MARKET &COMPETITION ANALYSIS

Current Industry Status

 The two-wheeler market in India is the biggest contributor to the automobile industry with a
size of or Rs 22000 crores.
 In terms of volume the industry sales around 5.4 million units a year.
 India is the second largest producer and manufacturer of two-wheelers in the world.
 It stands next only to Japan and China in terms of the number of two-wheelers produced and
domestic sales respectively.
 India is the two wheeler capital of Asia with 27 two wheelers per 1000 persons as compared to 8
two wheelers per 1000 persons in China.
 According to the figures published by SIAM, the share of two-wheelers in automobile sector in
terms of units sold was about 80 per cent.
 Indian two-wheeler industry has got spectacular growth in the last few years.

Sales of two wheelers in India

Source : SIAM
Key market forces

Demand drivers for two wheelers

• Inadequate public transportation system, especially in the semi-urban and rural areas. Delay in
initiation of Mass Transport System - Probably a future threat to the two-wheeler market, the
implementation of the mass transport system has been delayed.
• Increased availability of cheap consumer financing in the past 3-4 years; Two-wheeler loans and
financing has been on the rise.
• Increasing availability of fuel-efficient and low-maintenance models and increasing number of
models with different features to satisfy diverse consumer needs.
• Increasing urbanization, which creates a need for personal transportation and Changes in the
demographic profile
• Steady increase in per capita income over the past five years. There has been steady increase in
consumer's salary - Due to opportunities offered by multinationals the disposable incomes of
salaried individuals have increase manifold.

Major players

Major players in the 2-wheeler industry are

• Hero Honda Motors Ltd (HHML),

CD Dawn
CD Deluxe
Pleasure
Splender +
Splender NXG
Passion Pro
Passion +
Super Splender
Glamour
Glamour PGM FI
Achiever
CBZ Extreme
Hunk
Karizma
Karizma ZMR

• Bajaj Auto Ltd (Bajaj Auto)

Avenger 200 DTSi

Pulsar LS (New)
Pulsar 220 DTSi
Pulsar 180 DTSi
Pulsar 150 DTSi
Discover 135 DTSi
Discover DTSi

Platina 125 DTSi

Platina 100 CC

XCD 135 DTS Si

Cristal DTSi

Kawashaki Ninja 250 R

• 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).

Segmentation

The three main product segments in the two-wheeler category are

 scooters,
 motorcycles and
 mopeds.
However, in response to evolving demographics and various other factors, other sub segments have
emerged which are
 scooterettes,
 gearless scooters, and
 4-stroke scooters.

Comparative Characteristics

 Characteristics Scooter Motorcycle Moped

Price > 22,000 > 40,000 > 12,000

Stroke 2-stroke, 4-stroke Mainly 4-stroke 2-stroke

Fuel Efficiency (kms per litre) 50-75 50-100 70-80

Load Carrying High Highest Low

The bike segment can be further classified into the following sub segments:
 1. Entry level – 100 cc bikes
2. Deluxe/Executive segment – 100-135 cc bikes
3. Premium/Performance segment – 135-250 cc bikes

Current market share

19%

44%

16% Hero Honda

Bajaj Auto
TVS
Others
22%

Growth trend of major Players

 Bajaj Auto was the undisputed market leader till the year 2000.
Bajaj Auto dominance arose from its complete hold over the scooter market.
 Hero Honda almost doubled its market share from 20% in FY2000 to 40% in 2005 to emerge as
the market leader.
This was because of the rising preference towards motorcycles and HH had concentrated on
motorcycles only.
 TVS, on the other hand, witnessed an overall decline in market share from 22% in FY2000 to
18% in 9MFY2005.

Growth Perspective

National Council of Applied Economic Research (NCAER) had forecast two-wheeler demand during the
period 2002¬-03 through 2011-12.

The forecasts had been made using econometric technique along with inputs obtained from a primary
survey conducted at 14 prime cities in the country.

The models considered a large number of macro-economic, demographic and socio-economic variables
to arrive at the best estimations for different two-wheeler segments.

