Rise and Rise of the two-

wheeler market in India

(Analysis by Group 6)

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1. Introduction

Sales of two-wheelers are on the rise with a growth rate of nearly 8% in year 2017-18. India is

now the world’s biggest two-wheeler market. Hence the need to study the consumer behavior of

people owning two-wheelers is on the rise now. There is an increase in the number of rural

people owning two-wheelers. This increase can be credited to better road infrastructure in rural

areas. So even the village consumers now days are ready to travel a bit to purchase products.

Similarly, there is an increase in the number of women owning the two-wheeler in the country.

Unlike the earlier years, household women like to go out and explore the options to buy different

products, rather than being satisfied with the ones that were available near to home. There is also

an increase in the sales of high-end premium bikes. People owning these are basically consumers

who give importance to quality and brands of products than just the prices. So it’s evident that

the two-wheeler users have increased in all different segments of the market, and hence their

buying patterns have also changed. This report analyses the consumer behavior of different types

of two-wheeler owning consumers and different marketing implications for the different

customer preferences

2. Body

The Indian subcontinent, with its large population base, favorable demographics, rising

disposable incomes and varied customer needs offers a ready and untapped market to companies

and manufacturers worldwide. India offers a global platform to automobile manufacturers, and

beat China to become the biggest motorcycle maker in the world (Singh, 2017). With a customer

base as large as India’s, it doesn’t come as a shock that it is the biggest two wheeler market in

the world as well. Compared to 16.8 million units that were sold in China (previously the largest

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two wheeler market) in the fiscal year 2016-17, India recorded sales of 17.7 million units (Doval,

2017).

Figure 2.1 draws a comparison between India and China. China has seen a decline in its two

wheeler sales in the past few years due to a highly regulated market with high import barriers

and an underdeveloped motorcycle culture. Availability of inexpensive Chinese cars further

posed a threat to the domestic two wheeler market there. On the contrary, Figure 2.2 shows how

the Indian market has seen an upturn with diverse demands from diverse segments of the market.

A major portion of India’s sales comes from commuter motorcycles and automatic scooters. An

increase in the purchasing power and absence of restrictions like those in China has given a boost

to Indian two wheeler sales (Bora, 2017). In terms of having the largest market share within

India, Hero, with a recorded sale of 66.6 lakh units in FY2016-17, enjoys the lion’s share. With

sales of 50 lakh units in the same year, Honda is a close second.

Figure 2.1

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 Two wheeler sales in India (millions)
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2011-12 2012-13 2013-14 2014-15 2015-16 2016-17

Figure 2.2

Two wheeler sale on a continuous rise. Where will the old two wheeler go ?

The Indian two wheeler market can be segmented on the basis of the following variables.

Geographic Segmentation –

Figure 2.3 shows a distribution of two wheelers and other vehicles over different geographical

locations in India.

1. Rural

Consumers in rural areas form a major chunk of the total two wheeler population in

India. Almost 50 % of the demand comes from rural areas. The Indian government

plans on improving road connectivity in the years to come, and this move shall

further surge up rural demand. In the rural areas, demand for scooters particularly, has

seen an upward trend. Absence of adequate public facilities also adds to a greater

demand for two wheelers. According to reports, two out of every five two-wheelers

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 sold is in rural India (Team Fintapp, 2017).=> Rural area can’t be neglected in terms

of two wheeler exchanges.

2. Urban

Two wheeler demand arises equally from urban areas. Urban infrastructure being

choked is one of the main reasons why urban consumers have moved to two

wheelers. There’s more convenience and ease, and the travel time reduction has been

a major reason too. People are buying two wheelers for shorter commutes and errands

even if they have a car.

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Figure 2.3; Source: Livemint

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Demographic Segmentation – ( Under Social)

1. Income groups

For the poorest people; bicycle is the preferred vehicle for daily commute whereas the

richest quintile chooses two wheelers as the preferred medium. A surprising detail

however is that even car owners prefer using two wheelers to reach work, maybe due to

road congestion and traffic. (Bhattacharya, 2016) Rising disposable income has led to

the replacement period for two wheelers to come down to 5-7 years. Newer and more

efficient models in the market are being bought by people, because they have more

purchasing power now and easier finance options have emerged.

