Report On The Indian Two Wheeler Industry

Submitted To: Mr. Sanjay Nadir
General Manager- Accounts & Finanace

Submitted By: Mohit Singh
Submitted On: 16.07.2010


I wish to express my sincere gratitude to Mr.Sanjay Nadir, (General Manager – Accounts & Finance, for me with an opportunity to work on this project and learn something new. We are indebted to him for clarifying our concepts by sharing his valued experience in teaching, research and training which have thereby become an unconscious part of our ideas and thoughts. I would like to thank Mr. DILIP THAKUR Department of

Accounts,for his valuable suggestion, guidance and support at all stages of the project. I would like to thank my family members for their encouragement, inspiration and moral support. A special thank to the Almighty for giving us the opportunity and strength to complete this project. Last but not least, my sincere gratitude is also extended to the various other person involved directly and indirectly in the project for their kindly and valuable suggestion.


Executive summary

In view of the increased competition due to globalization and the expansion of economy, all industries need to constantly add more attributes and features which consumer want in two-wheeler. In this context companies have to adopt more innovative and consumer friendly attributes so that their product should be more popular among the customer. The project is aimed at studying the reason why the consumer purchase any particular two wheeler or which are those attributes which affect more to the consumers in making the buying decision. Moreover the attributes which satisfy then the most. In the market there are many players, but Bajaj, Hero Honda, Honda, TVS Motors etc are the major players in the market. Let us first identify the current market leaders in each category. In the economy segment Bajaj is the leader with 46% of the market share with boxer being the largest selling bike in this segment. In the executive segment Hero Honda is the clear leader with 67% market share with splendor and passion leading the market in this segment . The research assigned to me was to study the parameters or the features that affect most of the customer satisfaction in two wheeler industries. There were many features

which affect the two wheeler industry but the importance among all of them were the following: 1. Fuel efficiency 2. Maintenance 3. Availability of the product 4. Resale value 5. Look and style 6. Image of the brand By the study conducted on the customer satisfaction in two wheeler industry it will make companies more delighted about which attributes to inculcate in the product and which attribute is of the least importance.

Introduction Evolution of Indian two wheeler Industry
The two-wheeler industry in India has been in existence since 1955. It consists of three segments viz Scooter, Motorcycles, and Mopeds. The increased sales volume of this industry is proof of its high growth. In 1971 sales were around 0.1 million units per annum. But by 1988 the figure had risen to 3 million units per annum. Similarly capacity of production have increased from 0.2 million in seventies to more than 4 million in the late nineties. (1960-69) The automobile industry being classified as one of important under the Industry Policy Resolution of 1948 was therefore controlled and regulated

Furthermore. automobile assembler firms were phased out by 1952 and only manufacturing firms allowed to continue production of automobile was licensed. It also meant that the government determined a firm’s capacity of production. (1981-90) The technological backwardness of the Indian two-wheeler industry was one of the reasons for the initiation of reforms in 1981. the levels of restriction and control over the industry were also high. (1970-80) This was a period during which the overall growth rate of the twowheeler industry was high. Indian motorcycles in the seventies had two major drawback viz-low fuel . while that of cars declined by 21% and jeeps grew only by 11%. During this period collaborations with foreign firms were encouraged. The former was the result of the steep oil price hikes in the year 1974 following which twowheeler became popular of personal transport because they offered higher fuel efficiency over car. In order to encourage manufacturing besides restricting imports of complete vehicles. Between 1974-79 sales of two-wheeler increased by 60%. Foreign collaborations were allowed for all two-wheelers up to an engine capacity of the government. which meant that a firm required a licensing approval in order to open a plant.

The two-wheeler industry was completely deregulated. For Mopeds it improved from 50 to 80 kmpl. In the Motorcycle segment. as they were lighter and more fuel-efficient. the new 100cc models compared well against the existing heavier models of 250cc. Worldwide however. The two-wheeler industry in the nineties was characterized by an increase in the number of brands available in the market. . there was a trend towards using high strength.efficiency and high weight. which caused to compete on the basis of fuel efficiency improved by (60-100)% in the new vehicles. In the area of trade. several reforms were introduced with the goal of making Indian exports competitive. Output of the engine also increased from 3-4 hp to 10hp per 100cc.1999) The reform that began in the late seventies underwent their most significant change in 1991 through the liberalization of the economy. (1991. low weight materials for various components that resulted in vehicles that were compact and lower weight. In the seventies Motorcycle mileage was on an average between 25 to 50 kmpl.

. It stands next only to Japan and China in terms of the number of the two-wheeler produced and domestic sales. Although various government. • In 1948 Bajaj auto began trading in imported Vespa scoops and threewheelers. • In the initial stage. it was later overtaken by Bajaj auto limited.Some Interesting Facts About two-wheeler industry In India. Indian two-wheeler industries have made beginning in early fifties when automobile products of India started manufacturing scooters in the country. private enterprises entered the fray for scooter. • India is second largest manufacturer and producers of two-wheeler in the world. automobile product of India dominated the scooter segment.

Hero Honda showed a marginal decline in the year 1992. • In 1990 the entire automobile industry saw a drastic fall in demand. Escorts and Ideal Jawa were two stroke bikes. Barring Hero Honda. low power bikes. It was a complete seller market with the waiting period of getting a scooter from Bajaj auto being as high as 12 years. While Enfield and Rajdoot were four stroke.• Under the regulated regime foreign companies were not allowed to operate in India. • The Motorcycles segment was no different with only three manufacturers viz Enfield. all the major producers suffered from recession in 1993 and 1994. demand swelled resulting in Hero Honda then the only producer of four stroke bikes gaining o top slot. This resulted in a decline of 15% in 1991 and 8% in 1992. . • With the availability of fuel efficient.

Hero Honda and TVS Motors. Maharashtra t stands second with a population of 6.5 SOUTHERN 15.73 vehicles. .4 • In terms of two-wheeler vehicle population Tamilnadu stands first with a population of 6.Industry structure • The scooter market is dominated by 150cc vehicles from Bajaj auto and LML with the rest being served by 100cc variometric scooter from Kinetic Honda. SCOOTER PERCENTAGE • NORTHERN 46 WESTERN 27.7 The Indian Motorcycle segment is dominated by Bajaj.16 mn of vehicles as on 31 March 2005. MOTORCYCLES PERCENTAGE WESTERN 40 SOUTHERN 27.5 NORTHERN 17.21 vehicles and Gugrat stands third with 5.

3% Four players viz Hero Honda.9% 13. Bajaj dominated Motorcycle segment. But majority of the sales is of 100cc-125cc vehicles. The market share of each of the players is as given above.3% YEAR’2008 21.7% 14% 42.9% 36% 17.STATES POPULATION OF VEHICLES (MN) TAMIL NADU MAHARASHTRA GUJARAT 6. The Japanese range of Motorcycle is costlier due to import content and royalty payments. Escorts.4% 11. TVS Motors.73 6.6% 38% 13. .3% 15.16 Market Share in Motorcycle Segment COMPANIES BAJAJ ESCORTS HERO HONDA TVS SUZUKI YEAR’2007 28.5% YEAR’2009 24.21 5. Nearly 80% of the Motorcycle sales are of Japanese Motorcycle with rest coming from Indian Motorcycles.

The Company was promoted by Hero Cycles (P) Ltd.HERO HONDA Hero Honda is the only two-wheeler company in the country with a 100% Motorcycle exposure. which can be ramped up to 2. The company is upbeat about demand as is reflected in its progressive capacity bikes from 1. . it is looking at a 200cc bike next fiscal and a relaunch of CBZ. (HCPL). which is a fraction of the Rs 464 crore net profits it generated in fiscal 2002.The Company was Incorporated on 19th January. the 133cc AMBITION this bike is targeted at users who wish to use high-end model but would not like to shell out premium models.4 million units. To counter the competition the company is looking to create as intermediate category with its latest model. Although its sales have growth at a good clip over the past year a bigger Motorcycle pie and greater competition has resulted in a fall in the company’s market share 5% in August 2001 to 47% this August. which has been steadily looking out to Bajaj comparable PULSAR. 1984 . The Company Manufacture motor cycles upto 100 cc capacity. at New Delhi. Hero Honda is taking it easy on launches besides AMBITION.5 million units a year in fiscal 2002 to be increased to 2 million units this fiscal. The warranty program is expected to add Rs 10 crore to costs for the year.

