THE INDIAN MOPED MARKET – MARKET ANALYSIS

INTRODUCTION

1982 – 1987 was an excellent period for TVS Suzuki two wheelers. From being a late entrant in the market TVS mopeds
had worked its way to a market leadership position in these few years. The product manager of TVS mopeds had every
reason to be satisfied with his performance over these last few years.

However the Indian two-wheeler market was going through a difficult time in 1987 - 88. After a healthy growth
between 1982 and 1985, the mopeds segment was showing signs of stagnation. Things were not looking bright for the
moped and scooter categories . The moped category sales for 1986 and 1987 did not augur well for moped
manufacturers (Table 1).

All sales and market share numbers looked good for TVS mopeds. TVS mopeds was the fastest growing brand in the
category . The mopeds had shown good sales growth and market share improvements as compared to their
competitors ( Table 2) . The product manager was not very happy with the way things were going. The slow down in
the growth in the mopeds segment was a matter of concern and the TVS Suzuki management was keen on knowing
what the product manager planned to do to handle this situation.

The product manager needed to present a business plan for mopeds to the management. He reviewed the situation
before sitting down to prepare a detailed analysis of his understanding of the situation and the options available before
him.

THE TWO WHEELER INDUSTRY – BACK GROUND

The Indian two-wheeler industry is broadly broken up into three categories of products – motorcycles, scooters and
mopeds. While scooters and motorcycles have been around in the country for long, mopeds were introduced in the
1960s.

After a very slow growth in the 1970s, the moped market took off in sales in the early 1980s. The two wheeler m arket
saw a boom in the 1982-86 period and the moped segment grew very rapidly till 1986 (Ref. Table 1). Some
environmental factors contributed to the rapid growth in the two-wheeler market in this period- the most significant
factors being the entry of Japanese collaborations in the motorcycle category and the increase in licensed capacity for
scooter manufacturers. All four leading Japanese manufacturers came into the country with Indian partners for the
manufacture of 100 cc motorcycles. Honda also came to India to manufacture Scooters with Kinetic Engineering
Limited.

Till 1984, the two wheeler market consisted of local manufacturers with the leading ones being Bajaj Auto, Escorts,
Kinetic Engineering, Majestic Auto, Sundaram Clayton (TVS), Ideal Jawa (Yezdi) and Enfield India. The market was quite
well defined in terms of categories – scooters dominated by Bajaj Auto, motorcycles by Escorts followed by Enfield and
Ideal Jawa and mopeds by Kinetic Engineering, Sundaram Clayton and Majestic Auto. 1984 was however a turning
point for the industry. As a part of the liberalization move, foreign equity was allowed in the country in this industry.
Almost overnight, not only did the country get a range of new products but production capacities increased
substantially.

To a large extent the sales figures of two wheelers was not reflective of the true situation of demand because of
production capacity constraints in the country. In the 1984 – 85 period, Bajaj almost doubled their production capacity
of scooters. From a situation in the early 1980s when the waiting period for a Bajaj scooter was a few years and there
was a premium of over 100 per cent on the product, by 1985 – 86 the scooters were available off the shelf.

In the motorcycle segment, demand was limited largely because the manufacturers had outdated products in their
fold. In 1984 when the government opened the doors to foreign technology, the leading two wheeler manufacturers
tied up with Japanese manufacturers. The tie-ups were as follows:

Bajaj with Kawasaki for motorcycles

Sundaram Clayton (TVS) with Suzuki for motorcycles
Escorts with Yamaha for motorcycles
Hero group with Honda for motorcycles
Kinetic with Honda for scooters
Lohia with Piaggio for scooters.

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These tie ups resulted in a very large capacity of two wheelers being built up almost overnight. The market absorbed
this increase in production and availability for the first few years till demand stabilised. By 1987 – 88 the market
showed signs of stabilising. The tie ups also gave the Indian market access to reasonably state of art technology in the
motorcycle and scooter categories.

MOPEDS

While collaborations happened in the motorcycle and scooter segments, the Indian manufacturers had to largely go by
themselves for the production of mopeds. Post liberalization, there was however some rub off to the moped category
not so much on product technology as in the marketing efforts, dealer upgradation and image enhancement through
their collaborations.