2. Gender -

A noticeable trend in the past years regarding two wheeler sales is increasing number of

women buyers. Reports show that a quarter of scooter buyers are women. Among all two

wheelers, scooters have been a favourite among this segment, with a quarter of the total

buyers being women. Data shows that in the past 5 years, the percentage of scooters in

the collective two wheeler market in India has grown from 20 to 33 (Bhattacharya, 2016).

This increase in scooter demand is also a key factor in the overall positive growth

witnessed by the two wheeler market.

3. PESTLE

Political:

With political decisions such as GST and demonetization coming into effect in the recent past,

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people who buy normal price range bike ranges, have faced a lot of issues including price rises.

For the higher end buyers, it hasn’t affected much. (Roy, Pal & Saha, 2017)

Economical:

According to latest economic survey of India by IMF, the average salary hike of Indian

employees has increased by around 10% in 2017-18 (IBEF, 2018), whereas the two-wheeler

prices have increased only by nearly 5%. This shows that the ability to buy a two-wheeler is

easier than it used to be in India. Comparing the urban and rural consumers with two-wheelers,

people in urban areas spend a lot more since they have a lot of options. Higher brand products

are much accessible to urban people than villagers. With two wheeler usage rise in villages,

compared to few years back, their spending has also increased as they can travel some distance

to buy the necessary products.

Social:

Comparing men and women, number of women who ride two wheelers is less. But it’s becoming

better in the recent past. It is evident from the fact that the share of scooters in the overall two-

wheeler market in the country has risen from 20% to 33% (Thakkar, 2017). The social stigma

that only men should drive two-wheelers is rapidly changing, number of urban working women

using two-wheelers is increasing each year and even women in rural areas are starting to use

scooters these days.

Technological:

As the technology has improved, bikes have become cheaper. Hence the number of two-wheeler

consumers has also increased. Similarly, as the technology has improved, gearless and self-start

two-wheeler sale is on the rise as it easier to ride. This can be seen in the increase in women

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drivers.

Most of the two-wheelers have the space to keep a specific amount of luggage in it. Therefore, it

is easier to go for shopping and bring the products, especially the daily use household items.

Legal:

With much stricter rules against drunken driving, two-wheeler users consuming alcohol at bars

have reduced. This has led to increase in two-wheeler owners taking use of taxi services while

going to and coming from bar. So online taxi service providers such as Uber and Ola should try

to capitalize on it. They should identify the major bars in the cities and try to provide more taxi

availability in the rush hours near the bar. They can also come up with ads which portray how

taxis can help drunken people to reach safely to their homes.

4. MARKETING APPLICATIONS

The two wheeler market is on a consistent rise in the last few years and the statistics show that it

will further increase in the near future (Figure 2.2). What it means for the market is a growing

income pattern amongst the Indian consumers. A major portion of sales is also derived from the

people having two wheelers. Therefore all these factors make this section of consumers a

paramount customer segment.

As we have seen in the previous section, consumers owning two wheelers comprise a major

chunk of the Indian economy. From men in rural India to the modern women in urban India,

from bottom quintile to the top quintile there is a huge variation in the aspiration, demand,

expectation and composition of the customers. Hence, different analysis and strategies are

required by different segments comprising this vast group.

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Two wheeler owners from Rural India

Approximately 50% of the two wheeler owners are from Rural India. Hence, study of the

economics and infrastructure of these regions become important for the companies in order to

market and sell their products efficiently to these consumers. Recent studies have shown a

changing consumption pattern amongst this section which now largely resembles the urban

consumption trend. Also, owing to the potential size of the market, this section presents large and

attractive investment opportunities for the private companies.

Needs & Wants

The needs of this section are very basic. To name some, they comprise of nutritious food, basic

amenities such as potable water, roads, electricity and commodity goods for day to day use.

According to “Masters of Rural Markets: From Touchpoints to Trustpoints - Winning over

India's Aspiring Rural Consumers,” rural consumers are particularly aspiring or striving to

purchase branded, high quality products, which could be considered as a rising want amongst

this section.