19. and Bahadur Chand Investments (P) Ltd. neutral and flasher indicators.985 shares reserved for allotment as under: . As per this collaboration agreement. 119..(ii) 31..(i) 31. Japan and .20.64.998 shares to Hero Cycles (P) Ltd. Its most attractive features are fuel efficiency and its light weight.985 No.15 No.59.(iii) 9.00.Hero Honda CD-100 is the first four stroke motorcycle to be introduced in India in 100cc range..50. of equity shares issued at par of which 71.99. 2. Japan (HML). etc. Out of the balance 48. Ltd. Ltd. etc. illuminated speedometer. 4 speed gear box. .40.000 shares to Honda Motor Co.The Company embarked on its 2nd phase of expansion of increasing its installed capacity from 1. 1985 . The remaining 44.000 to 1. of equity shares subscribed for by the promoters.987 shares to friends and association of promoters.99. .000 shares by business associates.20. CD-100 will be equipped with electronic ignition system. .The Company entered into a technical-cum-financial collaboration agreement with Honda Motor Co...000 shares were reserved for subscription by the employees of the Company and 96.000 vehicles per annum by the addition of several critical aluminum and steel components. . Hero Investments (P) Ltd.000 shares were offered at par for public subscription during November. In November.000 shares. HML was to furnish complete technical information and know-how and trade secrets and other relevant data.

000 .Another 3.000 .00. 1989 .000 rights equity shares issued at par in prop. 1987 .000 rights equity shares issued at par in prop.75. .850 forfeited shares reissued. In the domestic market the Company was reported to have a market share of 46%.00.00. 1990 .3. 3:10. of equity shares forfeited.The Company introduced a new model "Sleek" during July.36. The debentures were to be redeemed at a premium of Rs 5 per debenture on the expiry of the 7th year from the date of allotment of the debentures. .The Company offered 6. 3:10. .1986 .15% debentures were allotted to retain oversubscription. 850 No.The Company was planning to launch a new model motor cycle-CD 100 SS sutiable to semi-rural conditions.15% secured redeemable non-convertible debentures of Rs 100 each for cash at par on rights basis in the proportion 1 debenture: 18 equity shares. .

Another plant with an installed capacity of 1. per annum at Gurgaon Industrial Estate was being set up.A new Technical Collaboration Agreement has been signed with Honda Motor Co. of Fractional Coupons representing 14.each as Bonus shares on 7th February.40. 1995 .50.79.420 bonus shares issued by way of consolidation of fractional coupons. .557 number of fractional coupons representing 14.500 No.1994 .85 crores respectively due to growth in demand for two wheelers and declining inflation.000 nos.250 shares against which the Shares shall be alloted on presenting the same for consolidation and allotment.The Company issued 39.The Company had issued 28557 No.490 motorcycles and Rs.The Company proposed to expand the capacity of existing plant at Dharuhera to 2. .The Company's production and turnover increased to 1. of Equity Shares of Rs. Ltd.500 bonus shares to the existing shareholders in the ratio of 1:4.The Company alloted 39. .000 nos. Japan for the period upto the year 2004 which includes technology related to models of higher Engine displacement. per annum.83. 10/. The Company also issued 28.14..79. . .483. by way of capitalisation of General Reserves. .250 shares against which shares shall be allotted to presenting the same for consolidation and allotment.

Hero Honda Motors Ltd (HHML) has set up a new motorcycle plant in Gurgaon.A new step thru model `Street-100' with unique feature was launched on 24th January. 100 each and 4 lakh cumulative convertible preference shares of Rs.Motorcycles major Hero Honda is considering entry into scooters in collaboration with partners. . the Street.Hero Honda Motors has launched its newest motorcycle. .750 fully paid bonus shares will be allotted and distributed to members of the company holding equity shares of the company in the proportion of one bonus share for every fully paid equity shares of Rs.68.Hero Motors of the Rs.500 from general reserve to share capital through issue and allotment of bonus shares. heralding a new phase of development of motorcycle industry in India.10 each. 1998 . their scooter venture with the Firodias of Pune.1. a 100 cc bike designed for use in congested urban traffic conditions. . 4 lakh cumulative redeemable preference shares of Rs. after the Japanese company decided to walk out of Kinetic Honda.The company proposes to increase the share capital to 5 crore equity shares of Rs. Altogether.99.1997 . 1. near Delhi for the manufacture of the Honda Super Cub 100 cc stepthro bike. 100 each with power to increase or reduce it from time to time. as part of its globalisation plan.Hero Honda has set up a new state-of-the-art plant.600 crore Hero group. . .96. Honda Motors. . to provide the most modern and technologically advanced production facilities.87.The company further proposes to capitalise Rs. has set up a plant in Brazil for manufacturing hero winner scooters. . 10 each. 19.

. also aims to increase its share by 1 per cent to 38.23. . critical vehicle parts and access to Honda's markets even after the sale of Honda stake in KHML to Kinetic Engineering Ltd (KEL).Honda Motor Company of Japan has decided to re-enter the scooter market in India as also foray into three-wheelers in a joint initiative with its existing joint venture company Hero Honda Motors Ltd.Honda Motor Company Ltd of Japan (Honda) and Kinetic Honda Motor Ltd (KHML) have signed a five-year licence and technical assistance agreement under which KHML will continue to receive the technical knowhow. a top company.962.6 per cent during the current fiscal. . a joint venture between Honda Motor Company of Japan and Hero group of India to produce four-stroke motorcycles.Hero Honda Motors Ltd (HHML) and 20th Century Finance Corporation Ltd have signed a Memorandum of Understanding (MoU) for financing of Hero Honda motorcycles.500 bonus shares issued in prop. . 1999 . .Honda Motors recently pulled out of its joint venture with the Firodias in which it held a 51 per cent equity stake.The Company changed the paradigm in two-wheelers by launching the most powerful and fast bike.Leading two-wheelers manufacturer Hero Motors has formed a joint venture with Briggs Stratton of US to develop and manufacture four-stroke engines for mopeds and scooters in India. . .CBZ(ee) with a unique feature of Transient Power Fuel Control (TPEC) system. . 1:1.The company.

Hero Honda Motors Ltd.The Company was ranked as the 9th Highest Value Creator among 12 industry groups within the Bombay Stock Exchange top 100 companies over a five year period (1994-99). has become the largest seller of motorcycles amongst all Honda companies and ventures in the world by selling one million motorcycles during the current financial year.the Hero Honda Street.2000 .Hero Honda Motors Ltd (HHML). Rs 16 crore commercial paper programme and fixed deposit programme of Hero Honda Motors.Hero Honda Motors Ltd.Promoter-Chairman of the country's largest motorcycle manufacturing company. The Company is the largest manufacturer of motorcycles in the country. have signed a national tie-up agreement. . . . .Credit rating Agency Crisil has reaffirmed outstanding `AAA' rating assigned to the proposed Rs 15 crore non-convertible debenture issue. has launched a new 100cc motorcycle named `Passion'.The Company will relaunch its stepthru Stree Smart on Baisakhi 13th April. . .The Company has secured shareholders' approval for splitting one equity share of Rs 10 each into five equity shares of Rs 2 each in the ratio of 1:5.Hero Honda Motors Ltd. 2001 . has launched an upgraded version of the existing step-through motorcycle . . Hero Honda Ltd. and Tata Finance Ltd. Brijmohan Lall Munjal has bagged the prestigious Ernst & Young Entrepreneur of the Year (EOY) award here on September 27. .

Hero Honda maintained its one-million vehicle lead over its nearest competitor and for the fourth successive year. Passion Plus and Ambition 135 during the year. making Hero Honda the first two-wheeler Company in India to do so. the company retained its slot at the top as the world's largest two-wheeler manufacturer. the entire product range gave a fresh and contemporary image to the customers. 2004 Hero Honda sold over 2 million motorcycles and recorded a 23% growth over last year’s 1.62 million bikes. Glamour FI. The Company is also looking at expanding its capacity further. namely CD Dawn. The Company has retained its number one position as the single largest two-wheeler manufacturer of the world for the third year in a row. Plant maintenance and operations. . We've already introduced cutting-edge Fuel Injection technology in one of our products. we expect to cascade this technology across other models.2003 Company has stabilized ERP programs in the areas of Human Resources. 2006 Launched new engine platforms in 125cc and 150cc categories. the world’s largest selling brand. Company has emerged as one of the best performing companies in the country.2 million vehicles. Ccompany also improved its market share to 48% and 37% in motorcycles and two-wheelers respectively. Hero Honda tightened its grip in the motorcycle segment with a 50 per cent share (up from 48 per cent). The current capacity of both the plants put together is 2. and is planning several new launches in the forthcoming year. Your Company also accounted for 40 percent of the Indian two-wheeler market (up from 37 percent in the previous fiscal). Splendor+. With 5 new launches. A decision regarding the same will be taken after due consideration arising out of the recommendations of the study. During the year. for the fourth consecutive year not only retained its position but also achieve the 1 million sales mark. Over time. Splendor. your Company’s sales growth was higher than the industry average of 14%. Study has been carried out to identify potential location for the third plant. Karizma. Not only that. 2005 Company sold 2.68 million sales.

