Report Motorbike Industry Group 'Honda

A PROJECT REPORT on

MOTORCYCLE INDUSTRY(The Indian Scenario)

GROUP ‘HONDA’

(08FT-091) Nitish Raut(08FT-103) Satwik Pattanayak(08FT-105) Shantnu Prakash(08FT-107) Soumyadip Pal(08FT-111) Sudarshan Shridhar

CONTENTS

IMT Ghaziabad Page 2

1. Overview

India is the second largest market for two-wheelers in the world. It stands next only to

China in terms of the number of two-wheelers produced and domestic sales respectively. This

distinction was achieved due to variety of reasons like restrictive policy followed by the

Government of India towards the passenger car industry, rising demand for personal

transport, inefficiency in the public transportation system etc.

The two wheeler industry (motorcycles, scooters and mopeds), with estimated sales of

over Rs 280 billion during FYI 2007 accounted for close to 0.7% of the GDP. In volume

terms, it is the largest segment in the Indian automotive industry.

.Source: SIAM

Figure 1 : Domestic Sales share automotive Industry


2. Historical perspective

The first Motorcycle was first manufactured in India way back in the 1950s; after which

the motorcycle industry has seen a considerable amount of demand in the country. It is

amazing to note that Enfield bullet was among the first two wheelers to hit the Indian roads

and it still is the passion for most motorcycle lovers. Another bike available at the time was

Rajdoot, which was a close second to Bullet. Dharmendra was its brand ambassador

promoting its sturdy image. Rajdoot went on to sell 1million bikes.

After the huge hit in motorcycles, it was a scooter for Bajaj Auto that became widely

popular in the Indian market. The scooter was named Bajaj Chetak dedicated to the brave

horse of the legendary Rana Pratap, which till recently was one of the triumphant brands from

the Bajaj Auto. LML also introduced scooters which were reasonably successful. Apart from

heavy motorcycles and scooters, lighter bikes from TVS Suzuki named Ind Suzukia was

another choice among the Indian two wheelers. However due to high import rates the bike

couldn’t penetrate into the Indian market.

The industry was opened to foreign investments in the mid 80s, which led to the entry of

as many as four Japanese bike (100cc) manufacturers, in collaboration with Indian

companies. As these 100cc bikes were more fuel efficient when compared to the available

bikes, it soon led to their dominance and Hero Honda the only producer of four stroke bikes

at that time (100cc category), gained a top slot, which it maintains to this day.

The industry saw a sudden growth in the 80s due to foreign investments. The industry

witnessed a steady growth of 14% leading to a peak volume of 1.9mn vehicles in 1990. In

1990, the entire automobile industry saw a drastic fall in demand. This resulted in a decline of

15% in 1991 and 8% in 1992, resulting in a production loss of 0.4mn vehicles. Barring Hero

Honda, all the major producers suffered from recession in FY93 and FY94. Hero Honda

showed a marginal decline in 1992. The reasons for recession in the sector were the incessant

rise in fuel prices, high input costs and reduced purchasing power due to significant rise in

general price level and credit crunch in consumer financing. Increased production due to new


entrants, coupled with the recession, resulted in companies either reporting losses or a fall in

profits.

3. Current Trends

Post 2000, the Indian two-wheeler industry comprising of motorcycles, scooters and

scooterettes opened up tremendously. With a 20% YoY growth, motorcycles captured almost

80% of the market primarily at the cost of the scooter segment. The scooter segment though

has witnessed a revival with the launch of scooterettes aimed at young women and

adolescents.

The two wheeler market can be segmented into three categories on the basis of price –

Entry segment (<35000), Executive segment (between 35000 and 50000) and Premium

segment (>50000).

Motorcycles are now sold as an “experience” rather than a product. New products are

being introduced at a rapid pace and brands are gaining prominence. Thus there is an

increased focus on the premium segment which has an increased scope for differentiation.

Buyer Power is relatively high with buyers becoming more discerning. Reliability and

economy have become more of a hygiene factor. Buyers now demand two-wheelers that fit

their personality thus increasing the scope for differentiation and branding. Provision of easy

financing through EMI’s has reduced the price sensitivity to a great extent. This has resulted

in higher growth in the 125-150cc segment. High level of branding has also helped revive

niche players like Royal Enfield.

Supplier Power is low as most suppliers are exclusive and far more diffused than the

industry itself. It is further reduced due to the threat of backward integration by the two-

wheeler companies.

Barriers to entry has reduced with the introduction of Government policies such as

reduction in excise duty from 24% to 16% and allowing for 100% FDI. However, the

investment required for setting up large distribution channels and service stations can be a

major entry barrier. Another significant entry barrier is the brand building required. Thus,

initially foreign players set up Joint Ventures with indigenous companies. After establishing


their brand they have launched their own line of products, eg.: Honda with Hero Group and

Yamaha with Escorts.

