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Two-wheeler industry in India
Contributed by Administrator Tuesday, 07 April 2009 Last Updated Tuesday, 07 April 2009

Sector Watch Two-wheeler industry in India With an expanding market and entry of new players over the last few years, the Indian two wheeler industry is now approaching a stage of maturity Introduction The two-wheeler industry in India has grown rapidly in the country since the announcement of the process of liberalization in 1991.

Previously, there were only a handful of two-wheeler models available in the country. Currently, India is the second largest producer of two-wheelers in the world. It stands next only to China and Japan in terms of the number of twowheelers produced and the sales of two-wheelers respectively. There are many two-wheeler manufacturers in India. Major players in the 2-wheeler industry are Hero Honda Motors Ltd (HHML), Bajaj Auto Ltd (Bajaj Auto) and TVS Motor Company Ltd (TVS). The other key players in the two-wheeler industry are Kinetic Motor Company Ltd (KMCL), Kinetic Engineering Ltd (KEL), LML Ltd (LML), Yamaha Motors India Ltd (Yamaha), Majestic Auto Ltd (Majestic Auto), Royal Enfield Ltd (REL) and Honda Motorcycle & Scooter India (P) Ltd (HMSI).

Evolution of 2-wheeler industry The trend of owning two-wheelers is due to a variety of facts peculiar to India. One of the chief factors is poor public transport in many parts of India. Additionally, two-wheelers offer a great deal of convenience and mobility for the Indian family. A description of the evolution of the two wheeler industry in India is usefully split up into four ten year periods. This division traces significant changes in economic policy making. 1960-1969 The first time-period, 1960-1969, was one during which the growth of the two-wheeler industry was fostered through means like permitting foreign collaborations and phasing out of non-manufacturing firms in the industry. The automobile industry being classified as one of importance under the Industrial Policy Resolution of 1948 was therefore controlled and regulated by the Government. In order to encourage manufacturing, besides restricting import of complete vehicles, automobile assembler firms were phased out by 1952 (Tariff Commission, 1968), and only manufacturing firms allowed to continue. Production of automobiles was licensed, which meant that a firm required a licensing approval in order to open a plant. It also meant that a firm’s capacity of production was determined by the Government. During this period, collaborations with foreign firms were encouraged. Most firms existing in this period had some form of collaboration with foreign firms. 1970 – 1980 The period 1970-1980 saw state controls, through the use of the licensing system and certain regulatory acts over the economy, at their peak. During 1981-1990 significant reforms were initiated in the country. The technological backwardness of the Indian twowheeler industry was one of the reasons for the initiation of reforms in 1981. Foreign collaborations were allowed for all two-wheelers up to an engine capacity of 100 cc. This prompted a spate of new entries into the industry the majority of which entered the motorcycle segment, bringing with them new technology that resulted in more efficient production processes and products. The variety in products available also improved. Change sin government policies gave firms the flexibility to choose an optimal product and capacity mix which could better incorporate market demand into their production strategy and thereby improve their capacity utilization and efficiency. Powered by Joomla! Generated: 20 March, 2012, 13:55

