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Two Wheeler Market in India

Uploaded by airdmj23 on Feb 2, 2007

Two Wheeler Market in India

INTRODUCTION:

The Indian two wheeler market has a size of over Rs 100,000 million.

The Indian two wheeler segment contributes the largest volumes amongst all the segments in automobile
industry. Though the segment can be broadly categorized into 3 sub-segments viz; scooters, motorcycles
and mopeds; some categories introduced in the market are a combination of two or more segments e.g.
scooterettes and step thru’s. The market primarily comprises five players in the two wheeler segment with
most of the companies having foreign collaborations with well-known Japanese firms earlier. But most of
the companies are now planning 100% subsidiaries in India.

In the last four to five years, the two-wheeler market has witnessed a marked shift towards motorcycles at
the expense of scooters. In the rural areas, consumers have come to prefer sturdier bikes to withstand
the bad road conditions. In the process the share of motorcycle segment has grown from 48% to 58%,
the share of scooters declined drastically from 33% to 25%, while that of mopeds declined by 2% from
19% to 17% during the year 2000-01. The Euro emission norms led the existing players in the two stroke
segment to install catalytic converters. All the new models are now being replaced by 4-stroke
motorcycles. Excise duty on motorcycles has been reduced resulting in price reduction, which has aided
in propelling the demand for motorcycles. Fierce competition has also forced players to cut prices in
certain models.

CURRENT SCENARIO:

Motorcycle sales grew by an annual average of 27% over f 1995-2002, and constituted nearly 66% of
total two wheeler sales in F2002, up from just 24% in F1995. Average monthly motorcycle sales have
increased five-fold since F1995 to almost 250,000 units in F2002. The current share of the leading three
companies is shown in the pie chart. And this clearly shows that hero Honda is the current market leader
with a 49% market share. Hero Honda has been an early entrant in the 4 stroke segment of the two
wheeler industry. With a right mix of product styling and pricing the company helped garner a larger
market chunk of the 4-stroke market as compared to Bajaj Auto. A shifting consumer preference towards
motorcycles also enabled the fast growth of the company in the last few years. Hero Honda motorcycle
sales jumped 40.6% in April at 135,961 units from 96,672 units it sold in the corresponding month last
year. The change in product mix in favor of higher value products has resulted in improved realization for
the company the growing popularity of the passion model appears to be the key factor behind
improvement in unit realization. Taking into account the recent trend in performance, the company
appears well positioned to retain its top position in the motorcycle market and also sustain the recent rate
of growth. Bajaj auto ltd is the second biggest manufacturer of motorcycles. The companies recent
indigenous launch in 4-stroke segment viz; the 150 / 180 cc pulsar which has practically snatched the
market share of the bikes like Hero Honda CBZ, Suzuki Fiero, Lml adreno etc, and it appears that pulsar
would rule this segment till the time there are some new launches in this segment by other
manufacturers, for bajaj pulsar has been the major contributor for the rise in its motorcycle sales along
with its other popular models such as boxer, caliber croma etc. well coming to the third largest share
holder in the motorcycle segment which is the tvs motors, which has emerged as a ‘victor’ after the
Suzuki break up, riding high on the success, of it’s motorbike by the same name. Tvs victor is the first
indigenously produced motorcycle from tvs motors. Infact with a six week waiting period, even six months
after its launch, tvs motors plans to double its production capacity.