Apart from successfully launching of 4 new models during the year in review. translating to a 13.2 per cent in October.000 units. The new plant will employ flexible production techniques enabling production of different models in the Company’s portfolio. The plant will have an initial production capacity of 0.4 per cent share in the entry segment. During the year. Company made its debut in the scooter market with the 100cc offering called "Pleasure" targeting women commuters and home makers. Hero Honda. Hero Honda also sold more than 90. The total capital outlay on the new manufacturing facility has been around 375 crores. Hero Honda launched a new offering. by focusing exclusively on the women commuter segment. which are mostly sold through a chain of unique all-women retail outlets. CBZ X-treme.6 per cent share. The products. were received well by the market. The sparkling performance of this bike came about even as the rest of the industry went into a tailspin in the last quarter of 2006-07. In the premium segment. From a segment share of 1. 2007 In the price or the entry segment. Hero Honda’s presence in this segment was marked by strong performances by the re-launched premium offering. CBZ X-treme commanded a segment share of more than 20 per cent by the end of March. and we hope to gain critical mass over the next few years. 2008 Company inaugurated its third plant – the “Shrine of Technology” in the holy city of Haridwar in Uttarakhand.09. clocked a 28 per cent growth and sold 1. This bike ended the financial year with a 33. Hero Honda will continue to grow this unique niche segment in the years to come. . In addition to manufacturing for the domestic market.000 scooters. the CD Dawn Deluxe as part of its strategy to give customers value for money.5 million units which would be scaled up to a million units by 2008-end.

4% MARKET SHARE OF HERO HONDA 2009 36.22.1% .142 33.37. OF UNITS SOLD MARKET SHARE% 2009 2008 2007 37.756 38.36.5% 42.540 CR RS 1282 CR YEAR NO.1% 33.REVENUE SHARE MOTORCYCLES OTHERS 100 - MARKET SHARE 36% - SALES NET PROFIT RS 12.000 36.

4% BAJAJ AUTO LIMITED .2008 38.5% 2007 42.

Bajaj auto limited is currently developing a 125cc Motorcycle in collaboration with Kawasaki for both the domestic and export markets.3% and TVS Motors 72. though. 85. The same cannot be said for geared scooter. Although the company continues to be the leader in the geared scooters. chief being reserves of Rs 2700 crore and lowest Motorcycle costs as a proportion of sales in the industry.5 billion as against Rs. to sharpen the comptetive positioning of the products.6%) the segment is seeing negative growth sales fall 35% in the June quarter on a year basis.42 billion in 2004-05 an increase of 31 percent included in this.7% against Hero Honda’s 69. it planned to take its premium segment bike PULSAR national September 2002 and launch of CROMA in early 2003. segment (Motorcycle 40. both in Passanger and Cargo segement of the industry. The launch is started in early July.Around 56% of Bajaj auto limited revenues comes from Motorcycle sales. Its current price of Rs 380 discounts .*(54. 2008 . 2005 Sales for the year 2005-06 was Rs . To start with.its annualized fine quarter earnings just and times definitely worth a ride.5%). It is looking to increase this further for which it has lined up some product initiatives. Bajaj is doing all right on the Motorcycle front. 2007 Chakan 4-wheeler plant – The “Lite” range of 4 wheeler vehicles. Also. 65. Bajaj auto is well placed to whether a slowdown. are under re-design.

OF UNITS SOLD 331. i.332 216.9% 28.109 MARKET SHARE% 24.7% MARKET SHARE OF BAJAJ AUTO .181 MN RS 17036 MN YEAR 2009 2008 2007 NO.707 264.Bajaj Auto issued and allotted Global Depository Receipts (GDRs)on April 2008 to the shareholders of BHIL (formerly BAL) pursuant to the scheme of demerger sanctioned by the Hon’ble High Court of Judicature at Bombay vide its order dated 18 December 2007 and the underlying shares against each GDR were issued in the name of the overseas depository. REVENUE SHARE (%) MOTORCYCLE OTHERS 56 - MARKET SHARE (%) 63.e.3% 21. Deutsche Bank Trust Company Americas (DBTCA).5% - SALES NET PROFIT RS 121.

3% 2008 21.7% .2009 24.9% 2007 28.

Japan. It was promoted by Mr.000 shares allotted to Suzuki Motor Co. The company entered into a technical know-how and assistance agreement with Suzuki Motor Co. Ltd. .70. 70.. 1984 The company received a letter of intent for the manufacture of 20. Chennai.000 shares allotted to employees and business associates and 29. 20.40.000 spark ignition operated out board motors and 30. trade secrets and other data.TVS MOTOR COMPANY LTD History of the company 1982 The company was incorporated as Indian Motorcycle Pvt. Japan. Ltd.. Ltd. 59. -All shares taken up by promoters etc. Ltd. 1984. 1985 A new company "Lakshmi Auto Components Pvt Ltd. Krishnan in collaboration with SuzukiMotor Co. Sundaram-Clayton. Ltd. N. Ltd.000 shares issued at par in 1984. a member of the Company to the extent of Rs 70 lakhs.. 2." was incorporated for the manufacture of critical engines and transmission parts. 7.000 shares offered to the public. of Japan on 22nd September. Chennai.000 internal combustion spark ignition engines upto 500cc per annum.000 shares allotted to Sundaram Clayton. Its name was changed to Indo Suzuki Motorcycles Pvt. and it was converted into a public limited company on 12th January.00.000 shares allotted to Anusha Investments (P) Ltd. Ltd. Suzuki agreed to furnish complete technical information and know-how.. on 15th July.00. As per the terms of the Colloboration.20.

The cost of acquisition was met partly by rights issue of equity shares. The name of the company was changed from Indo Suzuki Motorcycles Ltd..1986 The company acquired the assets of the moped division from Sundaram Clayton Ltd. The lock out was lifted in the second week of June 1990.10 each of Lakshmi Auto Components Pvt Ltd.00. 1988 The company obtained a letter of intent for expanding the capacity to 4. to TVS Suzuki Ltd with effect from 18th August.000 Nos. 1989 Working was adversely affected due to labour unrest which resulted in a lock-out from 28th February 1990. whereupon it became a subsidiary of the company. 1991 The technical aid agreement entered into with Suzuki Motor Co. The Company worked for only 10 months due to lock-out. Japan which expired in August 1991 was extended for three more years with the approval of the Government of India. The company subscribed to 39.000 equity shares of Rs. two wheelers. . 1990 The company launched a 34cc miniped to take advantage of the Motor Vehicle Act that exempts such vehicles from the payment of road tax.20.

1992 The Company launched two new models of motor cycles viz. Chennai. the information regarding conservation of energy. 1997 TVS-Suzuki plans to set up an auto ancillary estate through joint venture with some of its existing components suppliers. The proposed project is to come up at a new 57 .acre site near TVS-Suzuki's existing plant at Hosur. In addition. 1996 are attached to the Balance Sheet pursuant to section 212 of the Companies Act. As per the requirements of section 217(1)(e) of the Companies Act. `TVS Scooty'. 1988. during the year. M/s Lakshmi Auto Components Limited. 1956 read with the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules. technology absorption and foreign exchange earnings and outgo are given in annexure I to this report. A statement relating to the subsidiary. 1993 The Company launched a new model of moped viz. and a copy of its annual accounts for the year ended 31st March. `Sumurai' and `Shagur'. 1995 The Company was studying the feasibility of opening a second plant at a different location to meet the growth in demand for two wheelers in the near future. 1996 The company is taking steps to meet the increase in demand for its products and improve the market share. It also proposed to introduce upgraded version of mopeds. . the Company undertook to develop new models of motorcycles. 1956.

