Case: 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 liberalization, the
buying power of the Indian middle class has increased because of the increase in disposable
incomes. 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 Indian families.

Table 1
Sales of motorcycles, scooters, and mopeds in India in different years
Sales (Units)

Two- 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09

Wheeler (Estimate) (Forecast)
type

Motorcycles 4,357,732 5,241,876 6,196,653 7,092,787 6,544,482 6,996,051

Scooters 939,982 983,127 992,985 976,014 1,075,591 1,183,150

Mopeds 331,587 351,169 375,922 393,415 431,983 461,358

Source: Indian Industry: A Monthly Review, Centre for Monitoring Indian Economy Pvt Ltd,
Mumbai, June 2008, reproduced with permission.

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 1 exhibits the sales of two
wheelers in different segments.9
Owing to 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 Players 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 2, 3, and 4 give some statistics
about the two-wheeler industry.

TABLE 2
Market segmentation of two wheelers
Segment Share (%)

North 32

East 9

West 27

South 32

Source: www.indiastat.com, accessed June 2008, reproduced with permission.

TABLE 3
Product variation in two wheelers
Type Share (%)

Motorcycles 66

Scooters 22

Mopeds 11

Source: www.indiastat.com, accessed June 2008, reproduced with permission.

TABLE 4
Leading players in the two wheeler industry
Company Share (%)

Hero Honda 36

Bajaj Auto 23

TVS Motors 21

Yamaha 5
 Honda Motors 5

LML 4

Kinetic Engineering 4

Majestic Auto 1

Royal Enfield 0.5

Source: www.indiastat.com, accessed June 2008, reproduced with permission.

1. It has been mentioned in the case that the market share of motor cycles is 66%. For a random
sample of 50 potential customers, what is the expected number of customers who will
purchase motorcycles? What is the probability that 10 or fewer customers will purchase
motorcycles?
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 motorcycles sold in the first month of sales. To verify the result, the
company collects 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 had
purchased. The management is very particular about the quality of its product. Use Poisson
distribution and examine whether the average rates of complaints have increased or whether
these complaints are due to 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?