The motorcycle market can be further segmented on the basis of the price tags which are the economy,
executive and the premium segments. Basically all the three leading companies have a presence in all of
these sectors. Clearly, the race to the number one spot in the motorcycle segment has been a one sided
one. But times are changing, Given the fact that bajaj is positioning itself at all feature and price points, it
does have every model to satisfy the needs of a prospective motorcycle buyer, and also has the privilege
of being the only one in the cruiser segment but except for the two bikes i.e boxer ct and pulsar no other
Bajaj models seem to be on the line of prosperity and the recently launched dawn by Hero Honda is a
direct threat to the market of boxer ct price competitively at rs 37,000/- which is just rs 2,000/- more than
the boxer ct but then again boxer ct already enjoys a vast market share and is very popular especially in
the rural areas it will be a tough job for dawn to displace this bike from its current position a lot remains to
be seen by the feedback that it receives from riders. The pulsar has taken the market by storm in the
premium segment it has clearly displaced the CBZ and the other models of this segment and looks like
the things will remain this way for some time but there are tough times ahead since Hero Honda plans to
launch a new bike in this segment by the end of this year which means that there is a lot to look ahead
from a consumers point of view.

CURRENT POSITIONING:

ECONOMY BOXER AT & CT AND CALIBER. DAWN, CD100, CD100SS, JOY. MAX 100, MAX 100 R

EXECUTIVE CALIBER CROMA, PULSAR 150. SPLENDOR, PASSION. SAMURAI, VICTOR

PREMIUM PULSAR 180.

CBZ. FIERO

BAJAJ HERO HONDA TVS

Let us first identify the current market leaders in each category. In the economy segment Bajaj is the
leader with 46% of the market share with boxer being the largest selling bike in this segment. In the
executive segment Hero Honda is the clear leader with 67% market share with splendor and passion
leading the market in this segment and will continue to do so in the near future well now we come to the
most controversial segment which is the premium segment since the current market leader according to
the sales of the past few months is CBZ but then pulsar has arrived and the consumer choice clearly
shows that this place will be reserved for pulsar for some time as a counter attack hero Honda too would
be launching a bike in this segment but it is too early to comment on that.

KEY FACTORS AFFECTING THE SALES OF MOTORCYCLES.

Government policy impact on petrol prices : petrol prices determine the running cost of two wheelers
expressed in rupees per kilometer. Petrol prices are the highest in India as GOI subsidizes kerosene and
diesel. But with the change in the GOI policy to reduce the subsidy, the prices of petrol will remain
constant at the current prices. Which will have a positive effect on two wheelers market. This trend would
actually affect positively the whole automotive industry.

Improvement in disposable income: With the increase in salary levels due to entry of multinationals
following liberalization process the disposable income has improved exponentially over the years. This
will have a multiplier effect on demand for consumer durables including two wheelers. This is already
witnessed in improved demand two wheelers.

Implementation of mass transport system: many states have planned to implement mass transport
systems in state capitals in the future. This will have a negative impact on demand for two wheelers in the
long run. But taking into account the delays involved in the implementation of such large infrastructure
projects, we expect the demand to be affected only five to seven years down the line.

Availability of credit for vehicle purchase: The availability and cost of finance affects the demand for two
wheelers as the trend for increased credit purchases for consumer durables have increased over the past
few years.

Well to sum it up on the whole there are great times ahead for the bike lovers in India. With the decision
of companies like Honda to set up base in India, the consumers will have a wide range of choice and also
the freedom to choose something more exciting than the usual.

Hero Honda reinforces technology leadership


with India’s first fuel injection motorcycle
technology
Hero Honda Glamour FI will feature Honda’s first
125 cc PGM-FI Engine (Programmed Fuel Injection)

• Programmed Electronic Fuel Injection


(PGM – FI) for the best drivability & lesser
gear changes in traffic
• Real time Mileage indicator (RTMI) for
achieving optimum mileage
• Bank Angle Sensor – Cuts off fuel supply
in case of a tip over - an industry first safety
feature
• Lowest Emissions – will meet even the
most stringent emission norms of the future
• No carburetor – less maintenance

• Starts easily in all weather conditions –


even in very low temperatures

26 Jun 2006 , New Delhi : Hero Honda Motors


Ltd., the ‘World No.1’ two-wheeler company,
today announced the launch of India’s first Fuel
Injection technology for two-wheelers, with the
125 cc Glamour FI. The new technology
eliminates the need for a carburetor, offers the
most comfortable drive and the lowest
emissions, in addition to a host of other features,
which will be available for the first time to
Indian two-wheeler riders. The Glamour FI will
be launched in 2 variants – Drum Kick at Rs.
49,990/- and the fully loaded Disc Self at Rs.
53,990, ex-showroom Delhi. and will be
available in 60 towns at over 180 Hero Honda
dealerships throughout the country. Hero Honda
plans on extending the Fuel Injection
technology to other models gradually.