2-Wheeler Segment Regions

South West North-Central East & North-East All India

 Motorcycle 2835 4327 2624 883 10669

Scooter 203 219 602 99 1124

 At the all India level, the demand for motorcycles will be almost 10 times of that of the scooters.
 The same in the western region will be almost 20 times.
 Motorcycle will find its major market in the western region of the country, which will account
for more than 40 per cent of its total demand.

Strengths

 Advancement in technology and new variants in the two wheeler industry.

 Introduction of new fuel efficient and high performance variants.

Weaknesses

Opportunities

 There is a large untapped market in semi-urban and rural areas of the country.
The two¬-wheeler industry needs to identify these markets with the help of available statistical
techniques. Potential markets can be identified using these techniques with the help of
secondary data on socio-economic parameters.
 Increasing urbanization, creating a need for personal transportation and changes in the
demographic profile
 Availability of easy credit for two-wheelers in rural and smaller urban areas.

Threats

 Introduction of secondhand car market by the reputed car manufacturers and easy loan
availability for new as well as used cars.
 Introduction of new small cars like Tata Nano.
Emerging trends in consumer preference

100%
10 7 6 6
90% 23 21 20 19 18
24 17 16
17
80% 22
70% 24
33
60% 41 39
46 44 Mopeds
50% Scooters
40% 79 Motorcycle
76 77
68
30% 58
48
20% 37 41
30 33
10%
0%
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

 Till the year 1999 the scooter segment had the highest share of 41% in the two wheeler market.
 The share of motorcycle segment almost doubled from 42% in 1999 to 79% in 2005.

Bajaj was market leader in the two wheeler industry till the year 2000.

It had market share of 32% in the entire two wheeler industry in 2000.

Bajaj Auto had stopped making Chetak which was once the world’s largest selling scooter in 2006.

Hero Honda almost doubled its market share from 20% in 2000 to 40% in 2005 to emerge as the market
leader.

Bajaj could hardly sell 1000 scooters per month in the year 2009.

It finally decided to exit the scooter segment in December 2000.

The shift in the consumers’ preference pattern has been mainly because of the following major factors:

 Change in the country's demographic profile and increasing urbanization.

 Technological advancements, availability of new high performance and fuel efficient bikes.
 Declining difference in prices of scooters and motorcycles.
 High re-sale value of motorcycles.
Marketing Strategies

 In 2006 Bajaj had been outperforming Hero Honda in growth figures with the success of its 125
cc segment.
 Bajaj Auto had clocked 37% growth in motorcycle sales compared to Hero Honda’s 7.5%
 While Hero Honda’s 100-125 cc segment declined by 3.5% that of Bajaj increased by 35%.
 Bajaj was close to snatch away the market leader position from Hero Honda.
Bajaj’s strategy was to move the entry level market to bigger 125 cc bikes like Discover and XCD
 Hero Honda then took a strategic decision to focus on top lines rather than bottom lines.
 Bajaj took a miscalculated strategy of quitting the 100 cc segment.
 Credit squeeze induced by the global economic crisis worked in favor of Hero Honda.
 Hero Honda increased its number of dealers from 2000 to almost 4000.

Diamond Strategy used by Hero Honda

Hero Honda introduced four new models in the premium segment namely,
 CBZ X-Treme
 Hunk
 Achiever
 Karizma
These models were introduced to counter the Bajaj Pulsar.
It has newly introduced Karizma ZMR F1 with a new fuel injection technology.
This model has helped Hero Honda in increase its market share in the premium segment from 14% in FY
2006 to 21% in FY 2009.

 Hero Honda has strategically introduced a number of new models in various segments.
 It has almost launched 8-9 variants in various segments in the last few years.
 It is now dominating the executive segment with a market share of around 70%.
 Brands like Super Splendor and Glamour have helped them increase their market share in the
domestic market.

Tapping the rural market

Hero Honda has always tried to tap the rural market.

It has got a large base in the rural markets.

In the midst of the credit crisis players like Bajaj and TVS have badly suffered but Hero Honda continued
to be the market leader.

Hero Honda has dominated the rural market with its special programs like ‘Har Gaon Har Angan’.

It has made tie-ups with rural banks to provide finance for purchase of motorcycles in rural India.