The moped was essentially a “ motorised pedal “ vehicle. It was an entry level vehicle for people upgrading from cycles.
The early models of mopeds had pedal facility in addition to a petrol engine. These models were typically gearless
vehicles.

There were many manufacturers of mopeds. Though mopeds had come into the country in the 1960s, by the 1980s,
many of the marginal players were out this business. In early 1980s, the major players were Kinetic Engineering Ltd.
(Model s - Luna TFR, TFR Plus, Super), Majestic Auto Ltd. (Models -Hero Majestic ) and Sundaram Clayton Ltd. (Models -
TVS 50 XL, TVS XT, Champ).

Over the years there were significant changes in the shares of these companies and by 1986, the major contenders for
the top slot in this segment were Kinetic Engineering and Sundaram Clayton (Table 2).

Kinetic Engineering (KEL)

The Luna TFR moped was a highly successful model introduced in 1972. The product was basically designed as a single
seater moped. It had the image of a lightweight, easy to handle and reliable product suitable for women and students
and for city riding. Over the years, KEL introduced other models like TFR Plus and Super, which were two seater
models. Luna TFR however continued as the major flagship model of the company.

KEL (Luna) was undoubtedly the market leader in mopeds in the early 1980s. This position was being challenged by TVS
mopeds around 1987. KEL was headquartered in Pune, Maharashtra. Luna had a dominant share in the western market
and did well in the south too (Table 3). In fact in the west and in some parts of south, it was such a strong brand that
Luna had become a generic name for mopeds. Luna TFR had demonstrated that there was a good market for a
lightweight moped for the urban woman.

The Kinetic group tied up with Honda for the manufacture of new generation scooters in India – Kinetic Honda. These
scooters were primarily targeted at the urban user. When they were introduced, they were revolutionary – gearless,
electric start in addition to kick-start, plastics on the body and so on. The scooters were in fact very popular with the
urban woman.

Majestic Auto Ltd. (MAL)

A part of the Hero Cycle group, the Hero Majestic moped was introduced in 1978-79. The product had a strong
presence in the north and east (Table 3). From a comfortable market position in the 1970s and after a successful run till
1983-84, Hero Majestic mopeds started losing share in the battle between Luna and TVS.

Sundaram Clayton Ltd. (TVS)

Sundaram Clayton is a part of the highly reputed and respected TVS group of South India. The TVS group has a very
strong presence in the automobile sector including bus and cargo transport services , auto parts manufacturing , spares
distribution and automobile dealerships for leading brands.

The last entrant in the field, TVS mopeds came into the market in 1980-81. The TVS moped was positioned as “The
moped created for two” and was initially introduced in the west and south. The response to the product TVS 50 moped
was excellent in terms of initial bookings and sales.

However the product ran into performance problems soon after introduction. The company responded to the field
failures to the extent possible through replacement of failed parts and improving the performance and reliability of the
product. Being a south based company they were able to respond faster in the south. The strong brand equity of TVS in

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the south and their quick response to field problems in the south helped them retain their image in the south. This was
reflected in growing sales and market share in the south. The western market was however not so forgiving for the
early product problems faced by customers. Despite repeated attempts to gain a foothold in the moped market in the
west, TVS could not succeed. This was made even more difficult due to the strong brand image of Luna in the west.

TVS products were however good and the initial failures were more than made up by good engineering and R & D. The
success of the efforts is evident from the sales figures of TVS mopeds in the period 1982-87. Between 1980 and 1987
TVS introduced TVS 50, TVS 50 XL, TVS XT and TVS Champ – all two seater mopeds. All these models did well in the
various markets.

