Market Survey

By: Dr I. Satya SunDaram

Two-wheelers: running fasT

easier access to loans and introduction of new models by companies have bolstered the two-wheeler sales in the indian market.

ndia is the second-largest producer of two-wheelers in the world. The Indian twowheeler industry stands next to China and Japan in terms of production and sales, respectively. The younger generation prefers two-wheelers over cars due to convenience, easy commutation and better fuel efficiency. The Indian two-wheeler market comprises about 12 million units per annum, of which over 75 per cent is constituted by motorcycles. Scooters account for about 18 per cent of the sales in the overall two-wheeler market in India.

sea changes
Sea changes are taking place in the two-wheeler segment. Global two-wheeler makers are investing heavily on upgrading technology to comply with new emission norms in different parts of the world. More stringent emission norms are going to be observed from 2015. While the Indian twowheeler market will move to BSIV (corresponding to Euro-IV) in 2015, the European region will be upgraded to EuroV in the same period. Over 15

million two-wheelers are expected to be sold yearly from 2015 onwards in India. In 2008-09, Indians bought over 7.4 million two-wheelersmotorcycles, scooters, mopeds, stepthroughs and electric two-wheelers. The demand for two-wheelers has been influenced by a number of factors over the past years. The key demand drivers for the growth of the two-wheeler industry are as follows: 1. Inadequate public transportation system, especially in the semiurban and rural areas 2. Increased availability of cheap consumer financing in the last threefour years 3. Increasing availability of fuelefficient and low-maintenance models

4. Increasing urbanisation, which creates a need for personal transportation 5. Changes in the demographic profile 6. Difference between two-wheeler and passenger car prices, which makes two-wheelers the entry-level vehicle 7. Steady increase in per capita income over the past few years 8. Increasing number of models with different features to satisfy diverse consumer needs

Motorcycles vs scooters
Experts feel that there is a large untapped market in the 100cc segment, as 70 per cent of urban and 90 per cent of the rural population have not even bought their first motorcycle. If 100cc-motorcycle segment is divided into ten segments, starting from the entry of deluxe level, there is potential in every segment. There is a large market for scooters as well. Scooters now offer mileage that is not very different from motorcycles. Motorcycles are not going to marginalise scooters. At present, the top
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Bajaj Pulsar 135LS

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Table I

Table II

Production of two-Wheelers
(number of vehicles) Year 1999-2000 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 Scooters 1,259,408 879,759 937,506 848,434 935,279 987,498 1,020,013 943,944 1,074,933 1,157,432 Motorcycles 1,794,093 2,183,430 2,906,323 3,876,175 4,355,168 5,193,894 6,201,214 7,112,281 6,503,532 6,801,964 Mopeds 724,510 694,974 427,498 351,612 332,294 348,437 2,379,574 379,987 430,827 435,513

Domestic Sales of two-Wheelers

(number of vehicles) Company Hero Honda Bajaj Auto TVS Motor Company Honda Yamaha Suzuki Mahindra Two-Wheelers Royal Enfield Total April-December 2009 3,440,287 1,235,548 999,255 830,039 170,712 124,190 37,977 38,612 6,779,102 April-December 2010 3,844,614 1,797,378 1,321,204 1,163,194 206,404 196,928 122,868 38,458 8,691,048

four two-wheeler makersHero Honda, Bajaj Auto, TVS and HMSI together account for around 93.5 per cent of the sales in the domestic market. The other players are Suzuki Motorcycle, India Yamaha Motor, LML, Mahindra Two Wheelers and Royal Enfield.

hero honda
Hero Honda thrived on the success of the Splendor brand created more than a decade ago. More products were launched by the Delhi-based company and the current

market leader riding on the success of Splendor and its derivatives over time. The success of Splendor and later Passion, proved the tipping point for Hero Honda. Both the models were promoted as fuel-efficient bikes. Hero Honda is planning to export motorcycles to markets in Latin America and Asia. The vendors are expected to gear-up for an export

thrust, as it plans to launch a new brand and market it internationally. The company exports 1,000,000 bikes a year to Bangladesh, Nepal, Bhutan and Myanmar, while competing with Chinese and Japanese brands, besides Bajaj and TVS Motors. Hero Honda, however, is not free from financial problems. It posted a 16.2 per cent decline in net profit for the fourth quarter ending March 31, 2011its fourth consecutive quarterly fall due to rising input costs.

hMsi
At present, Honda Motor Company is operating in India through both Hero Honda and Honda Motorcycle & Scooters India (HMSI). Honda is looking for mass market bikes. In 2010, the company started the construction of its second twowheeler factory at Tapukara in Alwar district in Rajasthan. The plant is expected to be operational soon. With this plant being operational, the combined capacity at the two manufacturing unitsthe other being at Manesar in Haryanawould increase by around 37 per cent to 2.2 million units per year. At present, the company has a waiting period from two to three

