A

PRESENTATION
ON
MANAGEMENT RESEARCH PROJECT - I
SUBJECT:

Automobile two-wheeler Industry

INTRODUCTION
The first automobile in India rolled in 1897 in Bombay.
India is being recognized as potential emerging auto market.
Within two-wheelers, motorcycles contribute 80% of the segment size.
Unlike the USA, the Indian passenger vehicle market is dominated by
cars (79%).
Tata Motor dominates over 60% of the Indian commercial vehicle
market.
2/3rd of auto component production is consumed directly by OEMs.
India is the largest three-wheeler market in the world.
India is the second largest two-wheeler manufacturer in the world.
India is the fifth largest commercial vehicle manufacturer in the world.
The number one global motorcycle manufacturer is in India.
India is the fourth largest car market in Asia - recently crossed the 1
million mark.
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Market Share of Automobile Industry

Source

: SIAM
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Market Share Of The Two Wheeler

April-Oct. 2008

2007- 08

Source

: SIAM

Major Manufacturers of Automobiles in India

Hero Honda Ltd.
Bajaj Auto
Hero Motors
Royal Enfield Motors
TVS Motors
Kinetic motors Ltd.
Suzuki motors

Growth of Two Wheeler Industry

Indian auto industry reported one of its worst performances in
November 2008 as economic headwinds continue to plague demand.
All companies, except for Hero Honda registered a decline in
volumes. In the two-wheeler pack, Bajaj Auto reported domestic sales
of less than 100,000 for the first time since April 2003. TVS also
reported a decline of 12.7%.
Domestic two-wheeler sales were down 14.6% in October, posting
negative growth for the first time in FY09.
Within segments, domestic motorcycle segment was the worst hit,
and was down 18.2%, as financing went totally dry in the market. A
few major players pulled out of two-wheeler financing completely.
Motorcycle exports, which continue to be on a high growth, were
up 37.8% Y-o-Y in October.
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PESTEL Analysis
POLITICAL ENVIRONMENT
Budget Impact on Major Players
A.The reduction in the import duty on used two-wheelers will
positive affect the industry.
B.The reduce in the excise duty on two-wheelers will positive affect
the industry
C.The extension up to March 2007 of 150 per cent deduction on
R&D expenditure will marginally benefit domestic two-wheeler
players, such as TVS Motors, Bajaj Auto and Kinetic.
D.The reduction in personal tax rates will increase household
disposable income, which is a positive for two-wheeler demand.
Negatives Impact
Competition from imports
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Excise Duty
1991-92 budget to only two-categories viz 15% up to 75cc
and 25% above 75cc.
1999-2000 budget, as a result of rationalization of duty
structure the excise duty up to 75cc vehicles was increased to
16% while for those above 75cc decreased to 24%.
2007-08 budget, as a result of rationalization of duty structure
the excise duty up to 75cc vehicles was Decreased to 12%
while for those above 75cc decreased to 12%.

Vehicle Emission Norms

Imports
Exports
Foreign direct investment

ECOLOGICAL ENVIRONMENT
Environment
Euro stage
Life limit
PUC

Engine Type

Technology
Mechanical Fuel Injection

2 Stroke
4 Stroke

Electronic Fuel Injection

Conventional 4 stoke engine
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SOCIO-CULTURE ENVIRONMENT
Geographical Distribution

Source

: SIAM

Geographical Distribution (motor cycle)

Urban- 49.9%
Rural- 50.1 %

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 Demographic profile

Age group
Life style
Monthly Holding Income
Monthly Holding Income Two wheeler household
Up to Rs.500-2000