675 million units per annum target set in the Sixth Plan. Second. The reforms that began in the late seventies underwent their most significant change in 1991 through the liberalization of the economy. http://enrich. TVS. In the area of trade. The two-wheeler industry in the nineties was characterized by: a) An increase in the number of brands available in the market which caused firms to compete on the basis of product features & b) An increase in sales volumes in the motorcycle segment vis-à-vis the scooter segment reversing the traditional trend. Motorcycle companies like the API and Enfield were the only producers of two-wheelers in India. In the mid 80&rsquo. Kinetic introduced a variomatic gearless scooter in collaboration with Honda. The two-wheeler industry was completely deregulated. The introduction of scooterettes created another segment for people such as women and teenagers who could not get used to driving either motorcycles or gearless scooters. However. 13:55 . there were only three major motorcycle manufacturers in India namely Rajdoot. The change in the government&rsquo.s. several existing but weaker players died out giving way to new entrants and superior products. licensed capacities went up to 1. with 150. The only disadvantage is speed. Rajdoot and faced immense competition from smaller 100 cc Japanese technology motorbikes. Bikes manufactured by Hero Honda. Until the mid 80&rsquo. Market trends today The latest trend in the two-wheeler market is the introduction of electrically operated vehicles from a range of manufacturers such as Indus and Hero. and Kawasaki. Sensing this movement. Hero. faced fierce foreign competition.s. Suzuki. Indus. several reforms were introduced with the goal of making Indian exports competitive. Kinetic. 1960 also saw the arrival of the third motorcycle in India. Currently. Currently there are around 10 two-wheeler manufacturers in the country. the market is maturing fast. tax. 180 and 200 cc engines with Dual Twin Spark Ignition (DTSi) technology. However. Honda. These can be recharged from convenient household electrical points. Many companies such as Kinetc. Companies in the business Bajaj auto began trading in imported Vespa Scooters in 1948. The two-wheeler market was opened to foreign manufacturers in the mid 80&rsquo. 1991-1999 The final time-period covers the period 1991-1999 during which the reform process was deepened. Rajdoot was manufactured by Escorts in collaboration with CEKOP of Poland. These reforms encompassed several areas like finance. trade. Honda. the only company manufacturing four-stroke bikes at that time. the motorcycle market is witnessing a demand for higher volume industrial policy etc. which had seen a smooth ride before. Previously.s policy owning to pollution control norms and the Kyoto agreement saw the phasing out of two stroke two-wheelers from production.s. This scooter became instantly popular with the younger generation. Meanwhile Automobile Products of India (API) commenced production of scooters in the country in the early 50&rsquo. 2012. set up shop in India in collaboration with various Indian two-wheeler companies. gained massive popularity. This deal expired in 1971. and Hero also started manufacturing mopeds that proved immensely popular with people who wanted a simple riding machine. and Enfield. The condition of motorcycle manufacturers was no different.enrich. Companies like Escorts. Until 1958. especially people who found it difficult to use geared scooters. the 100 c bikes were very popular owning to the high fuel efficiency offered. Hero Honda. TVS. The industry.s. which is restricted to around 25 miles per hour. Royal Enfield. Royal Enfield set up a manufacturing unit in Chennai in 1955 to produce the Bullet 350 motorcycles and in 1960 Ideal Jawa (India) started manufacturing the 250cc Jawa motorcycles under license from Jawa Motorcycles of Czechoslovakia.1 million units per annum overshooting the These reforms had two major effects on the industry: First. Bajaj has introduced the Bajaj Pulsar. and Yamaha. they being Bajaj. Escorts. Bajaj signed a technical collaboration in 1960 with Piaggio of Italy to produce Bajaj Powered by Joomla! Generated: 20 March.