Hero Honda Splendor NXG

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Market Survey
months. It will take Honda at least two years to balance the demand. HMSI is considering setting up a third facility in India to scale up operations after the termination of the joint venture between parent company Honda Motor Corporation (HMC) and Hero Honda Motors. HMSI has three brands under the automatic scooter segmentActiva, Dio and Aviator. It is the largest maker of two-wheelers, accounting for 43 per cent share in the domestic market. HMSI sold 893,335 scooters in 2010-11. Honda Activa alone has the potential to clock in a million units annually, compared with the current 700,000 units, if production constraints are overcome. Nearly 55 per cent of HMSIs sales came from scooters even though the company has more motorcycles in its portfolio. HMSI has seven motorcycle models, which account for 45 per cent of sales. model in India. In April 2011, Bajaj launched a third model under the Discover brandDiscover 125, which is expected to generate another 45,000 units per month. The target is to make seven to eight million units every year, including the new range, after three or four years. Bajaj intends to break into the league of European and Japanese companies like BMW, Piaggio (Aprilia), Ducati, Triumph, Honda, Yamaha and Suzuki with KTM Power Sports, Kawasaki and Bajaj itself. For this, the company has decided to drop the family name from its communication to ensure greater acceptability not just locally but in overseas markets such as Europe and the US. Bajaj Auto posted a net profit of Rs 140,003.9 million during the quarter ending March 31, 2011 as against Rs 5286.5 million in the same period the previous year. Its turnover during the quarter rose by 25 per cent to Rs 43,010 million. The companys net profit during the year ending March 31, 2011 rose by 96 per cent to Rs 33,400 million. Table IV

HMSI Aviator scooter

Bajaj auto
At present, two models dominate Bajajs portfolioPulsar, launched in 2001, and Discover, launched in 2004that have several variants at different price points. The two models constitute 70 per cent of its total two-wheeler sales. Pulsar has become popular as a performance-oriented motorcycle, serving mostly the younger buyers. Discover meanwhile is promoted as a fuel-efficient bike and is targeted at the Splendor segment. Of course, Bajaj Auto has two other brands in its portfolioPlatina and Avenger. There is a sustainable demand for these two also. Discover 150, which is the

second-largest selling model in the 150cc category after Pulsar 150, sees a sale of around 50,000 units per month. Bajaj Auto presently sells about 130,000 units of Discover per month. About 85,000 units of the Discover 100 are sold every month, making it the second-largest selling Table III

motorcycle majors market Share (Domestic Sales, 2010-11)

Company Hero Honda Bajaj Auto TVS Motor Company Honda Motorcycle and Scooter India Suzuki Motorcycle India India Yamaha Motor Mahindra Tow-Wheelers Royal Enfield Market Share (percentage) 44.69 20.50 15.10 13.20 2.39 2.35 1.40 0.46

Domestic Sales of two-Wheelers

Year 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 Number of vehicles 6,209,765 7,052,391 7,872,334 7,249,278 7,437,619 9,370,951 11,790,305

Source: Society of Indian Automobile Manufacturers

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TVs Motor
TVS Motor is the third-largest two-wheeler manufacturer in India. The company was the first in India to launch two-seater 50cc moped and 100cc Indo-Japanese motorcycles. At present, TVS Apache, TVS Victor, TVS Scooty, TVS Centra and TVS Fiero are the popular bikes in Indian market. TVS Motor announced the launch of Max4R LX in June 2011. It is a variant of recently-introduced Max4R motorcycle, which is easy to ride on uneven rural roads. Max4R LX is equipped with a four-stroke, air-cooled 109.7cc engine that produces high torque and has an enhanced pickup. TVS Motors revenues grew 42 per cent in 2010-11. The companys international business saw a significant increase with sales growing by 36 per cent. During the year, the companys two-wheelers entered two more countriesMexico and Brazil. In Brazil, the distributor set up a motorcycle assembly plant that is expected to significantly add to the sales. The company exported 239,000 units in 2010-11 compared to 165,000 units in 2009-10a growth of 45 per cent over the previous year.

TVS Max 4R

Yamaha
India Yamaha Motor has a marginal share of 2.35 per cent in the

domestic market. It is planning to invest $10 million by 2012 in capacity-expansion as well as in new products. It also aims at improving its market share to about 10 per cent. The company focuses on selling scooters in the southern and western market of India. In 201112, Yamaha expects to sell 500,000 motorcycles (domestic sales and exports) against 380,000 units sold in 2010-11. The company has

400 dealer-outlets across the country. Yamaha has scooters such as Neo, Fino, and Spark in its global portfolio, which it sells mostly in Southeast-Asian countries. In Vietnam, Thailand and Indonesia, Yamaha has 20 per cent market share. The company is planning to introduce two new motorbikes including upgrades every year.

road ahead
Rising feedstock costs are threatening to dent the profits of automobile companies in the current financial year. Easier access to loans and introduction of new models by companies such as Hero Honda and Bajaj Auto have bolstered the two-wheeler sales in the Indian market, second only to Chinas. However, a healthy environment should be created by the government for steady growth of the two-wheeler segment.

Royal Enfield UCE500

The author is an economist and a writer

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