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Automobile Sector - Two Wheeler Industry

Sector Update - Two Wheeler Industry:

2-Wheeler majors continued their streak of posting strong monthly numbers for the month of May 2010. Auto numbers posted by 2W players in the month of May 2010 reinforce our view of a strong year ahead for the players in the 2W space.

New launches in the past few months are also playing a critical role in expansion of the overall 2W market. Thus despite competition, all companies continued to grow at a fairly strong pace. With the onset of monsoon, one can expect cyclical slowdown in volumes on sequential basis, but YoY volume growth prospects are optimistic.

Increased government spending in the rural areas coupled with improved farm income will continue to remain critical growth driver for 2W volumes. The domestic 2W volumes are expected to grow by 15% in FY11E. Bajaj Auto and TVS Motor are top picks in the 2W space.