Another significant entry barrier is the brand building required. New products are being introduced at a rapid pace and brands are gaining prominence. This has resulted in higher growth in the 125-150cc segment.s Hayabusa tagged at Rs Powered by Joomla! Generated: 20 March. priced between Rs 15 lakh and Rs 50 these segments may be threatened by the Tata car.experience&rdquo. 13:55 . Motorcycles are now sold as an &ldquo.08 actually grew. announced plans to foray into aviation sector with Rs 500-crore investment that will see it manufacturing of light sports aircraft and applications for aerospace. The industry was unanimous that the decision by a majority of banks and financial institutions to either stay away from two-wheeler financing or tighten the norms has resulted in slowdown in retail uptake. sales during the Jan&ndash. and commissioned its third facility at Haridwar.Nov &lsquo. which has a capacity of producing 10 lakh units a year.000. 2008 was a year that it will look back with a sense of satisfaction on being able to not only withstand the intense pressure of market slump but also expand its market share. the price of even a low end car (2. High level of branding has also helped revive niche players like Royal Enfield. besides setting up aviation training institutes and colleges. However. triggered by high interest rates and lack of retail financing. Munjals-promoted Hero Group. a car has been positioned at a price point that fills the vacuum between a motorcycle and a low-end car such as the Maruti 800. albeit it leading to a court battle over patent between Bajaj Auto Ltd and TVS Motor Co. Provision of easy financing through EMI&rsquo. 2012. Barriers to entry have reduced with the introduction of Government policies such as reduction in excise duty from 24% to 16% and allowing for 100% FDI. which is reasonably priced and therefore a viable substitute. Reliability and economy have become more of a hygiene factor.000 to Rs 65. but the industry talk for most of the year revolved around sliding sales. As for the country&rsquo. The irony that encapsulated the sector was reflected in the fact that when all the manufacturers were crying hoarse about difficulties in selling products. four-wheeler major Mahindra& Mahindra saw an opportunity to test waters in two-wheeler space by forming a joint venture with Kinetic Motor.s launch of a range of bikes. When some companies were finding it difficult to sell motorcycles in the price range of Rs 35. hurting the sector.s has reduced the price sensitivity to a great extent. Since brand loyalty is lower for these segments vis-à-vis the premium segment. On other hand. some others thought of launching bikes priced around Rs 50 lakh. http://enrich. the investment required for setting up large distribution channels and service stations can be a major entry barrier. The company announced in the beginning of the year that it would launch 12 models in 18 months. Italian superbike maker Ducati&rsquo. was a roller-coaster ride for the two-wheeler industry in 2008. better known for their two-wheeler prowess.enrich. It is further reduced due to the threat of backward integration by the two-wheeler companies. Threat from Substitutes such as the Tata 1 Lakh car looms large over the two-wheeler industry. After establishing their brand they have launched their own line of products&ndash. The year also saw the home grown companies seeking to assert themselves in terms of technological development.Honda with Hero Group and Yamaha with Escorts. initially foreign players set up Joint Ventures with indigenous companies. and arrival of Suzuki&rsquo.5 &ndash. Their buyers will consider the convenience and status associated with owning a car. Buyers now demand two-wheelers that fit their personality thus increasing the scope for differentiation and branding. For the first time. Thus there is an increased focus on the premium segment which has an increased scope for biggest two-wheeler maker Hero Honda Motors.5 lakh were undoubtedly talking points. 3 Lakhs) was too high to attract the customers from the entry and executive two wheeler segment. Buyer Power is relatively high with buyers becoming more discerning. Supplier Power is low as most suppliers are exclusive and far more diffused than the industry itself. Industry in 2008 The grand plans for new launches backed by handsome sales to start with were followed by pressures of rising input costs. lack of retail finance and a nosedive in demand&ndash. rather than a product.

