Two Wheeler Industry in India: Rising

Demand

By:
Nikhil Gupta 10FN-121
Saurabh Thadani 10FN-102
Sharun Alipuria 10DM-147
Srikanth Konduri 10FN-109
Tushar Gupta 10DM-168
Tushar Gupta 10FN-115
Vinayak Saksena 10HR-046

Two-Wheeler Industry as seen Today

Introduction
Every possession is a statement. So are the two wheelers. In fact, two
wheelers are more than that. A good-looking two-wheeler or motorbike not
only impress others, but can go a long way in making your life convenient.
Two wheelers like bikes and scooters are the symbol of mass transporters.
Motorized two wheelers make life a hassle free journey
Two wheeler manufacturers are well aware of their rising demand and
hence, are teeming up the market with new products every day.
Manufacturers are targeting low income sections also with some cheap
motorbikes as they are increasingly becoming the potential consumers.
Seeing the great demand of the two wheelers, International automobile
giants are heading towards India and collaborating with the auto markets.
In order to meet the skyrocketing demands of the two wheelers, day-today swankiest bikes with high-powered features are launched in the
market to attract the maximum buyers.

Current scenario
Since January this year, the demand for models like Hero Hondas Karizma
and Hunk, Bajaj Autos 100cc Discover DTS-Si and Pulsar 135 LS and
Yamahas R15 has more than doubled. Bajaj Auto has a waiting list of
three weeks for their top- selling product Pulsar, pushing demand for
these bikes up to 80,000 units per month from 55,000 units. Honda
Motorcycle & Scooter India (HMSI) has a waiting period of four weeks for
their scooters Activa and Deo.
This year, the motorcycle segment has grown by more than a quarter with
94 lakh bikes sold across the country. This is the highest number of bikes
ever sold in the local market, with most consumers picking premium and
deluxe models with capacity of 150cc. The whole of last year saw 74.3
lakh bikes sold, according to Society of Indian Automobile Manufacturers
(SIAM).
Two-wheeler majors clearly did not expect this surge in demand. Since
January, demand has surged by 20%. Companies are streamlining
operations, opening new manufacturing facilities, strengthening
distribution and improving logistic operations.India Yamaha Motors has
increased the number of shifts to cater to the rising demand. The

company has a waiting time of 26 weeks for bikes like YZF-R15, FZ series
and Fazer. The upsurge is now reflected in the sales figures. In March,
India Yamaha sold 27,460 bikes, a threefold growth over last year. Honda
Motorcycle & Scooter India (HMSI) is investing Rs 4.7 billion to set up a
second production plant in India, with an annual capacity of 6 lakh units.
The new assembly line will be operational by second half of 2011. It is also
increasing capacity at its existing plant to 1.6 million units by next year.
The company sold 65,888 bikes in March this year, compared with sale of
40,360 units in the same period last year. While Hero Honda, which
controls nearly half of the domestic two-wheeler market, is in talks with
various state governments, including Tamil Nadu, Karnataka and Gujarat,
to set up a new factory. The company sold 414,638 bikes in March 2010,
as compared to 3,53,342 bikes sold during the same period a year ago. At
present, the Indian two-wheeler market is dominated by Hero Honda,
which controls nearly half the $8 million market. Bajaj Auto is the secondlargest two wheeler maker with nearly a fifth of the market.

Case study: Two Wheeler Industry in India: Rising

Demand
Introduction
The two wheeler industry in India has seen tremendous growth after the
announcement of the new industrial policy in 1991. India is the second
largest producer of two wheelers in the world. Several factors have
contributed to the rise of the two wheeler industry. After liberalisation, the
buying power of the Indian middle class has increased because of the
increase in the disposable income. The easy availability of financial
assistance from banks and other financial institutions has also been a
catalyst in the fast growth of the two-wheeler industry. Another major
reason for the increase in demand for two wheelers is the poor public
transport system in most parts of the country. Two wheelers are a
convenient and cheap mode of transport for most of Indian families.

Two-Wheeler Availability and Sales in India

The Indian two-wheeler market segment includes motorcycles, scooters
and mopeds. The overall market trend is upward in all the three segments.
Table 6.01 exhibits the sales of two wheelers in different segments.
Table 6.01
Sales of motorcycles, scooters, and mopeds in India in different years
Sales (Units)

Two
wheeler
type
Motorcy
cles
Scooters
Mopeds

20032004

20042005

20052006

20062007
709277

20072008(estim
ate)
6544482

20082009(forec
ast)
6996051

4357732

5241876

6196653

99982
331587

983127
351169

992985
375922

976014
393415

1075591
431983

1183150
461358

Owing to the decline in the motorcycle, the two wheeler industry has
witnessed a decline in the motorcycle segment, the two wheeler industry
has witnessed a decline in sales about 5% in early 2008. Irrespective of
this decline, experts are of the opinion that the two wheeler industry is on
an upswing.