Threat from Substitutes such as the Tata 1 Lakh car looms large over the two-wheeler

industry. For the first time, a car has been positioned at a price point that fills the vacuum

between a motorcycle and a low-end car such as the Maruti 800. Previously, the price of even

a low end car (2.5 – 3 Lakhs) was too high to attract the customers from the entry and

executive two wheeler segment. Since brand loyalty is lower for these segments vis-à-vis the

premium segment, these segments may be threatened by the Tata car. Their buyers will

consider the convenience and status associated with owning a car, which is reasonably priced

and therefore a viable substitute.

Current Competition has intensified thus requiring greater branding and marketing. Also

due to the presence of relatively undifferentiated products, advertising and promotions have

gained importance. The product has moved from a commodity to a branded product.

However, there is still tremendous growth potential especially in the rural markets due to the

under developed road infrastructure for which motorcycles are highly suitable.

The figure below shows the growth of sales of motorcycles and scooters.

Source: ICRAFigure 2: Growth in two wheelers Motorcycle and scooters


4. Major Players

Following are major players in the Indian motorcycle market.

Bajaj Auto Ltd. Hero Honda Motors Ltd. TVS Motor Company Ltd. Honda Motorcycle & Scooter India (Pvt.) Ltd. Kinetic Motor Company Ltd. Royal Enfield (Unit of Eicher Ltd.) Suzuki Motorcycle India Pvt Ltd. Yamaha Motor India (Pvt.) Ltd.

In this project, we limit our study to understanding the marketing strategy of 3 of the Top

players, namely Bajaj Auto Ltd., Hero Honda Motors Ltd. and TVS Motor Company Ltd.

Hero Honda Motors Ltd.

Hero Honda has a reputation of being the most fuel-efficient and the largest selling Indian

motorcycle. Its commitment of providing the customer with excellence is self-evident. A rich

background of producing high value products at a reasonable price led the world's largest

manufacturer of motorcycles to collaborate with the world's largest bicycle manufacturer.

It was this affinity in working cultures of Honda Motor Company of Japan & the Hero

Group that resulted in the setting up of Hero Honda Motors Ltd. Their relationship is so

harmonious that Hero Honda has managed to achieve indigenisation of over 95 percent,

which is a Honda record worldwide. Tactical promotions and excellent marketing helped

Hero Honda establish itself as an intelligent purchase. Its unique features like fuel

conservation, safety-riding courses and mobile workshops helped the group reach in the

interiors of the country.

Finance services helped facilitate purchase, as did an efficient dealer network across the

country. Well-entrenched in the domestic market, Hero Honda Motors Ltd. turned its


attention overseas, and exports have been steadily on the rise. Over the years, the Company

has received its share of accolades, including the National Productivity Council's Award

(1990-91), and the Economic Times - Harvard Business School Association of India Award,

against 200 contenders. It is the market leader with 49% market share.

Key Milestones

Year Event

1983 Joint Collaboration Agreement with Honda Motor Co. Ltd. Japan signed Shareholders Agreement

signed

1984

Hero Honda Motors Ltd. Incorporated

1985 First motorcycle "CD 100" rolled out

1989 New motorcycle model - "Sleek" introduced

1991 New motorcycle model - "CD 100 SS" introduced

1994 New motorcycle model - "Splendor" introduced

1997 New motorcycle model - "Street" introduced

Hero Honda's 2nd manufacturing plant at Gurgaon inaugurated

1999 New motorcycle model - "CBZ" introduced

2000 Splendor declared 'World No. 1' - largest selling single two-wheeler model

2001 New motorcycle model - "Passion" introduced

New motorcycle model - "Joy" introduced

2002 New motorcycle model - "Dawn" introduced

New motorcycle model - "Ambition" introduced

Appointed Virender Sehwag, Mohammad Kaif, Yuvraj Singh, Harbhajan Singh and Zaheer Khan

as Brand Ambassadors

2003 Becomes the first Indian Company to cross the cumulative 7 million sales mark

Splendor has emerged as the World's largest selling model for the third calendar year in a row

(2000-2002)

New motorcycle model - "CD Dawn" introduced

New motorcycle model - "Splendor +" introduced

New motorcycle model - "Passion Plus" introduced

New motorcycle model - "Karizma" introduced

2004 New motorcycle model - "Ambition 135" introduced

Hero Honda became the World No. 1 Company for the third consecutive year.

Crossed sales of over 2 million units in a single year, a global record.

Splendor - World's largest selling motorcycle crossed the 5 million mark


New motorcycle model - "CBZ*" introduced

Total sales crossed a record of 10 million motorcycles

2005 Hero Honda is the World No. 1 for the 4th year in a row

New motorcycle model - "Super Splendor" introduced

New motorcycle model - "CD Deluxe" introduced

New motorcycle model - "Glamour" introduced

New motorcycle model - "Achiever" introduced

First Scooter model from Hero Honda - "Pleasure" introduced

2006 Hero Honda is the World No. 1 for the 5th year in a row

Product Range

Hero Honda has a wide range of models ranging from the CD Dawn, Passion, Splendor

and Deluxe to the recently upgraded Karizma. But Splendor+ and Passion+ are evergreen

models. These models are still very much in demand. The CBZ Extreme is the powerful

motorcycle which is intended to take the battle with its rivals in the 150 cc category. The

other demanded models are Glamour, Ambition, Super Splendour. The latest Hero Honda

bike is the hunk.