future is electric&rsquo. the electric two-wheeler industry is gaining ground substantially by notching up a year-on-year growth of 35% to 40% and by the end of the fiscal. registering 33% sales increase. electric vehicle technology is a worthy viable alternative to a petrol vehicle. claiming 40% share of this segment. Much of this growth has come from the company&rsquo.. TVS had to launch a modified single spark ignition engine-based &lsquo. Market leader Hero Honda Motors continued its growth spree. With Electrotherm driving into the Indian market in 2006. Avenger and Pulsar. Hero group. are very convenient for the consumers.055 units (265. But despite doing poorly compared with February 2008. battery life and other parts.235 units) in the domestic market. with a speed limit of 25 km per hour. where 75% of total two-wheeler sales come from EV market. In the over 125cc segment. EVs. said Ganesh Mahalingam. adherence to climate changes. Ultra Motors.s new launches such as Passion Pro Power Start.508 units) in the domestic market. On the contrary. from the projected three lakh units by March 2009. are free from registration and licences. including Ultra Motor. As many as 70 individual traders have taken a plunge into this business by importing completely knocked down kits (CKDs. chairman.668 units.406 units). economy and convenience. China alone accounts for 75% of the global electric two-wheeler market with 1. needed to assemble a vehicle) from China and selling them in the market. Ever since its entry in to the Indian market two years units (75. it was a ride in rough terrain for the two-wheeler makers in 2008. uncertain fuel prices and climate change are expected to play a major role in driving the market in the coming days. increasing urbanisation. as urbanisation. &ldquo. the XCD 135 DTS-Si sold 20.164 units across brands Platina 125. according to industry captains. Bajaj Auto sold 132. The world electric two-wheeler market has grown from 23 lakh units in 2003 to 1.With rising fuel prices. have shown the world how the two-wheeler industry can grow with http://enrich. automobile ownership. its rivals Bajaj Auto and TVS Motor had to fight it out. Interestingly.78 crore units in 2007 and is expected to touch the 20 crore-unit mark by the end of 2008. Overall. Bajaj sold 80. Industry in Feb 2009 Much like car companies. Discover. Managing director Rajiv Bajaj said that within the first month of sales. but it is desperately hoping that the next year it should be able to cruise on the highway to growth. literally in the courts carrying over last year&rsquo. It plans to launch four product upgrades next month in the 125cc+ segment. Atlas and the Lohia group. Countries like China. this may well touch 3 lakh units.The EVs are highly energy-efficient. cost of ownership. India has seen many leading manufacturers with greenfield projects.Flame& logging 24% growth at 329. adds. a lower maintenance cost compared to petrol-driven two-wheelers. Petrol engine technology is in a mature state. India is poised to see a tremendous growth in the industry.& Powered by Joomla! Generated: 20 March. Bajaj managed to claw back to the second position in the domestic two-wheeler pecking order &ndash. XCD 135.393 units ( While Hero Honda was busy planning to strengthen its position. &ldquo. A corporate battle was also seen in the electric vehicle segment with Hero Group and Ultra Motors breaking off their joint venture and deciding to walk separate ways. M&M had bought operating assets of KMC for Rs 120 crore..431 units) and laying claim to a market share of over 56%.301 units (95. As the situation stands today. two-wheeler makers also reported healthy growth numbers in February with Bajaj Auto being the only exception since it reported a 17% decline in sales. cost effective and come with reliable technology which can be easily upgraded in terms of speed. which the latter had planned to use in its 125 cc bike &lsquo. followed by the US with 24 lakh units. TVS. MM Murugappan. With 45% of the population working and fuel costs rising. Bajaj Auto had accused TVS of violating its patent of twin spark technology.Flame&rsquo.&rdquo. Tube Investments of India Ltd.enrich. TVS Motor Company reported 13% increase at 107. Electric battery-operated vehicle technology is also more affordable compared to any other energy-efficient technology. Not much improvement is possible with respect to reducing exhaust gas emission. 2012. After doing rounds of various courts and defamation suits. Though the electric two-wheeler industry is relatively new to the country. MD. Market of the future: Electric two-wheelers Leading manufacturers of electric two-wheelers in India believe the &lsquo. Keeping in mind the growing traffic woes. and therefore. HMSI crossed the one lakh unit mark for the first time this fiscal with 100. a position it had relinquished to Honda Motorcycle & Scooter India (HMSI) for some months in the current fiscal. Tube Investments of India. Mahindra & Mahindra announced its entry into the twowheeler segment by forming a joint venture with Kinetic Motor Company (KMC) in which it held 80 per cent stake.50 crore units. 13:55 . its market is evolving very fast and is one of the most accepted concepts globally.s legal battle over usage of twin spark plug technology. it is expected that the industry will see a remarkable growth with five lakh units by March 2010. least polluting.