Glamour FI, based on stylish 125cc motorcycle


Glamour, has better fuel efficiency and ease of
engine start, due to the effect of PGM-FI. Riders
can view the digital real-time fuel economy
indicator situated at meter face, to know the
bike’s fuel efficiency at any given point of time.
Its design is more refined, with its engine
integrated with black color and its unique FI
logo.

Speaking on this momentous occasion, Mr.


Brijmohan Lall, Chairman, Hero Honda Motors
said, “The Hero Honda family is elated to have
set yet another precedent in the Indian two-
wheeler industry. Fuel Injection Technology has
till now been used in cars and is being
introduced in two wheelers for the very first
time in India by Hero Honda, with the help of
Honda Motor Company. This is the technology
of the future for all two-wheelers and we feel
privileged to be the first company to offer this
technology in India, with the launch of the
Glamour FI.”

According to Mr. Pawan Munjal, Managing


Director, Hero Honda Motors, “Today’s launch
reiterates Hero Honda’s superior technological
edge and pedigree of bringing world class
technology to India. Through the years, we have
successfully endeavored to deliver the best
value proposition to our customers and we will
continue to provide them with products that
incorporate the most advanced technology,
design and fuel-efficiency”.

The Glamour FI has a distinctive PGM - FI


feature (Programmed Fuel Injection) , a first in
two-wheelers. This is an intelligent computer
controlled electronic fuel injection system
which scans critical engine operating conditions
through sensors and provides input to the
Electronic Control Unit (ECU) to inject the
accurate amount of fuel as per the requirement.
The sensors include - throttle position, engine
operating temperature, intake air temperature,
manifold absolute air pressure and crank angle.

• Offers improved fuel efficiency & better


emission performance
• Excellent drivability owing to quick throttle
response
• Excellent cold starting ability (no choke
operation)
• Consistent engine performance at varying
altitudes and ambience temperature
• Ability to run the bike at lower speeds on top
gear without engine knocking that translates into
less gear changes in congested traffic
conditions.
• No starting problems after long storage
periods.

The RTMI takes input on distance travelled and


fuel consumed from the speed sensor and ECU
and displays the average mileage for the
preceding 10 seconds.

• Enables the rider to know the "Real Time


Mileage"
• Provides an opportunity to adjust riding style
to get the optimum mileage

The Glamour FI has a Bank Angle Sensor, an


industry first feature, is an important safety
feature which cuts off the fuel supply & ignition
if the bike tips over (falls). Apart from these the
motorcycle has a FI Malfunction Indicator
Lamp which diagnoses any malfunction of
sensors and indicates the same to the rider and a
LCD Fuel Gauge displays fuel level in the fuel
tank which is easy to read and contemporary.
Apart from the new FI technology, Hero
Honda’s Glamour also showcases new body
coloured grab rail and rear view mirrors.

The overall two-wheeler market in India has


been growing rapidly, reaching approximately
7,300,000 units in 2005, a 15% increase from
2004. The market is expected to grow further in
2006, up to approximately 8,500,000 units, a
17% increase from 2005.

Hero Honda Motors was incorporated in 1984


as a joint venture between Honda Motor
Company and the Hero Group. Hero Honda
began production of motorcycle in 1985. Its
annual capacity of production at the moment is
3,450,000 units together with its first plant in
Dalhera and the second in Gurgaon. This
September, the annual capacity of production in
the first plant in Dalhera will be expanded to
1,950,000 units from 1,500,000 units by adding
a new line. Moreover, its annual capacity will
increase to 4,400,000 units in 2007 when the
third plant with 500,000 units of annual capacity
of production will be constructed.