1998 . the second largest two-wheeler manufacturer in the country..000-crore turnover mark in 1997-98. .TVS Suzuki Ltd.TVS Suzuki Ltd (TSL).Credit Analysis & Research Ltd (Care) has assigned the credit rating of CARE AA+ (double A plus) to the proposed non-convertible debenture issue of Rs.TVS Suzuki is a joint venture between Saundaram Clayton Ltd. .was the first company to launch a 100-cc motorcycle in the Indian market. . .The Rs.The company proposes to introduce kick start facility.1. Japan. .TVS-Suzuki (TSL) . of the TVS group and Suzuki Motor Corporation. TVS Suzuki. the XL Super.a joint venture between the TVS group and Suzuki Motor Corporation. . will be restructuring its entire vendor-base in the next five years with the objective of creating robust vendors to meet its future expansion plans.TVS Suzuki Limited is officially launching its new moped model. will soon set up a new 2. has crossed the Rs. . .5 lakh capacity scooter plant in Mysore. .Leading two-wheeler manufacturer in the country. Japan .TVS will be the first company in the country to introduce the 4 stroke scooter in the Indian market. one of the leading two-wheeler manufacturers in the country.100 crore by TVSSuzuki Ltd (TSL). 100 crores non-convertible debentures of TVS-Suzuki Limited rating of AA + (high safety with higher standing) has been retained by CARE.

Two-Wheeler major. .The Tamil Nadu based TVS-Suzuki has launched the 150 CC four-stroke powerhouse Suzuki Fiero in Tamil Nadu. . Suzuki Fiero. TVS-Suzuki Limited is set to create a special cell to tap the institutional segment. . Spectra. pioneers of Indo-Japanese motorcycles in the country. .The Company proposes to relaunch its four-stroke scooter. it should allow Suzuki to set up a 100 per cent subsidiary. was launched in spectacular fashion at the TVS Millennium Show on October 1 in New Delhi. has launched its latest offering. close on the heels of its launch in Rajasthan. Karnataka and Kerala. 2000 . in the Kerala market.TVS' new-generation state-of-the-art four-stroke scooter Spectra. . . 1999 . in July..The company is set to launch Spectra on a nation-wide basis in April.Two-wheeler major TVS Suzuki is all set to cross the magic one million mark during the current fiscal with 12 new models lined up over the next 18 months.The Company.the recently launched four-stroke scooter.TVS Suzuki is all set to launch a scaled-down version of Spectra -.Suzuki has indicated to the TVS group that if it did not agree to the Japanese company's acquiring a majority stake.TVS Suzuki Ltd on October 1 launched its new generation 4-stroke scooter `TVS Spectra' in Delhi. . . of which we gave you an exclusive preview last month.

TVS Motor launched four new mobikes on June 4. The price has been fixed at Rs 41. formally launched its indigenously developed 4-stroke motorcycle.TVS-Suzuki Ltd on August 30th. Chennai). 2002 . Its launch will be backed by two new 125-cc variants of the best-selling Victor: a Max version for the rural market which will be simpler and more rugged with steadier shock absorbers and another urban.00. more stylish version. The bike will give the mileage of 98.The TVS group and Suzuki Motor Corporation September 27 parted ways from their 15-year-old joint venture with the former buying out the 25.6 km per litre. aggregating to Rs 231. . Named thus because it will target the central part of the mobike market and also offer almost a century in terms of mileage.187. . the Centra will roll out of the company's Mysore facility.070 equity shares of Rs 10/. has forged an alliance with Brand Dotcom to leverage the latter's online expertise brand building on the Net. 2004 Star of Asia Award to Mr. here. Venu Srinivasan. CMD TVS Motor Company by Business Week International.31..TVS Motor Company Ltd has informed that the Board declared an interim dividend of Rs 9.each fully paid up.00 per share on 2.00 million. TVS Suzuki.Motorcycle giant. including a brand new 100-cc mobike to be called the Centra. . 2003 .97 per cent stake of the Japanese company for Rs 9 crore. (ex-showroom. TVS Victor.

An eminent jury comprising of powerful industry names judged the company on various stringent parameters including use of SAP solutions to enable strategic decision making. SAP as a change agent for business transformation and to manage growth. the Company launched various new products and variants TVS Flame. "TVS Motor Company has been awarded 'Star Performer .He was also honoured with Doctorate in Science by University of Warwick. Scooty TeenZ Electric. by EEPC India.Silver Shield' in two/three wheelers category. StaR Sport. The company won the award for its exemplary implementation of TPM processes in its Plant II in Hosur and its Mysore plant. Apache RTR. for excellent export performance for year 2007-08. The Japan Institute of Plant Maintenance (JIPM) has awarded the coveted Total Productive Maintenance (TPM) Excellence Award to TVS Motor Company in the first category. SAP ACE AWARD 2007 For TVS MOTOR COMPANY New Delhi.TVS Scooty Pep won the prestigious 'Outstanding Design Excellence Award' from Business World and National Institute of Design 2007 During the year 2007-08. StaR City 110 cc. TVS Tru4 Oil . United Kingdom.“ 2008 During the year 2008-09. . Asian Network for Quality Award 2004 . Mr Venu Srinivasan was conferred with the prestigious JRD Tata Corporate Leadership Award for the year 2004. 27 August 2007: TVS Motor Company Limited has won this year’s SAP ACE 2007 Awards for Customer Excellence in the Most Innovative Netweaver Category. the Company recorded a growth of 5% in two wheeler sales in line with the industry growth of 5%.

The ETERNO has proved economical and has consistently returned between 53 and 57 kilometres to the litre. The scooter feels well built and the modern design is a departure from the conservative. between performance and economy.NEW LAUNCHES BAJAJ AUTO launched an all-new 135cc Motorcycle. . What’s not missing is the Honda quality. THE HONDA ETERNO came as a surprise. classic Vespa look we’re use to seeing on geared scooters. more as it does not have an electric start or DC horn. The logic behind this is to offer the customer a rung in the ladder of Bajaj Motorcycles. though critical components such as engine.500-Rs 58. It is the manufacturers first 135cc four-stroke Motorcycle and is fairly placed squarely between the 115cc HOODIBABA and 150cc PULSAR. Kawasaki heavy industries of Japan and Bajaj auto have collaborated at the design stage with this machine. Targeted at the executive family-commuting segment it is priced between Rs 56.500. gearbox and carburetor are all Kawasaki designs.

58000 Rs TOP SPEED .000 Rs. TOP SPEED –125KPH 0-60KPH IN 4.35SEC KPL 47.000 Rs.0(OVERALL) .0(OVERALL) YAMAHA SZ 153cc LIST PRICE .5 SEC KPL 60.126KPH 0-60KPH IN 3.70 SEC KPL 53.25 SEC KPL 65(OVERALL) HERO HONDA NEW KARIZMA ZMR LIST PRICE – 1.108KPH 0-60KPH IN 5. TOP SPEED.APACHE RTR 180 LIST PRICE – 74. TOP SPEED.Balancing Acts Balancing Act by TVS FIERO over highly popular BAJAJ PULSAR 135cc and HERO HONDA’S still-potent and handsome CBZ by launching APACHE RTR 180.120KPH 0-60KPH IN 5.56.00(OVERALL) BAJAJ PULSAR 135CC LIST PRICE . TVS.02.500 Rs.

Kinetic's distribution network includes 400 retailers. particularly in the styling and handling and stability departments. the buyer in this segment is less concerned with mileage than the 100cc customer. but is still does matter. Kinetic plans to launch an aggressive television ad campaign with a new strapline 'Kinetic: Because You Deserve The Best' soon. retail initiatives. the adline was—Kinetic—What's Next? The company has earmarked an ad budget of Rs 8 crore for the next six months. be a critical factor.APACHE RTR 180 against the reigning champ. as will fuel efficiency. Sure. and the evergreen HREO HONDA CBZ. the BAJAJ PULSAR. So. It was described in the mar’03 issue the F2 gets major improvements over the earlier FIERO. And to support its mass media ad campaign. below-the-line activities and direct marketing plans. Scooter majors revamp marketing strategies Kinetic Engineering Ltd and TVS Motors are refurbishing their marketing and ad plans. its showrooms would be revamped to give a new look and its sales personnel put in new uniforms.Recently relaunched TVS. while the F2 is the most fuel-efficient. arguably still the best looker in this company. Kinetic Engg strategy includes a revamped corporate image and its marketing plan includes mass media ad campaigns. and with the most powerful engine to boot. the company has launched 'Kinetic Marketing . To announce its revamped corporate image. Earlier. Pricing will always. The PULSAR is the most competitively priced here. are the changes enough to make the F2 a more complete package. As part of its direct marketing strategy. to displace the PULSAR from its seemingly unshakeable throne? And let’s not forget the CBZ.