TVS mopeds had an image of being tough and rugged, suitable for heavy-duty use. TVS 50 XL was positioned as “ The
moped for two “. TVS XT was positioned as “Built Tough to Last Long”. As a part of introducing different models to
cater to varying market segments, TVS introduced the TVS Champ in 1986 – 87. While the Champ was similar to TVS XT
in terms of technical specifications and performance, it had many aesthetic changes as compared to the other TVS XT
and other mopeds. The Champ targeted the style and status segment with the statement - “ A great way to get carried
away”. Though the technical / performance specifications of TVS XT and Champ were similar, the CHAMP was priced
higher than the TVS XT by almost 15 %. It was in fact the highest priced product in the moped class. The TVS Champ
was also a runaway success. Though the TVS Champ was targeted at the urban customer the product did well in semi
urban and rural markets too. Comparative prices of Luna and TVS models are given in Table 4.

TVS collaborated with Suzuki of Japan to introduce a new generation 100 cc motorcycle in India. In fact, TVS SUZUKI
motorcycle was the first of the new generation 100 cc motorcycles introduced in the country in 1984. Honda, Yamaha
and Kawasaki followed. The TVS Suzuki motorcycles did very well in the initial years. The product was seen as a reliable
and good product. A latent demand for motorcycles was suddenly met by the arrival of the Japanese new generation
motorcycles.

In the moped segment, TVS had a very good track record of growth and market share improvement. With the Suzuki
collaboration, the general image of the company was also good. The image of Suzuki motorcycles helped dealers in the
sales of mopeds in many markets. However in the West, while the sales of TVS Suzuki motorcycles were good, the
demand for TVS mopeds did not pick up. To a large extent the dealers in the west were happy dealing with motorcycles
only as they were easy to sell. There was really no effort on the part of dealers in the early years of introduction of the
new generation Japanese motorcycles . It was a clearly supply driven market. The effort to sell mopeds in the west was
considerably higher. The TVS dealers in the west had to contend with history – the initial failure of TVS mopeds in the
west and the hit to the brand reputation. This was compounded by the fact that the west was a very strong Luna
market. And finally, given that the margins on mopeds were low as compared to the margins on motorcycles and the
TVS Suzuki motorcycles were in a “pull” situation , the dealers did not have much incentive to put in the extra efforts
needed to sell mopeds.

THE TASK

As the product manager for TVS mopeds, you have to present an analysis of the current two-wheeler market scenario
and suggestions on the future product / market strategy of TVS mopeds to the senior management team.

Issues to consider:

1. How do you see the current market with respect to the moped segment?
2. As the TVS product manager what product management initiatives would you see for this category?
3. You decide to launch a product to take on Luna TFR head on in the western India market. What would be your
concept statement for the product?

(This case has been prepared by Ramesh Venkateswaran for the purpose of classroom discussion only.)

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 TABLE 1 : 2 Wheeler Sales: 1982 – 1987 (Nos.)

Year Mopeds Scooter Motor Cycle Total

1982 221091 240733 119653 581477

1983 354474 274077 130483 759034
1984 406296 303806 147109 857211
1985 480093 414240 206730 1101063
1986 492148 588587 273346 1354081
1987 492074 644503 285178 1421755

TABLE 2 : Brand-wise moped sales: 1982 – 1987

Year Luna TVS Hero Others Total

1982 58384 52530 77509 32668 221091

1983 132928 70181 109264 42101 354474
1984 157490 99588 95323 53895 406296
1985 152548 125941 97672 103932 480093
1986 149484 148197 60953 133514 492148
1987 167785 181760 57586 84943 492074

TABLE 3 : Region wise sales of Ungeared Mopeds: 1984 – 1986

Zone LUNA TVS MOPEDS

1984 1985 1986 1984 1985 1986 1984 1985 1986
North 32460 33144 27360 24650 30348 32134 42170 42681 30955
East 11604 11772 12720 6668 11157 14796 14768 14034 6822
West 72396 66240 71460 25016 27284 21865 15799 15196 10176
South 40872 40896 37944 43524 57152 79422 22606 25761 13005
Total 157332 152052 149484 99588 125941 148217 95323 97672 60958

TABLE4 : Comparison of Competitive Mopeds

Model Approx. Fuel

Ex-showroom Efficiency
Price (in Rs.) Km / Litre
Luna TFR 5200 58-60
Luna Super 5700 58-60
TVS 50 XL 5600 50-55
TVS XT 5800 50-55
TVS Champ 6600 50-55

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