The Karizma model of Hero Honda is a top-end bike and targets the niche section of

customers who have preference over performance than to economy. Karizma comes with a

223cc single cylinder, air-cooled, four stroke engine having maximum power of 17bhp at

7000rpm. It has broken the 200cc barrier and the fresh grounds in the acceleration aspect.

The bike has been received well by the youth who prefer style.

Hero Honda CD Dawn is an entry-level bike and competes with other low-range bikes

from rivals like Bajaj Auto and TVS. The performance and mileage of this bike is very good

and is cheap and yet carries the sticker of Hero Honda. This model has served the need of

middle class who have to battle the rising fuel prices. The other preferred choices are CD

100, CD Deluxe, etc. These bikes have the mileage of 70-80.

The latest hero honda bike is HUNK. This model is heavier than the Karizma and the

engine is not visible that much and is packed really nice. The sports bike look goes in

completely well. From the engine aspect the HUNK is similar to that of the Extreme's. The

engine displacement is 149.2cc and produces 14.2 bhp @ 8500rpm with a max torque of

12.8Nm @ 6500rpm. Fuel Economy is said to be a little better than the Extreme and the


features are not very hi-fi. It has no LED, digi-speedo and Clip handlebars. The plastic

mudguard are extended below the lights and signs of sportiness. The black and dark color

combo which is found in almost all the bikes are signs of sportiness as well as “beast” which

it mentions out in advertisements. The Hunk is priced at Rs. 55,000 for the kick start model

and Rs. 57,000 for the self start model.

Bajaj Auto Ltd.

It is one of India's top ten companies in terms of market capitalization and among the top

five in terms of annual turnover. Established in 1945, it was incorporated as a trading

company. From 1948 till 1959, it imported scooters and three wheelers from Italy and sold

them in India. It then obtained a production license in 1959 and struck a technical

collaboration with Piaggio of Italy in 1960. Scooter production began in 1961. Three wheeler

productions followed in 1962. Its collaboration with Piaggio expired in 1971 and since then

the Company's scooters and three wheelers are sold under the "Bajaj" brand name.

Under the "Horizontal transfer of technology" policy, Maharashtra Scooters Ltd., a

Company with 24% equity participation by the Company and 27% participation from

Maharashtra State Government's Western Maharashtra Development Corp. was formed in

1975. Production facilities are located at Satara, in Maharashtra State. This helped augment

production capacities. The unit continues to assemble scooters from CKDs supplied by the

Company. These scooters are marketed through the Company's distribution network and

under the Company's brand name. The Company's second plant was set up in 1984 at

Aurangabad, in Maharashtra State. In this plant, scooter production commenced in 1986;

three wheeler production commenced in 1987; and scooterettes and motorcycle facilities

were commissioned in 1990 & 1991 respectively. From 1961 when the annual production

was about 4000 units, today the Company has become a market leader with annual

production in excess of 1.35 million units and with product offerings in all segments (mopeds

& scooterettes, scooters, motorcycles, three wheelers).

Key Milestones(Reverse Chronology)

Year Event


2007 Launch of XCD DTS-Si

National Launch of 220 cc Pulsar DTS-Fi.

Bajaj Auto Commissions New Plant at Pantnagar, Uttarakhand

200 cc Pulsar DTS-i launched

Bajaj Kristal DTS-i launched

2006 Bajaj Platina launched

2005 Bajaj Discover launched

Bajaj Avenger DTS-i launched

Bajaj Wave DTS-i launched

2004 Bajaj Discover DTS-i launched

New Bajaj Chetak 4 stroke with Wonder Gear launched

Bajaj CT100 Launched

Bajaj unveils new brand identity, dons new symbol, logo and brandline

2003 Pulsar DTS-i is launched.

Bajaj Wind 125,The World Bike, is launched in India.

Bajaj Auto launched its Caliber115 "Hoodibabaa!" in the executive motorcycle segment.

2001 Bajaj Auto launches its latest offering in the premium bike segment ‘Pulsar’.

The Eliminator is launched.

2000 The Bajaj Saffire is introduced.

1999 Caliber motorcycle notches up 100,000 sales in record time of 12 months.

Production commences at Chakan plant.

1998 Kawasaki Bajaj Caliber rolls out of Waluj.

Legend, India’s first four-stroke scooter rolls out of Akurdi.

Spirit launched.

1997 The Kawasaki Bajaj Boxer and the RE diesel Autorickshaw are introduced.

1995 Bajaj Auto is 50.

Agreements signed with Kubota of Japan for the development of diesel engines for three-

wheelers and with Tokyo R&D for ungeared Scooter and moped development.

The Bajaj Super Excel is introduced while Bajaj celebrates its ten millionth vehicle.

One million vehicles were produced and sold in this financial year.

1994 The Bajaj Classic is introduced.

1991 The Kawasaki Bajaj 4S Champion is introduced.

1990 The Bajaj Sunny is introduced.

1986 The Bajaj M-80 and the Kawasaki Bajaj KB100 motorcycles are introduced.


500,000 vehicles produced and sold in a single financial year.