This segment is expected to grow at an average of 22 per cent in the year 2001-2002. TVS Motors Company recently relaunched its popular bike TVS Victor with a host of new features to woo customers. motor cycles and mopeds. This has resulted a shift in the consumer’s preference from scooters to Motorcycles. India is considered as the second largest manufacturer of two wheelers in the world. . The expansion plans adhered by Bajaj Auto. TVS Motor Company Ltd is also stepping up its below-the-line activities in an effort to promote the new avatar of TVS Victor. To promote the new Victor. As a result of this. TVS is focussing on below-the-line activities like consumer promotions and rolled out an ambitious consumer promo tilted 'Balla Ghumao' which will run till the end of August this year.Services' as part of which its sales personnel would go to the doorsteps of potential customers. the sale of Scooter segment is expected to fall further and the sale of motor cycles will go up further. the two wheeler Industry was mainly dominated by metal body geared scooters and the number of producers were less than five. the sale of motor cycles crossed 48 per cent where as the sale of Scooters have receded. This oligopolistic market structure has changed with the entry of lighter. Change in the manufacturing view & strategy of two wheeler market Till 1990. 100 CC motorcycles. This shift in demand and sales position in the two wheeler segment may continue. there will be an estimated production of 2. With the incremental capacity addition of these companies.20 million vehicles by the year-end of 2001-2002. The two wheeler segment in India can be classified in to three major segments-Scooters. LML and TVS have given more stress to the motorcycle segment.wheeler industry which is worth five million units. This trend has also influenced the production strategy of major two wheeler-manufacturing companies. The accent seems to be on an 'effective marketing mix' in the Indian two. TVS recently launched TVS Victor with a slew of new features as part of its marketing strategy. During the year 2000-01. There will be a corresponding growth in the demand for Motor cycles.

 Growth potential: In the last ten years. this could push topline growth of the company into a new trajectory over a period of time. which is slated for a 4QFY03 launch. From a company that was predominantly a scooter and three-wheeler manufacturer. which we expect to continue in the long term. rising double income families and robust growth . urbanisation. Bajaj Auto now derives nearly half of its revenues from motorcycles (14% in FY01). Kawasaki intends to utilise Bajaj's facilities as a global outsourcing base for the 125 cc bike.Changing strategy of two wheeler market. This initiative should continue to fuel growth. As per the study.  Changing demographic profile: Studies by research agencies like The National Council for Applied Economic Research (NCAER) on Indian households puts forth the latent growth potential for the two-wheeler industry.5% in FY98 to 6. particularly for South East Asian markets. the consuming class that was estimated at 17% of total households in FY95 is expected to touch 46% by FY07.  Changing product portfolio: In the past two years. which is likely to be the growth engine for the future. It is now set to tap the sub Rs 30. With its 'Boxer' range.000 category. bank rate has come down from 10. Bajaj Auto has already established itself in the entry-level motorcycle segment. Motorcycle demand would be primarily driven by replacement demand. the two-wheeler industry has grown at a CAGR of about 10%. affordable credit and introduction of motorcycles in the utility segment (just to put things in perspective. Poor urban transport infrastructure. Going forward.  Kawasaki partnership: Bajaj is in the process of developing a '125 cc world bike' based on Kawasaki's technology platform. Bajaj Auto has successfully revamped its strategy to emerge as the number two player in motorcycles. If successful. the company plans to introduce models that will cover the entire price spectrum. upgradation.25% in 1HFY03).

the company enjoys better margins in scooter and 3 wheelers than it does in the motor cycle segment. an 18% rise YOY. investment in equities (including equity mutual funds) amounted to Rs 8. The company has traditionally been a key player in the geared scooter segment. While the company expects demand for scooters to stabilise.  Scooters losing sheen: Bajaj also has presence in segments like geared scooters and step-thrus that are losing out to trendier and fuel-efficient motorcycles and ungeared scooters (geared scooter demand has fallen at a CAGR of 14% in the last six years). traditionally. Since this division is the cash cow for the company.of the services sector offers good long-term growth prospects for lead players like Bajaj Auto  Competition: Given the long-term growth potential of the motorcycle segment.  Equity exposure: Bajaj Auto. But the shift in consumer preference . The company's total investment of surplus funds in FY02 was Rs 22 bn. industry will suffer in the near-term. this is a cause of concern. Given the volatility in stock markets. Of this. If demand fails to meet capacity expansion. had a 28% market share in the two-wheeler segment in FY02. This is because. with a capacity of 2. Hero Honda triggered a price war in 1QFY03 with a special discount and other players followed suit.  Bajaj limited. a rise of 38% YoY.3 m vehicles. there is a strong possibility that low-end motorcycles will continue to eat into the scooter segment. has had a high exposure to stock markets.5 bn. margins are likely to come under pressure. the company's dividend payout ratio has also been lower historically (27% in FY02).  Margin pressure: As the product profile changes in favor of motorcycles. margins will come under pressure. Despite huge surplus funds. as sales contract. going by industry standards. existing manufacturers expanded their capacities while new players have tied up with transnational companies to tap the local market.

At this stage. This has resulted in the company gaining about 23% of the motorcycles market share in FY02. The motorcycle category grew at a CAGR of 33% in the last five years to touch 2.8 m units in FY02. which is a crucial input in the design process. up from 16% in FY00. The finalised interpretation of the new . However. new product launches and better fuel efficiency have been the key growth drivers for the motorcycle segment. The company's sales mix (in volume terms) consists of 30% geared scooters. moped and step-thrus are losing out to motorcycles and ungeared scooters. Bajaj fought back with a slew of new motorcycle launches that have met with success. Thus the mantra is "design right. After arriving at the right design.  While the economic growth has been lacklustre. over the last two years. the Indian two-wheeler industry has bucked the trend by growing at a CAGR of 9% in the last five years. Then these are tested meticulously for performance and durability in all parameters in order to finalise the design. Affordability. first time". The best of which are short-listed and converted into a product form.towards motorcycles had caught the company unawares. the designers have a brainstorming session. Design The primary purpose of product design is to understand the customers' requirements. Segments like geared scooter. Various Methods used for product development In the New Economy. where they submit all their ideas in the form of sketches. the product development process must give top priority to certain critical issues such as eliminating any design errors right at the start of the process. ungeared scooters . 48% motorcycles and the rest from step thrus. Bajaj Auto's design team is in close touch with the market and continually collects data. prototypes are developed expeditiously. We expect demand to remain robust. This is imperative to avoid unnecessary wastage of time and productivity.The next step in the design process is conceptualising the new product.

optimisation of the designs is achieved early in the product development cycle. kinemetic and dynamic factors. Pro Engineer. this part can be tested . Some of the sophisticated machines at the Bajaj Auto prototype shop include: Rapid prototype equipment-this enables stereo-lithographic facilities. Bajaj Auto's talented and tireless engineers and designers are constantly improving their expertise. as the engine components can be run in virtual reality on the computer screen. Prototype manufacturing This is a crucial phase in the product development process. Unigraphics. which can produce any part of a 3 dimensional computer design file. or our vendors in India and abroad. Once produced. Sysnoise. Our state-of-the-art prototype shop has excellent manufacturing is converted into a three-dimensional clay model. as was the case in the past. The designers make 3-dimensional solid models. Digitisation of this clay model is achieved using a highly accurate co-ordinate measuring machine. This digitised data is then used to generate accurate surface models using advanced software programs such as Alias. Ricardo suite of software for advanced Computational Fluid Dynamics (CFD) analysis. which can be rotated and sectioned so that the designers have a complete idea of each component. Moldflow. Ansys. Vehicle engineers use these sophisticated computerised tools to analyse various critical parameters such as stress on components. Keeping up-to-date with the latest technologies. These prototypes are painstakingly tested both in the laboratory and on the road. Also. These solid models are then passed on to our tool design engineers.etc. as well as noise levels. valve dynamics and cam dynamics during the design stage. for designing tools and dies. where prototypes are created by Bajaj Auto's prototype shop based on the final designs approved by the designers. This makes it unnecessary to actually build a physical prototype. We also use software programs like AutoCAD. which becomes the basic reference of the new product. which are essential to ensure that the exact design specifications are accurately incorporated in the prototypes.