12.4

2001-5000

38.5

5001-1000

32.9

10001-15000

10.2

15001-20000

3.7

20001-30000

1.4

30001-40000

0.4

Above 40000

0.4
Source : NRS Household Data

TECHNOLOGY ENVIRONMENT
Nature of Alliance

Company

Technological tie-up

Tokya R&D Co Ltd,

Japan

Technological tie-up

Kawasaki Heavy
Industries Ltd, Japan

HHML

Joint Venture

Honda Motor Co,

Japan

LML

Technological tie-up

Daelim Motor Co Ltd

Bajaj Auto

Hero Motors

Technological tie-up

Aprilia of Italy

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ECONOMICAL ANALYSIS
GDP growth rate in 2007-08
7.7%
Inflation (15th December 2008)

8%

Foreign Exchange Reserves

US$ 246349 mn

( As on November 14, 2008)

Exchange rate (15th December 2008)

US$ 1 = Rs.49.13

Exports (April - March 2007 08)

US$ 155.5 billion

FDI (Apr - Feb 2007 - 2008 )

US$ 20.13 billion

FII (Apr March 2007-2008 )

US$ 16.1 billion

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LEGAL ENVIRONMENT
CMVR- Technical Standing Committee (CMVR-TSC)
Driving license
Registration of motor vehicle
Control of traffic
Construction & maintenance of motor vehicle
Standing Committee on Implementation of Emission Legislation
(SCOE)
To discuss the future emission norms
To recommend norms for in-use vehicles to MoSRT&H

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Five Force Model

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Threats Of New Entrants

Large Investment

Economics of Scale

Product Differentiation

Distribution Channel

Threats Of Substitute Product

Relative Price Substitute

Bargaining Power Of Buyer

Product Differentiation
Products Information
Large No. of Buyers
Bargaining Power Of Supplier
Suppliers are Weak
Own Engine Production

Porters Diamond Model

Government

Firm Strategy,
Structure and
Rivalry

Factor
Conditions

Demand
Conditions

Related and
Supporting
Industries

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OT Analysis

Opportunities
Participate in domestic growth opportunities.
Exports of vehicles.
Exports of components.
Engineering and Design Services.

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 Threats
New Entrance
M&M. enter into two wheeler.
Buyers
Brand Modification
Substitute
Electric Two wheeler
Substitute For high segment Bike
Launching of NANO car
Petroleum price change

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Strategic Grouping
GROUP

PLAYERS

Bajaj, Hero
Honda

TVS

ATTRIBUTES

COMPETITIVE FORCES

- High buyer power

Highly diversified
- High competitive rivalry
Aggressive promotion
- High entry barriers
- Low entry barriers
Selectively diversified - Narrow product lines imply
Aggressive Promotion that aggressive promotions
can eat into market share

- High threat of substitution

Honda, Yamaha, Selectively diversified
(Rs 1 lakh car)
Kinetic,Suzuki Moderate Promotion
- Low entry barriers

Royal Enfield

Highly specialized
Low Promotion

- Low buyer power high

brand loyalty
- Product diversification will
imply risk of brand dilution
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Value Chain Analysis

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CONCLUSION
Two Wheeler segment as a whole during the year 2007-08 decline
by 8 % YOY. Backed by Governments cut excise duty but global
crisis the automobile two wheeler sales are decline.
The two-wheelers market has had a perceptible shift from a sellers
market to a buyers market with a variety of choices. Players will
have to compete on various fronts viz pricing, technology, product
design, productivity, after sale service, marketing and
distribution. In the short term, market shares of individual
manufacturers are going to be sensitive to capacity, product
acceptance, and pricing and competitive pressures from other
manufacturers.

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 The motorcycle segment will continue to lead the demand for

two-wheelers in the coming years. Motorcycle sales are
expected to increase by 18%yoy as compared to 1% growth in
the scooter market and 2% by moped sales respectively for the
next coming years.
The fast changing business environment makes urgent
necessity of product innovation and strategic management
awareness. Firms can no longer produce and market huge
amounts of standard products with a relatively stable market
and technological climate. Instead, they have to grapple with
unstable, rapidly changing markets and technologies in order
to run their organizations and be able to sell their brands

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M
O
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Thank You

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