1977 The Rear Engine Autorickshaw is introduced.

Bajaj Auto achieves production and sales of 100,000 vehicles in a single financial year.

1976 The Bajaj Super is introduced.

1975 BAL & Maharashtra Scooters Ltd. joint venture.

1972 The Bajaj Chetak is introduced.

1971 The three-wheeler goods carrier is introduced.

1970 Bajaj Auto rolls out its 100,000th vehicle.

1960 Bajaj Auto becomes a public limited company. Bhoomi Poojan of Akurdi Plant.

1959Bajaj Auto obtains licence from the Government of India to manufacture two- and three-

wheelers.

1948 Sales in India commence by importing two- and three-wheelers.

1945 Bajaj Auto comes into existence as M/s Bachraj Trading Corporation Private Limited.

Product range

Bajaj Platina, a 100cc bike from Bajaj Auto was launched after TVS Star City. The

cheaper version of this bike is priced for Rs 34,500, while the higher version of Bajaj Platina

costs Rs 36000 according to Delhi showroom prices. The bike was introduced into the market

as the very cheap bikes in its segment to compete Hero Honda. Bajaj has entry-level bikes

like Bajaj CT-100 and Bajaj Discover. The entry-level segment was strengthened by the

arrival of Bajaj Platina.

Bajaj Pulsar, perhaps, was the bike which done wonders for the auto company. This bike

was received very well among the bikers. Bajaj Pulsar DTSi comes in two models: Bajaj

Pulsar 150 DTSi and Bajaj Pulsar 180 DTSi. The 180cc bike is a stunner. On admires its

perfectly sculpted body. It is loaded with a very responsive engine, 14.8 Bhp from 180 CC.

The pricing of the bike is also very affordable. It has lighter and stronger alloy wheels with

superb stability. Bajaj Pulsar 150 DTSi has mileage of 55-60 kmpl and Bajaj Pulsar 180 DTSi

gives a mileage of 45-50 kmpl.

Bajaj Avenger, 180cc DTSi was introduced into the cruiser bike segment post Eliminator.

The wheelbase is 1475mm in comparison to Bajaj Pulsar’s 1,330 mm wheelbase. The bike is

extremely high speed machine and stylish. Bajaj Avenger gives a mileage of 40-45 kmpl in


city conditions. The engine of the bike is 4 - stroke and the displacement is 180cc. Overall it

is stylish and a brand new experience for the bikers.

The other models of Bajaj Bikes are CT-100, Wave, Discover, Wind. Bajaj is considering

launching big bikes in India. The bike include the Ninja 250, the Sports Roadster the ER-6n

Super Sports bikes, the Ninja ZX-6R, the Z1000 and the Vulcan Cruiser.

TVS Motor company Ltd.

TVS Suzuki, a leading two wheeler company began with the vision of the founder of the

Sundaram Clayton Group, the late T.S. Srinivasan - 'to design, develop and produce an

affordable moped for the Indian family.' This vision was realized in 1980 when TVS 50,

India's first two-seater moped rolled out of the factory at Hosur in Tamil Nadu, Southern

India.

A byword for ruggedness and reliability, the TVS 50 proved to be a promising success

and paved the way for many successes for TVS Suzuki ever since. The TVS 50 XL, a proven,

much sought after moped; likewise, the TVS Champ and the Super Champ, created for those

who want economy fused with sporty looks. And now the new XL Super with a 70 cc high-

tech Power Pack is all set to redefine the category of mopeds in the country.

Alongside the economy two wheeler range, it has constantly worked on innovating the

motorcycle segment as well. The Suzuki Samurai was launched for the time conscious urban

commuter.

The Max 100 R was engineered for those who demanded strength and ruggedness.

The Suzuki Shogun was for those who wanted raw power. And today, TVS Suzuki continues

to keep one step ahead of its time by creating India's first 5 speed, 140 cc motorcycle - The

Suzuki Shaolin. The TVS Scooty, a 60 cc Scooterette, is yet another example of the company

pioneering a new category and emerging as market leaders in it.

As for other wins, 'Team TVS' has conquered every major race and rally in the country

from the road to the racetrack, with each of the TVS bikes being a winner. And each time the


'Team TVS' has won on the track or off it, our customers have secured a better product for

their personal transportation.

Key Milestones

Year Event

1980 Launched TVS 50, India's first 2 seater 50 cc moped

1984 First Indian company to introduce 100 cc Indo - Japanese motorcycles

1994 Launched India's First indigenous scooterette (sub - 100 cc variomatic) - TVS Scooty

1996 Introduced India's first catalytic converter enabled motorcycle, the 110 cc Shogun

1997 Introduced India's first 5 speed motorcycle, Shaolin

2000 Launched India's first 150 cc, 4 stroke motorcycle - The Fiero

2001 Launched India's first fully indigenously designed and manufactured motorcycle.

2004 Launched the revolutionary VT-I engine for the best in class mileage in TVS Centra

2006 Launched TVS Apache - first bike to win 6 awards in a row

2007 Apache RTR - first two wheeler in India to have racing inspired engine and features.

2008 TVS Flame, TVS Scooty Electric Vehicle and Three wheeler TVS King launched.

Product range

TVS Apache is very high performance bike. TVS Apache is well styled and has awesome

finish. The design theme of the bike is unique, stocky, but muscular. The headlamp is arrow

shaped and fares combo along with triangular front mudguard giving it an aerodynamic look.

