MARKET &COMPETITION ANALYSIS

Current Industry Status

• The two-wheeler market in India is the biggest contributor to the automobile

industry with a size of or Rs 22000 crores.

• In terms of volume the industry sales around 5.4 million units a year.

• India is the second largest producer and manufacturer of two-wheelers in the

world.

• It stands next only to Japan and China in terms of the number of two-
wheelers produced and domestic sales respectively.

• India is the two wheeler capital of Asia with 27 two wheelers per 1000
persons as compared to 8 two wheelers per 1000 persons in China.

• According to the figures published by SIAM, the share of two-wheelers in

automobile sector in terms of units sold was about 80 per cent.

• Indian two-wheeler industry has got spectacular growth in the last few years.

Sales of two wheelers in India

Source : SIAM

Key market forces

Demand drivers for two wheelers

• Inadequate public transportation system, especially in the semi-urban and

rural areas. Delay in initiation of Mass Transport System - Probably a future
threat to the two-wheeler market, the implementation of the mass transport
system has been delayed.
• Increased availability of cheap consumer financing in the past 3-4 years; Two-
wheeler loans and financing has been on the rise.
• Increasing availability of fuel-efficient and low-maintenance models and
increasing number of models with different features to satisfy diverse
consumer needs.
• Increasing urbanization, which creates a need for personal transportation and
Changes in the demographic profile
• Steady increase in per capita income over the past five years. There has been
steady increase in consumer's salary - Due to opportunities offered by
multinationals the disposable incomes of salaried individuals have increase
manifold.
Major players

Major players in the 2-wheeler industry are

• Hero Honda Motors Ltd (HHML),

CD Dawn
CD Deluxe
Pleasure
Splender +
Splender NXG
Passion Pro
Passion +
Super Splender
Glamour
Glamour PGM FI
Achiever
CBZ Extreme
Hunk
Karizma
Karizma ZMR

• Bajaj Auto Ltd (Bajaj Auto)

Avenger 200 DTSi

Pulsar LS (New)
Pulsar 220 DTSi
Pulsar 180 DTSi
Pulsar 150 DTSi

Discover 135 DTSi

Discover DTSi

Platina 125 DTSi

Platina 100 CC

XCD 135 DTS Si

Cristal DTSi

Kawashaki Ninja 250 R

• TVS Motor Company Ltd (TVS).

The other key players in the two-wheeler industry are

• Kinetic Motor Company Ltd (KMCL),

• Kinetic Engineering Ltd (KEL),
• LML Ltd (LML),
• Yamaha Motors India Ltd (Yamaha),
• Majestic Auto Ltd (Majestic Auto),
• Royal Enfield Ltd (REL) and
• Honda Motorcycle & Scooter India (P) Ltd (HMSI).

Segmentation

The three main product segments in the two-wheeler category are

• scooters,
• motorcycles and
• mopeds.
However, in response to evolving demographics and various other factors, other sub
segments have emerged which are
• scooterettes,
• gearless scooters, and
• 4-stroke scooters.

Comparative Characteristics

Characteristics Scooter Motorcycle Moped

Price > 22,000 > 40,000 > 12,000

Stroke 2-stroke, 4-stroke Mainly 4-stroke 2-stroke

Fuel Efficiency (kms per litre) 50-75 50-100 70-80

Load Carrying High Highest Low

The bike segment can be further classified into the following sub segments:

1. Entry level – 100 cc bikes

2. Deluxe/Executive segment – 100-135 cc bikes

3. Premium/Performance segment – 135-250 cc bikes

Current market share

Growth trend of major Players

• Bajaj Auto was the undisputed market leader till the year 2000.

Bajaj Auto dominance arose from its complete hold over the scooter market.

• Hero Honda almost doubled its market share from 20% in FY2000 to 40% in
2005 to emerge as the market leader.

This was because of the rising preference towards motorcycles and HH had
concentrated on motorcycles only.

• TVS, on the other hand, witnessed an overall decline in market share from
22% in FY2000 to 18% in 9MFY2005.

Growth Perspective

National Council of Applied Economic Research (NCAER) had forecast two-wheeler

demand during the period 2002¬-03 through 2011-12.

The forecasts had been made using econometric technique along with inputs
obtained from a primary survey conducted at 14 prime cities in the country.

The models considered a large number of macro-economic, demographic and socio-

economic variables to arrive at the best estimations for different two-wheeler
segments.

2-Wheeler Regions
Segment
Sout Wes North- East & North- All
h t Central East India

Motorcycle 2835 432 2624 883 10669

 7

Scooter 203 219 602 99 1124

• At the all India level, the demand for motorcycles will be almost 10 times of
that of the scooters.

• The same in the western region will be almost 20 times.

• Motorcycle will find its major market in the western region of the country,
which will account for more than 40 per cent of its total demand.

Strengths

• Advancement in technology and new variants in the two wheeler industry.

• Introduction of new fuel efficient and high performance variants.

Weaknesses

Opportunities

• There is a large untapped market in semi-urban and rural areas of the

country.

The two¬-wheeler industry needs to identify these markets with the help of
available statistical techniques. Potential markets can be identified using
these techniques with the help of secondary data on socio-economic
parameters.

• Increasing urbanization, creating a need for personal transportation and

changes in the demographic profile

• Availability of easy credit for two-wheelers in rural and smaller urban areas.

Threats

• Introduction of secondhand car market by the reputed car manufacturers and

easy loan availability for new as well as used cars.

• Introduction of new small cars like Tata Nano.

Emerging trends in consumer preference

• Till the year 1999 the scooter segment had the highest share of 41% in the
two wheeler market.

• The share of motorcycle segment almost doubled from 42% in 1999 to 79%
in 2005.

Bajaj was market leader in the two wheeler industry till the year 2000.

It had market share of 32% in the entire two wheeler industry in 2000.

Bajaj Auto had stopped making Chetak which was once the world’s largest selling
scooter in 2006.

Hero Honda almost doubled its market share from 20% in 2000 to 40% in 2005 to
emerge as the market leader.

Bajaj could hardly sell 1000 scooters per month in the year 2009.

It finally decided to exit the scooter segment in December 2000.

The shift in the consumers’ preference pattern has been mainly because of the
following major factors:

• Change in the country's demographic profile and increasing urbanization.

• Technological advancements, availability of new high performance and fuel

efficient bikes.
 • Declining difference in prices of scooters and motorcycles.

• High re-sale value of motorcycles.

Marketing Strategies

In 2006 Bajaj had been outperforming Hero Honda in growth figures with the
success of its 125 cc segment.

Bajaj Auto had clocked 37% growth in motorcycle sales compared to Hero
Honda’s 7.5%

While Hero Honda’s 100-125 cc segment declined by 3.5% that of Bajaj

increased by 35%.

Bajaj was close to snatch away the market leader position from Hero Honda.

Hero Honda then took a strategic decision to focus on top lines rather than
bottom lines.

Bajaj took a miscalculated strategy of quitting the 100 cc segment.

Credit squeeze induced by the global economic crisis worked in favor of Hero
Honda.