Companies will have to invest heavily in technology platforms like battery. motor.s life totally depends on the driving/charging habits of owner and with modern technologies being in place. to boost demand and keep the market growing. elderly citizens. colours.Kawasaki. clutch or starter) and economical (with lower initial and running costs). Anyone looking for economy. JapanMotorcycleHero Honda 100 cc Kinetic Engineering LTd. U. (MSL)ScooterPriya Majestic Auto Ltd. graphics and names and they have been extensively tested and validated for Indian requirements. A battery&rsquo. (BAL)Piaggio All the major manufactures of electric two-wheelers are gearing up to tap the huge potential in India with huge investmentcum-expansion plans.MotorcycleRoyal Enfield 350 cc Automobile Produce of India (API)Innocenti Ltd. CzechoslovakiamotorcycleYezdi. BSA Motors too. recently announced similar investments in expanding dealer networks and new products. It is important that companies design and develop components keeping the Indian customers in mind. The industry believes that consolidation will happen with the closure of many trader-dealers while banks and lending institutions will come forward to finance the products in the months to come. 250 cc Escorts Ltd. (EIL)Enfield Ltd. The e-scooter segment is addressing key customer needs as it is convenient to use (with light weight. India. (KEL)-MopedLuna Scooters India Ltd. ItalyScooterVespa Ideal Jawa Pvt.Honda. controller. new products innovation. lack of finance and insurance coverage. thereby wooing young and techno savvy customers with dependable after sales. the electric scooter segment is bound to grow manifold. no gears. the electric vehicles are more suitable for Indian road conditions. ease and eco-friendliness can immensely benefit from e-vehicles. on an average. sells seven million two-wheelers every year. The e-vehicles are fuel-free and hence cheaper to run by at least 80% and support cleaner and greener technologies. (IJPL)Jawa Ltd. JapanScooterNH 100 cc Lohia Machinery Ltd. The industry is not looking at particular consumer demographics. With this.K. scooteretteSunny TVS-scooter-scooteretteScooty KineticHondascooter-scooteretteMarvel TVSscooterSpectra Kinetic Motors-ScooteretteStyle http://enrich. JapanMotorcycleKawasaki Bajaj 100 cc Escorts Ltd. difficulty in charging (battery) at public places. expansion and modernisation at its plants. Ltd. small businesses/petty traders and delivery agents in the age group of 17-40 years are ideal customers for e-vehicles. Of one million petrol-driven scooter market. (SCL)-MopedTVS 50 cc19811990TVSSuzuki. at almost 14%.Piaggio.Yamaha. ItalyScooterVersa XE Enfield IndiaZundapp-Werke GmBHmopedmotorcyclemotorcyclemotorcycle50cc50cc80cc100cc1991-1999Bajaj Auto Ltd. JapanMotorcycleYamaha RX 100 cc Hero Majestic Ltd. 175 cc1970-1980Kinetic Engineering Ltd. Factors such as no after sales service. Battery is an area of concern. designs. the EV industry has already converted 15% in its favour. 2012. apart from its enormous latent demand. the industry is fully geared up to tackle any problem. if anySegmentBrand name of product1955-1969Enfield India Ltd. The electric two-wheeler industry also has products designed for segment-specific preferences in electric technology. Electrotherm and Ultra Motors are also investing in R&D. JapanmotorcycleInd-Suzuki 100 cc Bajaj Auto Ltd. The scooter segment is growing fast. he pointed out. 13:55 . With much higher specifications/performance. (SIL)-scooterVijai Maharashtra Scoters Ltd. Currently the industry is not growing at a higher pace due to poor quality and reliability of bikes supplied by traders with imported CKD kits from countries like China. parts and service support. People like working/dependent women. (EL)CEKOP. An electric two-wheeler can be operated at 1/10th the cost of running a petrol-driven two-wheeler and at a much lower maintenance cost. inadequate customer promotions and difficulties in registering in some states are major hurdles faced by the industry. (MAL)-MobbedHero Majestic Sundaram Clayton Ltd.moped & Powered by Joomla! Generated: 20 March. The EV industry is targeting to substitute 10% to 15% of the total scooter inadequate supplies and lack of spare parts. PolandMotorcycleRajdoot. safe driving. strengthening of supply chain and a strong distribution and dealers network. While Hero group is planning to invest close to Rs 100 crore for new products. ItalyScooterLambretta Bajaj Auto Ltd. Details of firms within the two-wheeler industryPeriod of entryName of the Indian firmName of foreign collaborator.