The fuel tank capacity of 16 litres, gives Apache a heavy front look, similar to Pulsar and

Unicorn. The other features include a dual cradle chassis, six-spoke, matt-black finished alloy

wheels, rectangular-section swing arm for the rear wheel and a straight, low-set handle bar

that offers the rider a forward position. By far it has been one of the most successful model

from TVS. It was given the following awards in 2006


TVS Victor is 4-Stroke, 125cc, performance motorcycle with VT-i technology. It is

available in three different models: TVS Victor Edge, TVS Victor GLX 125 and TVS Victor

GX. TVS Victor has number of innovative features. Its engine has temperature sensors which

can sense, the engine temperature is low and the engine then activates the spark plug and

advances the ignition timing. This allows the bike to start fast and with lesser fuel. TVS

Victor has good suspension and better shock absorption. It includes advanced safety features.

The features include are optional right side disc brake for instant stop and provide good

braking control. It has mileage of 60-65 kmpl.

TVS Centra is equipped with super efficient 100cc VTi engine, developed by TVS

Motors themself. The engine has 7.5 Brake Horse Power (Bhp) @ 7250 RPM making it a

powerful motorcycle in its segment. VT-i (variable timing - intelligent) engine contains the

dual spark plugs. It also has advanced microprocessor control system that adjusts the ignition

timing based on certain information, such as engine temperature, rpm level, etc. It has

superior performance and great fuel economy than its previous models.

TVS Fiero Fx is equipped with the features like round headlamps, round mirrors, turn

signal lamps and innovative twin pod instrument cluster containing the speedometer and trip

tachometer together. The engine of Fiero has the single cylinder which is air-cooled, 4 stroke

150cc. The engine generates a peak power output of 12 bhp at 7000 rpm and a maximum

torque of 10.5 Nm at 6500 rpm.


5. Marketing Environment

Macro Environment

Demographics Environment

Population:

With the population of India crossing the 1.2 billion mark India is making its mark as an

emerging market for automobile and consumer market. Today automobiles companies see

India as a huge untapped opportunity. And as if to reaffirm their faith has been a surge in

demand of two wheelers and four wheelers for the past few years.

Geographical Distribution of population:

Increasing urbanization and poor planning has led to a massive horizontal expansion of

cities. The prohibitive cost of land ownership in the business districts results in people having

to travel long distances to work. With the public transportation system being inadequate in

most cities, two-wheelers are essential.


Figure 3 : Growing Urbanization (%)

Figure 4: Increasing No. of cities with 1M+ population

Population age mix and household income:

The population can be divided into six areas

• Pre-school• School age children • Young age adults• Middle age adults (40-65)• Older age adults (above 65)


India’s current demographic profile is very benign to economic development, with the

proportion of educated employable population being on the rise. Pertinently, the population in

the age group 20-39, the main consumer group of two-wheelers, is expected to grow at 1.5x

the total population growth over the next 10 years. The combination of benign age profile and

economic prosperity would help sustain the demand for two-wheelers.

Age Group 1996 2001 2006 2010 2013 20160-4 120 109 114 120 121 1235-14 233 239 221 216 220 22815-19 91 109 122 117 110 10520-24 82 90 109 121 121 11525-34 142 157 171 191 211 22935-44 105 122 139 151 159 16845-54 73 86 100 113 123 13455-59 26 31 37 42 46 5160 & above 62 71 82 93 101 113Total 934 1012 1094 1162 1212 1264

Table 1: Age profile (figures in millions)

House hold Annual Income 1995-96 (%) 2001-02 (%) 2006-07 (%)Very Rich (>Rs 360,000) 0.7 1.4 2.6Consuming class(Rs 80,000 – 3,60,000)

19.7 25.7 37.9

Climbers (Rs 40,000 – 80,000)

32.8 41.2 41.0

Aspirants (Rs 28,000 – 40,000)

26.7 18.3 10.1

Destitutes (<Rs28,000) 20.0 13.3 8.3Table 2: Income profile

Educational groups:

The population in any society falls in any of the five educational groups:

• Illiterates• High school dropouts• High school degrees• College degrees• Professional degrees

India’s population consists of all the five major groups. Illiterates constitute

approximately 25% of India’s population. The demand of two wheelers is present across all

educational groups. Educational level determines the kind of two wheeler models demanded.

Household Pattern:


India has traditionally been a joint family society but with the changing social and

economic environment there has been a transition towards nuclear families. This has resulted

in a surge in demand for two wheelers because earlier there was pooling of vehicles but with

more and more people opting for nuclear family the requirement of owning a vehicle has

increased.

Economic Environment

Income Distribution:

With Indian economy moving on fast track and per capital income increasing the middle

class expanding there has been a surge in the demand for two wheelers as the purchasing

power of consumer is increasing.