which can give high accuracy with the requisite flexibility to handle several different designs. where the manufacturing is of a repetitive nature.used for making 1:1 master models. reducing exhaust emission is of paramount importance.unlike production. Bajaj Auto identified this need early in our company's history and has been continuously upgrading its testing laboratories over the last decade. Bajaj Auto has carefully selected a range of flexible machining centres. Therefore. Bajaj Auto has the highly sophisticated Horiba exhaust emission . These simulated tests can cover thousands of kilometres in a few weeks and are fast. A designer can touch and feel his design and models can be painted to get a physical idea of the product.for proper fitting in the assembly. safe and repetitive. All types of road conditions can be simulated and gruelling. This equipment ensures that every minute detail is replicated in the prototype part. or can be used to produce multiple parts of the prototype test vehicle. Bajaj Auto R&D has also acquired the robotic chassis dynamometer system where a run of several thousand kilometres can be accumulated on the power plant and transmission in only a few weeks. With the evergrowing vehicle population. True to life testing in the shortest possible time is a challenge faced by engineers. Testing Prototype testing is another extremely crucial phase in the product development cycle. This flexibility in manufacturing is essential to create prototype samples more rapidly. we have servo-hydraulic fatigue testing equipment for the entire range of vehicle and structural components. Any shortcomings in the design phase are promptly detected under such rigorous testing. Bajaj Auto faces the challenge of designing vehicles with excellent performance and least impact on the environment. Five-axis machine. Flexible machining centres. R&D prototypes are all different. To help achieve this endeavour. In today's world. clearances between the mating parts. accelerated tests are conducted. Today.

This is run round the clock. helping our engineers to optimise their designs for the lowest impact on the environment. bringing out their true mettle. Lastly. A judicious mix of accelerated laboratory tests and road & track tests gives us immense insight. Bajaj Auto also has test riders who continuously test vehicles on all types of roads and weather conditions to ensure suitability of the designs before commercial production. we have a bank of engine dynamometers that help engineers to optimise engine performance and assess exhaust pollutants in the engine development phase. These rigorous tests give us an accurate insight into the performance of the components and assemblies. which has varied gradients and a high-speed circuit. Laboratory testing apart. . We also have an extensively used and gruelling in-house test track. Riders are not unnecessarily subjected to fatigue whereas the test vehicles are continuously subjected to rigorous tests. over 3 kilometres long.measurement system.

we started developing direct injection systems for our 2-stroke engines in the last decade with Orbital Engine Co.. The Chairman's message to the R&D team is "Anticipation is the key".Bajaj strategy towards environment protection Bajaj Auto are fully aware of the need to protect our environment and all our efforts in R&D go to ensure that our vehicles have the least impact on the environment. True to this. Bajaj Auto first started improving 2-stroke engines. We are actively working in this area and hope to come out with noteworthy solutions. Australia. Simultaneously we embarked upon the development of 4-stroke engines. We have developed "secondary air induction" system that helps in to eliminate unburnt fuel in the exhaust. Exhaust emission reduction is a long and never-ending journey towards "Zero Emission". Not stopping at this. . Engine emissions were reduced and catalytic converters were developed with good performance and adequate life. With 4-stroke engines we are able to substantially reduce hydrocarbon emissions. The next area in emission reduction is fuel injection. We made a complete road map towards achieving low emissions. Over the last five years we have developed 4-stroke engines for all our products. The mission to improve our designs from the environmental point of view was declared over a decade ago. a well renowned and pioneering automotive R&D organisation. Engine-out-emission is thus reduced substantially. Subsequently we decided to shift our focus to 4-stroke fuel injection since this would be a better solution from environmental considerations. Bajaj Auto's engineers developed catalytic converters for 4-stroke engines.

more efficient and less polluting vehicles for both the Indian and International market. project management and quality assurance. Our strength in R&D comprises 500 dedicated professionals who work as team members on a platform concept. Research & development objectives and setup The objective of Bajaj Auto's R&D is to contribute towards making life a better experience for society as a whole.Alternate fuel is an area that is being actively pursued all over the world as a solution to reduce emissions. We have indigenously developed CNG and LPG 4-stroke 3-wheelers in the last two years and over 15. which include minimising toxic emissions and optimising the use of natural resources while also keeping in mind the exact requirements of the customers in a fast changing world racing towards modernisation. The primary objective of these platforms is to develop newer. Prototype vehicles have been developed and are undergoing rigorous testing in Delhi and Agra. we intend to achieve this objective by giving priority to environmental concerns. These platforms comprise of engineers skilled in product engineering. component development.000 vehicles are already on road. At Bajaj Auto. manufacturing engineering. Our customers are extremely satisfied with these vehicles. but to also evolve technologies that are eco-friendly. more fuel-efficient and cost effective. better. We intend to use R&D not only to develop products better and faster. Bajaj Auto has an ongoing demonstration program for electric vehicles involving USAID and a US R&D company in this field. We are working with well renowned organisations in the world in the field of CNG and LPG systems to further improve the designs and bring them to international standards. . Our quest for reducing emissions will continue.

upgraded products and innovative marketing techniques. Our designs are also subjected to an exacting and critical assessment from our technology partners. Indian Two-wheeler Industry: Changing gears The Indian two-wheeler industry is experiencing a major shift in its shape and structure. who has an increased array of products to choose from. today the Indian twowheeler market is highly competitive with numerous players who offer anything and everything a consumer demands and that too at affordable price. The two-wheeler industry is perhaps the most happening place in terms of new models launched. collaborate closely with the platform teams. From a sellers market where one had to wait for a scooter for 12 years to the days when you can just walk into . with transfer of the latest technology and R&D assistance. Gone are the days of regulation when the production of scooters and motorcycles was limited to two or three brands and the number of products produced was decided by the Government. The market leaders of yesteryears are being driven to maintain their leadership position in the forthcoming years. The last four-five years have brought about a great change in the consumer preferences for two-wheelers.Our foreign technology partners. Those who have had a great going in the last few years are fighting hard to retain their new supremacy. like Kawasaki. The beneficiary is of course the consumer. The established players in the industry are taking a hard look at their portfolio of products and are in the process of reshuffling them to meet the expectations of customers. Kubota and Tokyo R&D.

have been able to bag the scooter of the year award for 2001 and 2000 respectively. motorcycles and mopeds. In the scooters segment Bajaj is the market leader.any showroom and drive out in the vehicle of your choice. Hero-Honda. The recently . is a joint venture between the Munjal-promoted Hero Group and Honda Motor Co. LML and others account for the remaining 20 percent of the market. which has been successful at designing models in-house. (till June 2001). the three-wheeler segment or the car segment. mainly Japanese firms. Indian automobile market. be it the two-wheeler segment. is yet to come to a stage where all the models are developed indigenously. Bajaj. This trend too is in for a change. For years now. and Yamaha-Escorts. TVS controls the major chunk of the market. TVS-Suzuki was an alliance with TVS and Suzuki Motors (till September 2001). The industry can be divided into three broad segments: Scooters. the market of two-wheelers in India has come a long way. Indian companies have been dependent on their foreign joint venture partners or collaborators to provide them with the technical know-how. Bajaj's Saffire and Spirit. Most Indian players in the two-wheeler industry had been into some kind of strategic alliance. The other players including Kinetic Engineering. Hero Honda is the market leader in the motorcycles segment and in the segment of mopeds. Leading the pack in this arena is Bajaj. technical collaboration or joint venture with foreign players. The industry The Indian two-wheeler industry is dominated by three players. its Spirit was adjudged the "Indigenous product design of the year" for the year 2000. of Japan. who account for 80 percent of the total two-wheeler market. a joint venture between Escorts and Yamaha Motor Corp. Bajaj-Kawasaki a joint venture between Bajaj Motors and Kawasaki. Hero Honda and TVS Suzuki. But this is only the beginning of the transformation. In fact.