Hero Honda's product range includes successful


motorcycles that have redefined the Indian
motorcycle market: Hero Honda Super
Splendor, Hero Honda Glamour; Hero Honda
Karizma; Hero Honda Passion Plus; Hero
Honda Splendor +, Hero Honda CD Deluxe,
Hero Honda CD Dawn and Hero Honda
Achiever. Hero Honda Splendor is the largest
selling motorcycle brand in the world. The
company recently ventured into the scooter
market with launch of Hero Honda Pleasure,
which has been very well received in the
market.

Indian Two-Wheeler Industry: A Perspective

Dripto Mukhopadhyay, Associate Fellow, NCAER1

Automobile is one of the largest industries in global market. Being the leader in product and process technologies
in the manufacturing sector, it has been recognised as one of the drivers of economic growth. During the last
decade, well¬-directed efforts have been made to provide a new look to the automobile policy for realising the
sector's full potential for the economy. Steps like abolition of licensing, removal of quantitative restrictions and
initiatives to bring the policy framework in consonance with WTO requirements have set the industry in a
progressive track. Removal of the restrictive environment has helped restructuring, and enabled industry to
absorb new technologies, aligning itself with the global development and also to realise its potential in the
country. The liberalisation policies have led to continuous increase in competition which has ultimately resulted in
modernisation in line with the global standards as well as in substantial cut in prices. Aggressive marketing by
the auto finance companies have also played a significant role in boosting automobile demand, especially from
the population in the middle income group.

Evolution of Two-wheeler Industry in India

Two-wheeler segment is one of the most important components of the automobile sector that has undergone
significant changes due to shift in policy environment. The two-wheeler industry has been in existence in the
country since 1955. It consists of three segments viz. scooters, motorcycles and mopeds. 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 during 2003-¬04. This high figure itself is suggestive of the importance of the sector. In the initial years,
entry of firms, capacity expansion, choice of products including capacity mix and technology, all critical areas of
functioning of an industry, were effectively controlled by the State machinery. The lapses in the system had
invited fresh policy options that came into being in late sixties. Amongst these policies, Monopolies and
Restrictive Trade Practices (MRTP) and Foreign Exchange Regulation Act (FERA) were aimed at regulating
monopoly and foreign investment respectively. This controlling mechanism over the industry resulted in: (a)
several firms operating below minimum scale of efficiency; (b) under-utilisation of capacity; and (c) usage of
outdated technology. Recognition of the damaging effects of licensing and fettering policies led to initiation of
reforms, which ultimately took a more prominent shape with the introduction of the New Economic Policy (NEP)
in 1985.

However, the major set of reforms was launched in the year 1991 in response to the major macroeconomic crisis
faced by the economy. The industrial policies shifted from a regime of regulation and tight control to a more
liberalised and competitive era. Two major results of policy changes during these years in two-wheeler industry
were that the, weaker players died out giving way to the new entrants and superior products and a sizeable
increase in number of brands entered the market that compelled the firms to compete on the basis of product
attributes. Finally, the two-¬wheeler industry in the country has been able to witness a proliferation of brands
with introduction of new technology as well as increase in number of players. However, with various policy
measures undertaken in order to increase the competition, though the degree of concentration has been lessened
over time, deregulation of the industry has not really resulted in higher level of competition.

A Growth Perspective
The composition of the two-wheeler industry has witnessed sea changes in the post-reform period. In 1991, the
share of scooters was about 50 per cent of the total 2-wheeler demand in the Indian market. Motorcycle and
moped had been experiencing almost equal level of shares in the total number of two-wheelers. In 2003-04, the
share of motorcycles increased to 78 per cent of the total two-wheelers while the shares of scooters and mopeds
declined to the level of 16 and 6 per cent respectively. A clear picture of the motorcycle segment's gaining
importance during this period is exhibited by the Figures 1, 2 and 3 depicting total sales, share and annual
growth during the period 1993-94 through 2003-04.