Savings, Debt and Credit availability:

Till a couple of months back the interest rates were quite low but with the increase in the

inflation rate, the RBI has begun tightening its monetary policy in order to suck the excess

liquidity from the economy, thereby leading to an increase in the interest rates for loans. The

increase in interest rates in case of auto loans has not deterred the prospective customers as

the increase in rate of interest has been outshined by the increase in their purchasing power.

The other important change that has made easy availability of credit is that the banking

system has increased its reach, covering many more towns and villages than ever before. This

has led to financing schemes being available to more consumers.

Political, Legal and Natural Environment


Anti pollution pressures:

Due to increase in the environmental awareness there has been a pressure on the

automobile companies to come up with newer technologies which are less polluting and more

environmental friendly. The Auto Fuel policy announced in October 2003 laid down a road

map for implementation of emission norms which is as follows:

Date Applicable Norms1st April 2005 Bharat II norms (equivalent to Euro II) for the entire country; Euro III

or equivalent norms for vehicles in Delhi / NCR, Mumbai, Kolkata, Chennai, Bangalore, Hyderabad, Ahmedabad, Pune, Surat, Kanpur and Agra

1st April 2010 Bharat III norms (equivalent to Euro III) for the entire country; ; Euro IV or equivalent norms for vehicles in Delhi / NCR, Mumbai, Kolkata, Chennai, Bangalore, Hyderabad, Ahmedabad, Pune, Surat, Kanpur and Agra

Table 3: Date line for anti pollution norms

Changing role of government:

With the liberalization of economy there has been a sea change in the industry with more

and more MNCs are establishing their businesses in India. The role of the government has

been credible in nurturing this industry through relaxation of excise duty. In the 2008-09

budget the excise duty was relaxed from 16% to 12%, which is positive for the sector which

has witnessed sharp decline in volumes in current fiscal year. The cut in excise duties can be

in effect be passed to the consumers so as to push the sales volume.

Time Line Excise DutyTill 1990 Varying excise duty from 10% - 30%, depending on the engine capacity1991-92 Excise duty rationalized to two categories

15% for vehicles up to 75cc25% for vehicles greater than 75cc

1999-00 Excise duty rationalized to a uniform 16%2008-09 Excise duty further reduced to 12%

Table 4: Reduction in Excise duty

Although there has been a reduction in excise duty, taxes on automotive manufacturing

are levied at city level (octroi), state level (sales tax) and the centre level (excise tax). These

taxes taken together, amount to 37% of total price, which is a huge figure and affects the

export competitiveness of the Indian manufacturers. Although the move towards VAT has led


to the reduction of the cascading effect, still VAT has not been implemented successfully in

all the states.

Technological Environment

Highly competitive markets and changing consumer preferences have led to a lot of

changes in the two wheeler industry. The companies have come up with new and powerful

engines, disk brake and better looks. This has caused the Indian motorcycles to come up to

international standards. The latest technological improvements are the use of liquid cooled

engines and the introduction of e-bikes.

6. Market analysis

Apart from the consumer changing preferences another thing that has a large bearing on

the company’s performance and its sales in the market is its competitors. The India

motorcycle industry has seen a very intense competition during the past three years with

companies adopting different strategies to gain market share. Here we have tried to

understand the strengths and weaknesses of different motorcycle companies operating in the

Indian market. In the last four to five years, the two-wheeler market has witnessed a marked

shift towards motorcycles at the expense of scooters. In the rural areas, consumers have come

to prefer sturdier bikes to withstand the bad road conditions. In the process the share of

motorcycle segment has grown to a staggering 75%. The Euro emission norms led to the

existing players in the two- stroke segment to install catalytic converters. This has been

replaced by 4-stroke motorcycles which do not incur the additional cost of such converters

and fierce competition led to a fall in price of certain models.

Segmentation of Motorcycles in Indian Automobile Industry


Motorcycle models are categorized according to the engine capacity and cost. Following

table lists the different segments into which the motorcycle industry can be categorized into:

Segment Models availableEconomy Lower Hero Honda CD DawnEconomy Upper Bajaj Platina, CD deluxe, TVS starExecutive lower Hero Honda splendor, Hero Honda PassionExecutive Upper Hero Honda Glamour, Bajaj Discover 135,

Honda Shine, TVS Flame, Bajaj XCDPremium Lower Bajaj Pulsar, TVS Apache, Hero Honda

Hunk, Hero Honda CBZ extreme, Honda Unicorn, Hero Honda achiever

Premium Upper Hero Honda Karizma, Bajaj Pulsar 220, Royal Enfield

Table 5: Segmentation of Motorcycle industry

The segmentation basis takes into account motorcycle price, engine capacity, and the

extent of cross shopping to demarcate models that form a competitive set. The most powerful

bikes are kept under the premium upper segment and the least powerful bikes are kept under

the economy lower segment.

Market share of different manufacturers

The figure below shows the market share of different players in the motorcycle industry.

It is obvious from the below statistic that Hero-Honda (49%) has the highest market share

followed by Bajaj Auto (33%) and TVS (9%). The major share of sales for Hero Honda

comes from the domestic market whereas Bajaj Auto has a higher percent in the export pie of

Indian automobiles.


Figure 5: Market share of different manufacturers

Competitor Analysis

Hero Honda Motors Ltd.

