Strategic Groups

The motorcycle segment constitutes about 81.5% of the two wheeler market
in India. It also contributes to three-fourths of the total exports in the two
wheeler industry. Exhibit 1 shows that Bajaj is the second largest player in
this segment after Hero Honda.

The industry exhibits some degree of collusive behaviour and thus

represents an oligopolistic form of market structure. Product and brand
differentiation are seen as the primary means of sustaining competitive
advantage. In order to sustain brand equity, players spend large
percentages of their revenues in advertising and brand building activities.
The supply and distribution networks are decisive factors in staying
competitive and normally need a huge capital investment.
The two wheeler industry is capital intensive with large fixed cost
requirements and new model introductions mandatory at frequent intervals
in order to sustain the demand. This involves substantial design and R&D
costs. Such high fixed costs can be offset only by achieving economies of
scale. Moreover, developing a distribution channel is extremely difficult in a
country like India. Therefore, it is difficult for a new player to enter this
industry.

The range encompasses two segments as defined by SIAM 150cc to 200cc and
200cc to 250cc. The segment is dominated by Bajaj Auto with its Pulsar / KTM range
and TVS with its Apache. Everyone else is just the applauding audience. Also, low
overall volumes in these segments, combined with its urban appeal, mean that a
new entrant has a much better chance of unsettling the applecart.
The segment s also hold a lot of promise, being one of the fastest growing segments
with relatively meaty volumes. Overall, the two segments accounted for a little
more than 460,000 units in 2014, a growth of 24.22% over 2013 dispatches of
370849 units.
From a modest base of less than 200,000 units, the segment grew by 74.4% in 2014
in case of big bikes (>250CC). Even though the number of models are quite large,
most of the Big Bike market is accounted for by Royal Enfield. The Bikes-wedemand-a-government-subsidy-for (import brands) part of the market is dominated
by Harley-Davidson, even though Triumph made some serious inroads in 2014. The
Japs are yet to wake up and smell the coffee in this part of the market.