and ACE. most of these foreign manufacturers are planning to enter the market on their own. Yamaha has started implementing its ambitious plans for the Indian market and has embarked on a challenge 21 project. albeit in tandem with Japanese design house. The inadequacy of the public transportation system. Yamaha has set for itself the target of capturing 21 percent of India's motorcycle market by 2003. the world's second largest motorcycle manufacturer operates a fully-owned subsidiary. Its name has become fairly established while the joint venture had been in operation for two decades.launched Pulsar from the Bajaj stable is yet another home-grown product. TVS's Victor is yet another development in this direction and this indigenously built model has been a success in the markets. On its own now. Other companies too are adapting the strategy of designing and developing products indigenously. a time-bound initiative that is aimed at reorienting and revitalizing the entire Indian operations in order to achieve a competitive edge. which was operating in India through a joint venture with Escorts Group. had decided to call it quits in mid-2001 by buying off Escorts' 50 percent share in the joint venture. Yamaha Corporation. Others are also queuing up. Honda Motors. which has the disposable income and the intent to own a two-wheeler and the sheer size of the Indian market is proving to be an attractive factor to many multinational companies. Bajaj has been laying increased emphasis on its R&D so as to be able to launch new products to tap the markets at all possible price points. RXZ. while they provided the distribution and branding in the Indian market. Yamaha now plans to tap the Indian market on its own with models such as RX-135. . whose tie-up with Hero-Honda is going to expire soon. India's two-wheeler industry is the second largest market in the world after China.. the upwardly mobile middle class. YD125. Lure of the Indian two-wheeler market Indian companies had relied heavily on their foreign counterparts for technical support. design of the model etc. India is one of the few countries where Yamaha. has already entered the fray with Honda-Activa. YBX125. Now that the Indian market for motorcycles is fairly developed and consumers are well aware. Tokyo R&D.

private industry emerging as a substantial employment provider and coming of age of . which accounts for a substantial portion of the industry's volumes. thus adding up to the costs of the scooters and making them more unattractive. This raised duties on geared scooters in western region of the country. But the robust growth in the motorcycle segment has been the only saving grace in the two-wheeler industry. They are yet to mold their product portfolios to take advantage of this shift. As recently as 1994.Changing preferences There has been a great change in the customer preferences from the erstwhile all pervasive scooters to the sleek motorcycles and other high-powered trendy motorbikes. in fact so short that many players in the industry are yet to fully acknowledge the shift. which accounted for 57 percent of the total two-wheeler volumes for the 2001 fiscal rising from a dismal 28 percent in 1994 and this trend of increased sales of motorcycles continued. The trends of sales in two-wheeler industry as a whole are on the decline. scooter sales accounted for 48 percent of the total two-wheeler volumes. which resulted in a sharp fall in the sales of geared scooters in 2001. The period between 1994-2001 has been characterized by the software boom. The production and sale of motorcycles has been continuing at a pace of 20 percent and 25 percent respectively during the first half of the current fiscal year. From a growth rate of more than 20 percent during the fiscal of 1995. One of the factors that contributed to the steep decline of scooter sales in 2001 is the sales tax rationalization in the budget of 2001. The scooters and the mopeds segments have been on the decline for some time now. In addition to that stringent environmental norms forced companies to install catalytic converters. the industry has come down to a zero percent growth rate by the fiscal year 2001. The shift has occurred in a short span of time. Numbers speak much more about the loss in volumes of scooter sales. however. their share in the two-wheeler sales fell to less than 25 percent by 2001. The tables turned in favor of motorcycles. By 2001.

registering a growth rate of around eight percent in the last financial year. Even in the rural market. women and teenagers. The fact that no other player commanded the brand name which Hero Honda enjoyed in motorcycle segment also added up to its success. Ensured success The story of motorcycles in India is a good case study of how fortunes change overnight. Motorcycles in India were hardly popular and Hero Honda was the only player. The obvious reason is that the pricing of both these segments of vehicles is so close that the borders are fast getting wiped away in the minds of consumers. Its market was small and limited while scooters ruled the roost but today. took time to assimilate the change in customer preferences and . Adding to the woes of geared scooters. In addition. Bajaj Sunny. who find these vehicles more comfortable with fewer hassles as compared to the geared scooters. the segment of buyers who would have gone for mopeds five years earlier are today showing interest towards the ungeared scooters. The sales of these ungeared scooters have also been on the rise.the generation that had started to feel comfortable and adopt western culture from the satellite television. which had carved a niche for motorcycles. The shift is not limited to urban consumers. it is one of the biggest success stories. LML etc. adding up to the volumes of these vehicles. The young earning men today increasingly prefer motorcycles to scooters unlike the generation of their fathers where a geared scooter was "the twowheeler".. This has added up to the costs of scooters while most motorcycles are in tandem with these new norms. and Kinetic Honda have found an instant market with the elderly population. One who is going in for a moped would not hesitate to spend a thousand or two more to get a scooterette offering better features. In addition most other players such as Bajaj. Its established presence in the motorcycle segment had stood it in good stead in this phase of boom in motorcycle sales. a number of ungeared scooters are flooding the market. TVS. Vehicles in this segment such as TVS Scooty. consumers prefer motorcycles for their sturdiness and ability to sustain bad road conditions. The stricter environment norms such as the euro emission norms are forcing companies to install catalytic converters in the existing vehicles or go in for four-stroke engines to reduce pollution.

000 in Uttar Pradesh. Hero Honda has successfully crossed over the one million units mark in motorcycle sales. in the premium segment to capture the hot demand. But of late the company seems to have awakened to the changes in the market. It has repositioned its focus on motorcycles and is planning to increase the production of motorcycles by around 60 percent from its current levels of 60. Its popular model Splendor is the largest selling motorcycle in the world. Wooing the market The story of Bajaj scooters is just the opposite. Meanwhile Hero-Honda's designs were ready on the platter. Passion etc. These mobile marketing efforts are focused on Splendor and Joy. The undisputable leader in the scooters segment was found wanting when it came to motorcycles. Its products in the motorcycle segment were few and far between and it did not and does not enjoy a brand name in the motorcycle segment. it started a mobile workshop and showroom. Riding high on the expectations of consumers..000 units per month. Its R&D had been able to come up with models such as CBZ. The company has also embarked on in-film advertising in a forthcoming Hindi movie. As a part of this initiative.come up with models to buck the trend. The company is fast trying to establish itself as a major player in all the price . In order to expand its reach to rural areas. To give a boost to its youthful image the company has chosen Saurav Ganguly and Hrithik Roshan as brand ambassadors. the company has recently launched a marketing initiative in towns with a population of less than 50. Ambitious products such as Eliminator are yet to be accepted by the market. through which people will be able to gather knowledge about the companies' vehicles and can also buy them. till a year ago.

women and students. TVS also has an established presence in the moped segment with its TVS Champ line of vehicles. this positioning has boosted its sales of motorcycles from 3. "Caliber Croma" and "Aspire". If Bajaj's strategies pay off. tops the product portfolio of Bajaj. In the motorcycles segment too. The Suzuki Shaolin is India's first 5 speed. Bajaj has intensified its efforts to position itself as a strong player in the growing motorcycle segment. Hero-Honda would suddenly be fighting for market share against a formidable competitor.14.641 to 4. Bajaj is coming up with a number of new models that would take it a long way to increase its market share with Sunny.points in the motorcycle market. the only cruiser bike in India. The company has changed its name from TVS Suzuki to TVS Motor company following the break up with Suzuki Motors in September 2001. and Suzuki Shogun.60. To cater to the premium segment the company has "Pulsar". in the executive segment it offers. The biggest challenge for Bajaj would be to reposition itself in the minds of consumers from a company trusted for its scooters to an all-round producer and seller of all kinds of two-wheelers. With a jump of 85 percent in the sales of its motorcycles.868 units for the three quarters ending in November 2001. the tie-up between TVS Group and Suzuki is a major player in the Indian two-wheeler market. Max 100 R. Differing destinies TVS-Suzuki. it has its "Boxer" series of bikes. In spite of the break up the company's motorcycle sales have registered a 40 percent growth till December 2001. In the section of ungeared scooters too. 1 selling scooterette brand in India with its excellent design and commands a market share of 36 percent. The result is that Bajaj's motorcycle sales are constantly on the increase and are more than offsetting the loss in the geared scooter segment. 140 cc motorcycle which had kept TVS Suzuki . The market leader is the vehicle of first preference with youth. the company has steadily carved a niche for itself. Rave etc. And "Eliminator". At the entry level. "Caliber". The company's "Scooty" is the No. The popular brands from the TVS stable are Suzuki Samurai. Bajaj has become the second largest manufacturer of motorcycles. In fact. precisely what the company is now doing. with its "Hamara Bajaj" campaign.