Strengths Strong dealer network.

Motorcycles catering to all the segments.

Easy availability of spare parts and easy maintenance of motorcycles.

Good after sales service.

Weaknesses Advertisement strategies are Corporate Image centric there is limited focus on individual

brands.

Confusion amongst buyers as too many products.

Bajaj Auto Ltd.

Strengths Bajaj has been manufacturing two wheelers for a very long time as a result it has core

competency in two wheeler manufacturing


Bajaj has a good research and development section as a result it keeps coming out with

new motorcycles

Bajaj has bikes catering to all the market segments

Weaknesses Bajaj has completely ignored the customers at the lowest level of the pyramid by

completely exiting the economy segment

TVS Motor Company Ltd.

Strengths Initially good technology due to a joint venture with Suzuki Japan

Advertisement strategy well developed by incorporating icon like Mahendra Singh Dhoni

Weaknesses TVS does not have a product portfolio catering to all the segments of Indian motorcycle

market

Dealer network is quite weak

Availability of spare parts is limited

Consumers not satisfied with the after sales service

“South India centric” company

SWOT analysis of the industry

Strengths Better Mileage when compared to the four wheelers

Improvements in the technology used in the manufacturing processes have led to more

efficient engines and hence improved driving experience

Greater market access when compared to other modes of transport

Appeal for youth


Weaknesses Bikes are not very safe when compared to cars and other four wheelers

There is very limited carriage space when compared to cars and even scooters so it is low

on “multi-utility value”

Only two people can comfortably sit on a bike as compared to a car where more people

can be accommodated

Opportunities Increase in purchasing power of the common man will increase the cash available in the

hands of the consumers which can be translated into higher sales

The present Indian population is “very young” and since youngsters are a main chunk of

the potential customers for any bike company, it could be good news for the company.

With Increase in urbanization, more and more people will need a means of transport as

they will have to travel long distances and as public transport is nonexistent in most of the

cities, most of the people may be enticed into buying bikes

The rise in the cost of fuel will make riding bikes more economical when compared to

four wheelers

Threats Credit crunch due to increase in interest rates by the RBI to control inflation

Increase in the fuel prices have in turn led to the increase in the operating costs of a bike

and hence it has become more expensive to own and maintain a bike

Tata Nano: The Tata’s are planning to pitch there four wheeler the Tata Nano against

premium bikes which may eat up into the market share of bikes

With Increasing environmental concerns, the regulators may force the manufacturers to

adhere to a very strict emission norms which may lead to additional investments into the

manufacturing plants

For the last two years the growth rate of scooter sales has been increasing whereas that of

bikes has dipped. The increasing share of the scooters may eat into the pie of the bikes

S Better Mileage Better Technology Greater Market Access Appeal for Youth

W Safety of Passenger Carriage Space Capacity


O Increasing purchasing power Young Indian Demography Urbanization Rising Fuel Price

T Credit crunch Tata Nano Environmental Concern Exhaustible Source of Energy Increase in market growth of

scooters

Figure 6: SWOT matrix

7. Analysis of competition in the motorcycle industry with reference to the Porter’s five forces model

Threat of intense segment rivalry

There is immense segment rivalry; both inter segment and intra segment in the

motorcycle industry. This is due to the fact that there are enough competitors available in all

the segments and also the bike manufacturers are trying to lure the customers into the higher

segments.

The upper executive and the lower premium segments are the most competitive with all

the companies trying to grab a large share of this expanding and relatively more profitable


segment. Though the fixed costs of entering this segment are high, yet most companies have

launched their models in this segment due to the high stakes involved. The various models

launched or re-launched in the last year are :

Premium lower: Bajaj Pulsar DTSI, TVS Apache RTR, Hero Honda Hunk

Executive upper: Bajaj Discover 135, TVS Flame and Bajaj XCD

The presence of numerous competitors has led to various companies upgrading their

existing products to gain an edge over the other competitors. The gain has all along been that

of consumers considering that they are now getting better offering at the same price.

Previously the consumer had wanted bikes which provided better mileage (kilometers a

motorcycle can travel on one litre of petrol), however now the consumer has become more

aware and conscious of new technologies and style which has led the motorcycle

manufacturers to introduce motorcycles which are better looking, provide a good average and

give more power.

There is immense rivalry in all the segments, hence to launch a new product, it is very

important to market it properly; proper advertising is also a must. The below table illustrates

the segment wise sale of two wheelers.

Volume (Thousands) GrowthMotorcycles 2003 2004 2005 2006 2007 2008 2008 3-yearLess than 75cc 52 32 19 1 0 0 - -75-125cc 3152 3659 4177 4806 5168 4196 -18.8% 0.2%125-250cc 417 453 741 975 1349 1536 13.9% 27.5%>250cc 27 27 28 29 30 36 18.6% 8.7%

Table 6: Segment wise sale of two wheelers

Threat of new Entrants

The motorcycle industry in India is very competitive and there is a huge investment

required to enter the market as it requires huge investments in machinery, distribution


network etc, hence normally we donot observe any new player entering the market. This year

there were three new entrants in the market.