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. Estimations were based on Panel
Regression, which takes into account both time series and cross section variation in data. A panel data of 16
major states over a period of 5 years ending 1999 was used for the estimation of parameters. 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. The projections have been made at all India and regional levels.
Different scenarios have been presented based on different assumptions regarding the demand drivers of the
two-wheeler industry. The most likely scenario assumed annual growth rate of Gross Domestic Product (GDP) to
be 5.5 per cent during 2002¬-03 and was anticipated to increase gradually to 6.5 per cent during 2011¬-12. The
all-India and region-wise projected growth trends for the motorcycles and scooters are presented in Table 1. The
demand for mopeds is not presented in this analysis due to its already shrinking status compared to' motorcycles
and scooters.

It is important to remember that the above-mentioned forecast presents a long-term growth for a period of 10
years. The high growth rate in motorcycle segment at present will stabilise after a certain point beyond which a
condition of equilibrium will set the growth path. Another important thing to keep in mind while interpreting these
growth rates is that the forecast could consider the trend till 1999 and the model could not capture the recent
developments that have taken place in last few years. However, this will not alter the regional distribution to a
significant extent.

Table 1 suggests two important dimensions for the two-¬wheeler industry. The region-wise numbers of
motorcycle and scooter suggest the future market for these segments. 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. It is also evident from the table that 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. The south and the north-central region
will follow this. The demand for scooters will be the maximum in the northern region, which will account for more
than 50 per cent of the demand for scooters in 2011-12.

Table 1: Demand Forecast for Motorcycles and Scooters for 2011-12

2-Wheeler Segment Regions

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

2835 4327 2624 883 10669


Motorcycle
(12.9) (16.8) (12.5) (11.1) (14.0)

203 219 602 99 1124


Scooter
(2.6) (3.5) (2.8) (2.0) (2.08)
Note: Compound Annual Rate of Growth during 2002-03 and 2011-12 is presented in parenthesis
Source: Indian Automobile Industry: Optimism in the Air, Industry Insight, NCAER

The present economic situation of the country makes the scenario brighter for short-term demand. Real GDP
growth was at a high level of 7.4 per cent during the first quarter of 2004. Both industry and the service sectors
have shown high growth during this period at the rates of 8.0 and 9.5 per cent respectively. However, poor
rainfall last year will pull down the GDP growth to some extent. Taking into account all these factors along with
other leading indicators including government spending, foreign investment, inflation and export growth, NCAER
has projected an average growth of GDP at 6.7 per cent during the tenth five-year plan. Its mid-term forecast
suggests an expected growth of 7.4 per cent in GDP during 2004-05 to 2008-09. Very recently, IMF has
portrayed a sustained global recovery in World Economic Outlook. A significant shift has also been observed in
Indian households from the lower income group to the middle income group in recent years. The finance
companies are also more aggressive in their marketing compared to previous years. Combining all these
factors, one may visualise a higher growth rate in two-wheeler demand than presented in Table 1,
particularly for the motorcycle segment.

There is a large untapped market in semi-urban and rural areas of the country. Any strategic planning for the
two¬-wheeler industry needs to identify these markets with the help of available statistical techniques. Potential
markets can be identified as well as prioritised using these techniques with the help of secondary data on socio-
economic parameters. For the two-wheeler industry, it is also important to identify the target groups for various
categories of motorcycles and scooters. With the formal introduction of secondhand car market by the reputed
car manufacturers and easy loan availability for new as well as used cars, the two-wheeler industry needs to
upgrade its market information system to capture the new market and to maintain its already existing markets.
Availability of easy credit for two-wheelers in rural and smaller urban areas also requires more focussed
attention. It is also imperative to initiate measures to make the presence of Indian two-wheeler industry felt in
the global market. Adequate incentives for promoting exports and setting up of institutional mechanism such as
Automobile Export Promotion Council would be of great help for further surge in demand for the Indian two-
wheeler industry.
TVS Tyres launch India's first concept tyre
for two wheelers
Vani Aseem Grover
Posted: Jan 19, 2008 at 0108 hrs IST
Updated: Jan 19, 2008 at 0123 hrs IST

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Honda’s new zero-emission, hydrogen fuel cell car ...