Products which could be marketed/sold

 Products where price is combined with utility and not just low prices’ products.

 FMCG products – According to a survey, 40 % of the total FMCG market in India is in

Rural India which is growing annually at a CAGR of 17.41 %. A rising trend of two

wheeler purchase is only going to further increase the sale of these products to this

section. Further easy commutation through vehicles is going to enhance the buying power

of these consumers

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  Services - Rural consumers have now realized that government provides them free

services but they are not of good quality. These days they do not want to send their

children to the local village primary schools because they know that teaching quality does

matter for the development of their children. A similar case holds true for healthcare

facilities. Further, as these consumers have a fair amount of equity and savings with

them, education and healthcare firms can find a good potential market here.

Some marketing strategies:

 These are the consumers which are currently showing the maximum signs of

development and an increasing smartphone and computer penetration simultaneously can

make online portals as key channels for companies trying to enter and establish

themselves amongst this section

 Techniques such as hoardings/wall paintings, shanties/hats/melas, non-price competition,

special campaigns etc. can come very handy in communicating and advertising products

to this section. Besides these, other mass media like hand bills and booklets, posters,

stickers, banners of the schemes etc. are also useful.

 Refill Packs- The concept of refill packs of toothpowder, tea, talcum powder and other

FMCGs are promoted by the marketer as the money saving options while providing

quality at the same time. Therefore big companies need to adopt this approach to

effectively sell their products to this section.

Two wheeler owners from Urban India

Urban population comprise of a diverse set of people coming from different economical

background and walks of life. Therefore, this is probably the most diverse section amongst the

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consumers owning two wheelers in the country. For example, a push-truck vendor might own a

second hand scooter while a rich college student might own an imported superbike and at the

same time, bikes and scooters might be the preferred mode of travel by middle income groups.

Hence segregating this section according to income is a sensible way to formulate marketing

strategies for this group.

1. Poor & Lower Income Group

This is the group which comprises of the major bicycle owners in the country. Apart from this

they also own mopeds and other second hand two wheelers. Any household earning an annual

salary less than 5 lakhs per annum can be clubbed into this category. This category is mainly

concerned with the basic utility products and the products which could be the needs for higher

income group could be a want for them.

Some strategies which could be used to market product to this category of consumers might

include:

 Feature Special Deals and Generics

Deals such as buy 1 get 1 or 1 free for 2 purchases could be an effective strategy for this section.

The more bargains offered, the more likely shoppers are to make an increased future purchase.

Other successful strategies include loyalty cards that offer rewards and double-coupon savings

days.

 Develop Relations

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Seeking feedback from the customers can deliver the message that their needs are being

understood and the organization is committed to fulfilling those needs. This could act as an

effective step towards building relations which could increase the prospects of future sales.

 Partner with Other Organizations

Partnering with government and non-governmental organizations can open up avenues and

markets that are difficult to reach otherwise and make the products visible to these sections.

 Stay Small

Low-income consumers tend to use neighborhood stores rather than large supermarkets and

department stores; some lack communication skills and are reluctant to talk to sales people.

Hiring local staff for communications can do the trick and attract a lot more customers. Also

word-of-mouth recommendations are heavily relied upon, especially in making major purchases.

2. Middle Income Group

Households earning an average income between 6- 15 lakhs per annum come under this

category. This section comprises the major bikes and modern scooter owners within the country.

New research from the McKinsey Global Institute (MGI) shows that within a generation, the

country will become a nation of upwardly mobile middle-class households, consuming goods

ranging from high-end cars to designer clothing. In two decades the country will surpass

Germany as the world's fifth largest consumer market. Middle class typically own a television, a

refrigerator, a mobile phone and perhaps even a car. Although their budgets are stretched, they

scrimp and save for their children's education and their own retirement. Typical needs of this

income group includes basic commodities such as utilities, rations, household goods along with

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petrol/diesel, family vacations, fast foods and their wants may include owning multiple flats,

multiple vehicles, buying a technologically advanced expensive gadgets, etc.

Marketing strategies for this section may include:

 Market the practicality of purchases

A combination of high utility with low purchase price is the key mantra to attract these

consumers.