Mahindra and Mahindra

Mahindra and Mahindra entered the two wheeler market by acquiring all the assets of

Kinetic motors co. They have a strong in-house design and development competencies

provided by Mahindra Engineering Services (MES) and the recent acquisition of Italy-based

design house, Engines Engineering.

They aim to enter the market initially in scooter segment later spreading to the whole

spectrum of two wheelers including premium bikes.

Ducati

Italy’s Ducati motors also entered the Indian market this year. They are pioneers in

making premium bikes and aim to become the market leaders in that segment in India.

There is a low threat from new entrants in the economy and the executive segments but

the domestic players in the premium segment may have to be ready for an onslaught from

foreign players as India is becoming more and more lucrative for them due to the increase in

purchasing power of the common man in India.

Threat from substitutes

Though the market of motorcycles after being is red is back into being in black and the

market fundamentals look good for the bike industry yet there is no scope for complacence as

there are other automotive products which are vying for a share of the pie of the motorcycle

industry.

Tata Nano

Tata have positioned there latest yet to be launched car against premium segment of

motorcycles. The car comes at an additional price of only about Rs 20,000, but at the same


time it promises better safety and provides the ease of additional space so that more people

can travel together. It is a serious threat for the bike industry and specially the premium

segment which has the most growth potential.

Scooters

It can be observed that over the last two years, the sale of scooters have gone up. This

may be attributed to the fact that the new generation scooters available are more efficient and

comfortable and can be easily handled by the lady drivers.

The threat from substitutes may not pose a major problem as of now but it is imperative

that the price of Nano and other low cost cars in the offing be taken into consideration when

pricing any motorcycle. It is also important that the products be improved continuously so as

to narrow the gap between the bikes and their substitutes.

Bargaining power of consumers

The Indian motorcycle industry has moved from a seller’s market to buyer’s market. Pre

liberalization era has seen a sudden increase in the consumer bargaining power in almost

every industry, motorcycle industry being no exception. The consumer has become more

aware about technology and style in motorcycles. This has pressurized the manufacturers to

come up with new and innovative products and provide the consumer with value for money

proposition. This has also led to a marked improvement in the quality of motorcycles in

India.


8. BCG Matrix

Stars Executive Upper

????

Premium UpperPremium Lower

Cash Cows

Executive Lower

Dogs

Economy Lower Economy Upper


Question Marks

These products are those which have a high market growth but relatively low market

share these products have the potential to become market leaders or stars through proper

nurturing and investment. If these products are not taken care of they may turn into dogs.

The premium segment of motorcycles are kept in this segment as this segment has a high

growth rate (27.5% over the last year 3 years) but have low market share.

Stars

These products are those which have high market share as well as high growth rate. These

products are the main front running products of any company.

The executive upper segment of bikes have been kept in this category as it has a high market

share and at the same time the market for such bikes is growing at a high rate. Bikes in the

120 – 135cc range are doing well owing to the increase in the demand of the customers for a

powerful (higher BHP) as well as fuel efficient bike.

Cash Cows

These products are those which have a high market share but a low growth rate. These

products donot need any new investment and are self sustaining and hence the return on

investments is high, in fact the revenue from these products at times support other brands

which require money.

The executive lower segment have been kept in this category owing to the fact that they

constitute about 60% of the market, but have a low market growth. These bikes were

launched a long time back and at the time had become very popular with the people in the tier

2 and tier 3 cities owing to lower price and higher fuel efficiency. In today’s scenario people

want more than just fuel efficiency and hence they prefer executive upper to the lower

segment.

Dogs


These products are in a stage where the share of the company in the overall market goes

down and the market is also not as attractive in terms of doing business. Here the company

would like to either harvest or divest the product.

The economy segment of bikes has been kept in this category as these bikes have lost

most of their market share to the executive segment. These bikes donot have a bright future

owing to people demanding better looks and power in a bike. This segment should be slowly

divested.

9. Unmet needs

Unmet Needs of 2 Wheelers Industry

Envrionmental friendly bikes

With rising fuel cost and depleting fuel reserves world wide , the consumer at large is becoming more sensitive to environmental issues and hence in years to come , bikes which run on renewable sources of energy and at the same time which can reduce the fuel emission to a great extent will find more demand .

Electric bike is an example of such a bike segment which is still untapped to a major extent.


The low cost of running electric bikes also make them a joy ride and hence they will find good popularity if a major player invests in them . At present Yo Byke manufactured by Electrotherm India Ltd is the only existing player in this segment .

Bike SafetyAt present , the Indian public still views bikes as not very safe and a middle class Indian always prefers to buy a car once he becomes a family man .Thus the bike only finds popularity amongst the youth who prefer to live their life on the edge . But with weak Indian road infrastructure , bikes will gain popularity if they can include safety features.Such features can include - autobrake system which can take over the bike speed if a collision is detected very close , impact detectors which can detect any impact on the bike's body and prevent a possible toppling by means of automatic support system. With the advent of Nano , bike will have to focus on the safety aspects otherwise a major of customers who are not able to move to car due to price issues might change their loyalty.


Documents

Report Motorbike Industry Group 'Honda