Egypt’s decision to ban the import of three-wheelers (tuk-tuks), citing safety concerns, can have major implications for India’s three-wheeler-makers including Bajaj Auto. Egypt accounts for about 5 per cent of three-wheelers exported by Indian OEMs.
Egypt had previously issued a similar ban in 2014, where it had halted import of 2- and 3-wheelers for three months. This time, the country appears to be focussing on three-wheelers for safety concerns, aiming to permanently transition out of three-wheelers.
Hemal N Thakkar, Director, CRISL, told BusinessLine, “Actually initially only Cairo had this ban and now entire Egypt has banned the import of 3-wheelers. What the order states is that the ban is because of safety concerns and they would want to shift to CNG 4-wheelers.”
While this may be bad news for India’s three-wheeler makers, Thakkar reckons that automakers will also gain on Quadricycle (4-wheeler) exports as a replacement category. OEMs can export alternatives or supplementary products instead of three-wheelers.
According to Anish Rankawat, Equity Research Analyst (Autos) at Centrum Broking Limited, “Unlike the 2014 ban by Egypt, which was on both two- and three-wheelers, the present ban is merely on three-wheelers which form a small part of the business for these OEMs. Although right now it is speculation, given that the ban is due to safety concerns where the government wants to encourage the adoption of minivans, etc., OEMs can export alternatives rather than three-wheelers.”
Bajaj Auto, which exports around ten per cent of its three-wheeler production to Egypt, will be the worst hit. While Bajaj Auto did not comment on the development, according to sources close to the company, the ban is only going to result in an impact of one per cent on the topline. “For Bajaj, three-wheelers comprise only 12-13 per cent of their overall export business, ten per cent of that is a 1 per cent loss of revenue from exports,” a source told BusinessLine on condition of anonymity.
According to sources, Bajaj’s distributors in Egypt are in conversation with the government and the company is also exploring the possibility of exporting its Quadricycle to Egypt.
On the BSE, shares of three-wheeler-makers dipped, with Bajaj Auto’s and TVS’ seeing a drop of 2.93 per cent and 2.01 per cent, respectively, on Friday.