Smooth ride

Mumbai, Feb. 18: Rural areas will be the primary growth driver for the two-wheeler industry in the next decade with total volume almost doubling to nearly 23 million units annually.

At present, demand for two-wheelers is higher in urban areas, which accounts for nearly 55 per cent of the volumes. Data available for the past five years shows that the rural share has grown from 38 per cent in 2006 to over 45 per cent in 2011. Demand in rural India is expected to overtake urban areas by accounting for over 54 per cent of annual sales by 2021.

According to a report by Kotak Institutional Equities, most of the growth for two-wheelers will come from the rural regions as penetration in the urban markets has reached significantly high levels, while that in the rural household is still low. Further, as rural income is lower than that in urban areas, migration to cars is not likely to happen at a robust pace.

Hitesh Goel, analyst at Kotak, estimates that volume of the domestic two-wheeler industry will grow at a compounded annual growth rate of 7 per cent between now and 2021 and penetration levels per person will increase to 14 per cent by that year from 6 per cent in 2010-11.

At the same time, rural volumes are likely to grow nearly 1.8 times that of the urban areas.