Major Player in the Market

Hero Honda Motors Ltd, Bajaj Holding & Invest. Ltd, and TVS Motor Co. Ltd
are the three major players in the market. Hero Honda is the market
leader in the two-wheeler industry. It became the first Indian company to
cross cumulative sales of 7 million units in 2003. With a campaign slogan
of Fill it- Shut it- Forget it. Hero Honda has been consistently growing
after its inception. Bajaj also has a firm footing in the market and is ranked
the second in the market. TVS is the third largest two-wheeler company in
India. Table 6.02, 6.03, 6.04 give some statistics about the two-wheeler
industry.
Table 6.02
Market segmentation of two wheelers
Segment
North
East
West
South

Share (%)
32
9
27
32

Table 6.03
Product variations in two-wheelers
Type
Motorcycles
Scooters
Mopeds

Share (%)
66
22
11

Table 6.04
Leading players in the two wheeler industry
Company
Hero Honda
Bajaj Auto
TVS motors
Yamaha
Honda Motors
LML
Kinetic Engineering
Majestic Auto
Royal Enfield

Share (%)
36
23
21
5
5
4
4
4
0.5

Case study Questions

1. It has been mentioned in the case that the market share of the
motor cycles is 66%. For a random sample of 50 potential
customers, what is expected number of customers who will
purchase motor cycles? What is the probability that 10 or fewer
customers will purchase motor cycles?
Conditions for applying Binomial Distribution:
a. Outcome is mutually exclusive: Here the customer will
either buy a motorcycle or not buy it. Hence the outcome is
mutually exclusive.
b. Random variable is result of counts: Here it can be
counted the number of customers who will buy a
motorcycle.
c. Trials are independent: Here it can be clearly seen that
the decision to buy the motorcycle by the third customer
does not make any impact on the decision of the tenth
customer.
d. Probability remains same for each trial: The
probability that a customer will buy a motorcycle or not will
remain the same from one trial to another.
Since we are able to fulfil all the conditions of Binomial
distribution hence we can apply the Binomial theorem here.
Probability p = 0.66
n = 50
E(x) = n * p
= 0.66 * 50
= 33
Approximately 33 customers are expected to
purchase motorcycles from a random sample of 50
potential customers.

X=Number of customers who will purchase motorcycles

P(X10) = P(X=0) + P(X=1) + P(X=2) + ........... +
P(X=10)
= 50C0 * (0.66)0 *(0.34)50 + 50C1 * (0.66)1 * (0.34)49
+ 50C2 *(0.66)2 * (0.34) 48+ ..................+ 50C10 *
(0.66)10 * (0.34)40
= 3.338 * 10-11
The interpretation from the above value is that
number of customers buying motorcycles will be
more than the 10 since the probability of 10 or less
than 10 customers buying the motorcycles is
negligible.
2. Suppose Hero Honda has implemented a quality improvement
programme. The company believes that the major complaints are
Poisson distributed at an average rate of 10 complaints/ 10,000
motor cycles sold in the first month of the sales. To verify the
result, the company collects the data about the sales of the first
10,000 motorcycles sold. It obtains the information that 35
customers have major complaints about the motorcycles that
they have purchased. The management is very particular about
the quality of its product. Use Poisson distribution and examine
whether the average rate of complaints has increased or whether
these complaints are by chance.
X = Number of Complaints
= 10 per 10,000 motorcycles
P(X = 35) = e- x/x!
= e-10*1035 / 35!
= 4.4 * 10-10
The interpretation which can be made from above
analysis is that since the probability is very low we
can infer that the complaints have happened by
chance.
3. Suppose Hero Honda has 120 dealers distributed all over the
country. The company wants to conduct a dealer satisfaction
survey. The company wants to select five dealers from the whole
list of dealers. It has 12 dealers in Madhya Pradesh. What is the

probability that one or more randomly selected dealer is located

in Madhya Pradesh?
X = Selecting a dealer in Madhya Pradesh
P(X=1) = 12/120
= 0.1
P(X1) = 1 P(X=0)
= 1 5C0 * (0.1)0 * (0.9)5
= 0.41
The probability that one or more out of a group of 5
dealers to be selected from the entire list 0f 120
dealers is located in Madhya Pradesh is 41%.