentially affecting 3W demand, we interacted with e-rickshaw
manufacturers, dealers and related parties. Even as the recent ban on
e-rickshaws by Delhi High Court eases concerns, our rough analysis
suggests that e-rickshaws have so far not affected the demand for 3Ws
or hand-pulled cycles; instead, it has created a new product class in
itself. In the past too, entry of SCVs (Small Commercial Vehicles) had
only very briefly dented the demand for 3W. Within our coverage, we
remain positive on Atul Auto and maintain Hold on Bajaj Auto (concerns
on domestic motorcycle segment).
$ Recent ban offers comfort to 3W investors, but concerns rise on
e-rickshaws: Delhi High Court has extended the ban on e-rickshaws and
said the government had not implemented all the guidelines to regulate
e-rickshaws in the city adding that it will not lift the ban till
e-rickshaws are brought under the provisions of the Motor Vehicles
Act. Further, all e-rickshaws will have to get registration numbers
and drivers driving licenses. According to a government affidavit,
e-rickshaws will have a maximum speed limit of 25km/hr.
$ Prolonged ban can upgrade e-rickshaw users to three-wheelers: Though
a temporary ban has been enforced on e-rickshaws by the Delhi High
Court, if this ban is prolonged or regulations (higher cost of
vehicles if it has to go for Homologation to ARAI and insurance
becomes mandatory) make it unviable, e-rickshaw users will migrate to
three wheelers. This should boost 3W demand.
$ Share of SCVs (goods, <2t declines="" demand="" span="" stable:="" three="" wheeler="">
Our recent interaction with SCVs and 3W users indicate that viability
of three wheelers (both in goods and passenger segments) is
significantly better than that of SCVs. This is reflected in the fact
that while the share of SCVs (3W+SCV) in the last 4 years declined to
57% from 74% in July 2010, raising the share of 3W from 26% to 43%.
Further, while NPA levels for 3W loans continue to remain normal that
for SCVs has risen steeply (reflecting fleet operators’ inability to
pay regular EMIs).
$ Positive on Atul Auto; Hold on Bajaj Auto: Over the long term, we
expect the 3W industry to grow at 6-8% driven by replacement demand,
opening up of permits and also as a viable option to SCVs. From our
coverage point of view, we remain positive on Atul Auto (given the
expansion in dealer network and entry into the petrol segment, we
expect it to outperform industry growth rate) and maintain Hold on
Bajaj Auto (as concerns remain on its ability to gain market share in
the domestic motorcycle segment).
Thanks & Regards
�� India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details ��
��
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3Ws show resilience despite entry of e-rickshaws, SCVs
In response to investor concerns over the rising share of e-rickshaws
(est. addition of ~150-175k units in NCR alone in the past 2 years)
potentially affecting 3W demand, we interacted with e-rickshaw
manufacturers, dealers and related parties. Even as the recent ban on
e-rickshaws by Delhi High Court eases concerns, our rough analysis
suggests that e-rickshaws have so far not affected the demand for 3Ws
or hand-pulled cycles; instead, it has created a new product class in
itself. In the past too, entry of SCVs (Small Commercial Vehicles) had
only very briefly dented the demand for 3W. Within our coverage, we
remain positive on Atul Auto and maintain Hold on Bajaj Auto (concerns
on domestic motorcycle segment).
$ Recent ban offers comfort to 3W investors, but concerns rise on
e-rickshaws: Delhi High Court has extended the ban on e-rickshaws and
said the government had not implemented all the guidelines to regulate
e-rickshaws in the city adding that it will not lift the ban till
e-rickshaws are brought under the provisions of the Motor Vehicles
Act. Further, all e-rickshaws will have to get registration numbers
and drivers driving licenses. According to a government affidavit,
e-rickshaws will have a maximum speed limit of 25km/hr.
$ Prolonged ban can upgrade e-rickshaw users to three-wheelers: Though
a temporary ban has been enforced on e-rickshaws by the Delhi High
Court, if this ban is prolonged or regulations (higher cost of
vehicles if it has to go for Homologation to ARAI and insurance
becomes mandatory) make it unviable, e-rickshaw users will migrate to
three wheelers. This should boost 3W demand.
$ Share of SCVs (goods, <2t declines="" demand="" span="" stable:="" three="" wheeler="">
Our recent interaction with SCVs and 3W users indicate that viability
of three wheelers (both in goods and passenger segments) is
significantly better than that of SCVs. This is reflected in the fact
that while the share of SCVs (3W+SCV) in the last 4 years declined to
57% from 74% in July 2010, raising the share of 3W from 26% to 43%.
Further, while NPA levels for 3W loans continue to remain normal that
for SCVs has risen steeply (reflecting fleet operators’ inability to
pay regular EMIs).
$ Positive on Atul Auto; Hold on Bajaj Auto: Over the long term, we
expect the 3W industry to grow at 6-8% driven by replacement demand,
opening up of permits and also as a viable option to SCVs. From our
coverage point of view, we remain positive on Atul Auto (given the
expansion in dealer network and entry into the petrol segment, we
expect it to outperform industry growth rate) and maintain Hold on
Bajaj Auto (as concerns remain on its ability to gain market share in
the domestic motorcycle segment).
Thanks & Regards
�� India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details ��
��
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