Country's leading two and three wheeler tyre manufacturer, TVS Tyres, launched
country's first concept tyres in Chandigarh here on Friday. The puncture-resistant
tubeless tyres have been specially manufactured for two wheelers. The company is
hoping to cater to the ever-burgeoning two wheeler market in the country which has
grown from 30 lakh in 1995-96 to over 95 lakh in the year 2006-07.

S Balasubramanian, EVP operations and marketing, TVS Tyres said, "The country's first
puncture-resistant tubeless tyres for two wheelers have been designed specially for Indian
roads where punctures are common. Also, the company has introduced two new
technology tyres— dual tread technology tyres and polyester technology tyres, again the
first of their kind in the Indian two wheeler industry."

Notably, TVS puncture-resistant tyres carry a self-sealing technology that allows no loss
of air pressure in the event of a puncture, withstanding air pressure even if the puncture
material is of 3 mm thickness. The technology involves the use of coating with
worldwide-patented, sealant gel on the inner surface of the tread of a regular tyre. A
unique spreading technique has been used to ensure a uniform and balanced coating on
the inner surface.

It makes sure that the tyre retains air and avoids failures arising due to less inflation/
deflation while running. Involving no maintenance, the tyres require only regular IP air
check throughout its life.
The company that manufactures a complete range tyres and tubes for two and three
wheeler in domestic as well as international market, has a capacity of producing 11
million tyres and tubes a year.

It exports 1.5 million off the road tyres per year. The company further had a sales
turnover of $ 11 million in 2007 and is hoping to do a business of approximately $ 15
million this fiscal.

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Revocation notice served on Bajaj: TVS

5 Sep, 2007, 0220 hrs IST, TNN

Print EMail Discuss Share Save Comment Text:

CHENNAI/PUNE: With the launch of Exceed—the new 125 cc offering from Bajaj
Auto—days away, the company on Tuesday sought to take time off from its v
erbal duel with rival company TVS Motors, even as the latter stepped on the gas and
sent a copy of its patent revocation petition to the former.

“We are now gearing up for our September 9 launch of the new bike,” said Bajaj Auto
two-wheelers division CEO S Sridhar. He added that the company had not received any
letter from TVS regarding the revocation of the patent.

“Two weeks ago, it (TVS) claimed to have sent a revocation letter to the patent office.
But we have not received any notification from the patent office,” he said. In Chennai,
TVS Motors international business and three-wheeler head H S Goindy told ET: “A
copy of our revocation petition was served to Bajaj Auto’s headquarters in Pune on
Tuesday.”

According to TVS, the company had filed the revocation petition in the week starting
August 20. This was made public after Bajaj raised the issue of alleged infringement.

TVS Motors has claimed in an earlier statement that the technology being used for its
new offering Flame is a combination of its in-house R&D effort (VTi) and AVL’s
patented 3-valve engine technology and not the patented one that Bajaj is claiming.

However, based on legal advice, the company decided to move an application to revoke
the patent granted to Bajaj Auto. The technology in question is DTSi, which is the
platform for most of Bajaj Auto’s motorcycles, including Discover, Pulsar, and Avenger,
which have made the company the leader in the premium (125 cc – 250 cc) segment in
the domestic market and also the largest two wheeler exporter from India.

The 125 cc motorcycles are all set to become the largest segment in the 7.8-million units
strong two-wheeler market. Bajaj Auto plans to make the 125 cc segment as its entry
level, where the DTSi technology will play major role.