Kinetic Marvel etc. The market today is predominantly a buyers market where customer is the king. Victor has been consistently generating sales of more than 30. The company is also making its way into the motorcycle segment with products such as "Kinetic Challenger" and Kinetic GF. The company has recently launched "TVS Victor". . In the endless game for supremacy. which has been an instant hit in the market. Kinetic Motors is the largest manufacturer of gearless scooters in India. The other products from Kinetic include Kinetic Style. Another major player in the motorcycles sector is Kinetic Group. As recently as January this year. Kinetic Nova.000 since its launch. The company has also won the "exports award for excellence" nine years in a row. with its Kinetic Engineering Ltd and Kinetic Motors. Kinetic has launched a new scooter with the brand name. lesser price to pay and is carried in luxury. who has a wider choice of vehicles. The Indian two-wheeler market has become highly competitive with each and every player trying to tempt the customers towards its products. The company is also planning to position Kinetic Nova as "International Fashion Statement". Kinetic Motors was started as a joint venture with Honda Motor of Japan in 1994 and was transformed into a technical collaboration by 1998. The company is also a leading exporter of scooters step ahead of the market demands. the beneficiary would be the customer. Starting from humble beginnings with Luna in 1970 the company today is a strong player in the ungeared scooters segment with its highly popular "Kinetic Honda".

has since been on a steady downtrend. The sharp slowdown in growth rate is explained by the drought that prevailed across most parts of the country last year. price discounts and attractive hire purchase schemes have helped stem the declining trend in demand. the success or failure of monsoon has a major influence on the sales volume. the sales growth dropped to 7 per cent to 8. monsoon failure and growing competitive pressure have changed the underlying basics of the industry. Hero Honda continues to be the market leader in the motorcycle segment with a 44. The Hero Honda share. have seen their share prices recover sharply from the lows recorded in October 2002. in the last quarter of the previous fiscal. Also. Developments such as the entry of more number of players into the motorcycle market. motorcycle offtake tapered during the second-half.9-lakh units. After a robust growth in the first quarter of the previous fiscal.7 per cent) and TVS Motor (19. a divergent trend in share price and the sharp swing in the price-earnings multiple. . Effect of monsoon failure With more than 40 per cent of the motorcycle demand flowing from the rural sector. motorcycle sales had zipped ahead by 50.9 per cent to 9. the situation would have been worse.7 per cent share. though. During April-June 2002. The impact of these developments is reflected in a change in market share. However. But it has ceded vital market space to competitors such as Bajaj (23. which peaked at around Rs 400 in April 2002.Modifying basics of two wheeler industry The two-wheeler industry is passing through a very interesting phase. The reasons for this kind of a disparate trend are not far to seek. Its competitors (such as Bajaj and TVS Motor).1 lakh units. price discounts offered by producers. But for the recovery in the industrial economy and a soft interest rate regime.2 per cent).

the recently launched Caliber 115 has also enjoyed a fair degree of success. As a result. Bajaj has also been offering discounts and attractive financing options to protect its interest in the industry. and this had the desired impact of higher sales volume.However. and aided by its cash-rich status. motorcycles in particular. Traits of consumer durables In stark contrast to the situation that prevailed in the 1990s. these cannot sustain the demand for long unless there is a normal monsoon in the current year. In the 1990s. the company has been able to hold its ground. The impact of competitive pressure and slowdown in growth is better reflected by TVS Motor's recent move to offer a discount of Rs 2. Max 100. the two-wheeler industry has now acquired the traits of any other consumer durables industry.001 discount across all products. The entry of more players into the fast-growing four- .003 even for its top-selling four-stroke model. celebrity endorsements and ever-increasing sales and other promotional outgo. Victor. The success of the latest Pulsar has helped the company to stay clear of adopting an aggressive price reduction strategy. Earlier. Besides. TVS Motor had dropped the price of its two-stroke motorcycle. Hero Honda took the lead in April 2002 when it announced a Rs-1. A sub-normal monsoon in the current year could have a direct negative impact on the two-wheeler offtake. the profit margin of the top companies was not subject to the kind of strain that is being witnessed in the recent quarters. of price wars. Discounts galore The slowdown in the demand has prompted two-wheeler majors to offer attractive discounts to lure customers.

Growth in volume would the key driver of financial performance even as the scope for margin expansion wanes. the constituents of the two-wheeler industry too would find profit margin being consistently under pressure once the scope for cost control diminishes. This has resulted in an increase in overall expenses. for the companies. This. new product launches have an inflationary impact on expenses of a recurring nature. such as sales promotion and staff cost. Ambition and Caliber 115. Earlier. the task of assessing or anticipating swings and changes in consumer preferences may not be an easy task. This is borne out in the case of Hero Honda's CBZ and the four-stroke scooter venture of Bajaj and TVS Motor. Kinetic. Going forward. Hero Honda and Bajaj were the only producers of four-stroke motorcycles. LML along with Bajaj and Hero Honda are jostling for space in the four-stroke market. This has led to an increase in the number of models and a consequent reduction in product lifecycle.stroke motorcycle market has led to higher competitive pressure for the companies. could have a negative impact on the profitability of the two-wheeler industry in the near term. In the past couple of years. The few past year also saw the launch of Byk. Tracking changes more difficult Though Bajaj and Honda Motorcycles have been successful. including promotional costs. Now. . Passion and Pulsar. coupled with the discounts that are being forked out. TVS Motor. at least until the volume growth manages to compensate this. Apart from the capital expenditure. more than ten new four-stroke motorcycle models have hit the Indian roads — the popular ones include Victor. The pressure on margins is not fully manifest owing to the cost control and indigenisation efforts undertaken by two-wheeler companies.

Hero Honda. Bajaj and TVS Motor. Strain on valuations The cumulative impact of these developments is reflected in the form of a divergent and volatile trend in share price movement of two-wheeler companies — Bajaj. TVS Motor . Similarly. the valuation levels are likely to be stressed in the future. Similarly. hold and sell at a later date will probably lose validity. That the success or failure of even a single product can have a major influence on the earnings performance would aggravate the uncertainty problem. This kind of a trend is already reflected in the valuation of software stocks. both Bajaj and TVS Motor did not make any progress in their four-stroke scooter venture. the earlier approach of buy. The inherent difficulty in assessing and addressing the developments or changes in the industry would mean a higher degree of uncertainty to the earnings growth of twowheeler companies. Along with these factors. the pick-up in sales volume of Hero Honda's Ambition. Considering that the stock market hates uncertainty. especially when it is associated with earnings stream. Hero Honda's CBZ (launched much ahead of Pulsar) failed despite possessing similar features. Honda Motorcycle's decision to venture into the motorcycle market next year could compound the problems for companies such as Hero Honda.While Pulsar turned out to be a huge hit for Bajaj. A similar kind of a trend could probably emerge in two-wheelers as well. From an investment perspective. The investment holding period would tend to get shorter and .Splendor and CD Dawn models have resulted in a sharp recovery in share price of the company from the low of Rs 180 to the current level of about Rs 230. But the latest entrant — Honda Motorcycle — has enjoyed a huge success in this segment through the Activa.

TVS controls the major chunk of the market. motorcycles and mopeds. existing holders of two-wheeler companies may look for opportunities to reduce exposures.9% in the year 2008. HERO HONDA market share was 36.5% and that of BAJAJ AUTO LIMITED was 21. CONCLUSION The Indian two-wheeler industry is dominated by three players. Although the features and reliability of both HERO HONDA and BAJAJ are quite same but the market share of HERO HONDA was 38. Bajaj. Taking into account the higher degree of uncertainty associated with earnings and the likelihood of a drop in valuation levels. From this it is very clear that market share of BAJAJ was low than that of HERO HONDA. . Hero Honda is the market leader in the motorcycles segment and in the segment of mopeds. In the scooters segment Bajaj is the market leader. are HERO HONDA and BAJAJ.7%. which are regularly trying to compete with each other they. The industry can be divided into three broad segments: Scooters. Hero Honda and TVS who account for 80 percent of the total two-wheeler market.riding the momentum associated with company-specific developments could well be the order of the day.1% and that of BAJAJ AUTO LIMITED was 28.Yamaha and others account for the remaining 20 percent of the market. But there are two big companies in two-wheeler industry. Evidence of increase in motorcycle sales or signs of normal monsoon can be used to take exposures in two-wheeler majors. The other players including Kinetic Engineering. Honda. The competition in the two-wheeler industry is increasing day by day.

autocarindia.BIBLIOGRAPHY Information regarding the project is collected from various sources like    www. which include: -   Magazines like auto car India  Newspapers .bajajauto. Internet  www.

Sign up to vote on this title
UsefulNot useful