 “Feel” local, no matter how mega your brand

When shopping, middle class consumers seek quality and value, but appreciate distinction. They

are proud to shop within their communities and support local businesses. But a brand doesn’t

have to be local to feel local. Even larger, national chains can emphasize the fact that they care

about their customers as individuals and members of a larger community.

 Capitalize on celebrity and social media X-factors

Indians are highly emotional - esp. this section of consumers. They are ardent followers of Indian

celebrities and prominent figures. Hence, featuring one of the popular stars in a companies’

official advertisements can work wonder to attract a major population. People also associate the

quality of brand with the level of celebrity popularity. Therefore, more famous the celebrity is,

more the chances of consumer aggregation.

3. Upper Middle & High Income Groups

Consumers whose household income is more than 15 lakhs per annum fall in this category. They

basically have very high end demands and need which is out of reach for the lower income

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groups. These customers have a distinctive sense of style and taste, and they feel that their hard

work and greater ability to spend means that they should enjoy exclusive brands. Those brands

should function not only as a great value and an excellent product, but also as a symbol of

success and as a distinctive marker of affluent class itself.

Some market strategies that may come handy while targeting these consumers include

 Focus Not on Price, But on Quality

Quality is the paramount criteria of purchase for this section. As these people have adequate

amount of wealth to spend, a more comfortable and luxurious brand placed at higher value is

expected to do well than an average or good but relatively cheap brand.

 Focus on Creating a Viral Marketing Campaign

Customers who make well above the average wage are simply more skeptical of mass-marketed

products and concerted advertising efforts. At the same time, they’re more likely than other

groups to purchase a product if they’ve heard about it from a friend. This word-of-mouth

recommendation doesn’t have to occur in the traditional form, however.

Therefore, Indian two wheeler owners are wide open for possibilities to the emerging as well as

well-established companies and is a budding ground for foreign investors.

5. LIMITATIONS

This study has few limitations as it is restricted to only a base of Two Wheeler users, and so the

results do not say a lot about consumer behaviour, and we do not have any hands-on primary

data about the real segmentation of consumers. The consumer behaviour is now changing rapidly

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with the new age internet and social media. Urbanisation, too, is a constant phenomenon in India

and is influencing the life style and buying behaviour of the consumers. Therefore, the study is

based on lot of perceptions and assumptions which might not be true in the real world scenario.

6. CONCLUSION

The two wheeler market in India has been performing considerably well and has seen a positive

CAGR over the past few decades. The large population base in India and the growing income

continues to provide immense opportunities for companies to tap into. Furthermore, government

schemes like Automotive Mission Plan (AMP) 2026 aim to take India ahead and achieve better

milestones with respect to India’s position in the global auto industry. Manufacturers need to

look out for changes in customer preferences as the youth market in India provides scope for

even high end and premium options. Good monsoons, continuous availability of easy financing

options in rural India, better road connectivity, and consistent need for mobility will ensure that

this sector keeps booming.

7. REFERENCES

Singh, 2017

https://autoportal.com/news/india-becomes-the-largest-motorcycle-producer-of-the-world-

overtakes-china-11537.html

Doval, 2017

https://timesofindia.indiatimes.com/auto/bikes/india-is-now-worlds-biggest-2-wheeler-

market/articleshow/58555735.cms

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Bora, 2017

https://auto.ndtv.com/news/india-becomes-no-1-two-wheeler-market-overtakes-china-1690084

Team Fintapp, 2017

https://www.fintapp.com/blog/two-wheeler-industry-analysis-research-report/

Bhattacharya, 2016

https://www.livemint.com/Politics/Yd2EAFIupVHDX0EbUdecsO/One-in-three-households-in-

India-owns-a-twowheeler.html

Roy, Pal & Saha, 2017

https://www.thequint.com/voices/blogs/demonetisation-and-gst-reckless-decisions-that-cost-the-

economy

IBEF, 2018

https://www.ibef.org, 2018

Thakkar, 2017

https://economictimes.indiatimes.com/two-wheelers/urbanisation-rising-women-users-better-

roads-add-speed-to-two-wheeler-sales/articleshow/58567070.cms

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