Indian Two Wheeler Industry_Group 7 Repaired)

INDIAN AUTOMOBILE INDUSTRY

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 recognized as one of the drivers of economic

growth. During the last decades, well-directed efforts have been made to provide a new look to the

automobile policy for realizing 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 realize its potential in the country. The

liberalization policies in 1991 have led to continuous increase in competition which has ultimately

resulted in modernization 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.

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THE 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.

The characteristics of this market are:

Oligopolistic market structure

Product and brand differentiation

Spending on advertising and brand building activities

Supply and distribution networks

Capital intensive market

Short design-to-market cycles

Achieving economies of scale

Complex distribution channel

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.

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

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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-utilization 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 liberalized 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.

KEY PLAYERS IN TWO WHEELER INDUSTRY

Major players in the Two-wheeler industry are Hero Honda Motors Ltd (HHML), Bajaj Auto Ltd

(Bajaj Auto) , TVS Motor Company Ltd (TVS), Yamaha Motors India Ltd (Yamaha), Honda

Motorcycle & Scooter India (P) Ltd (HMSI) and Suzuki India.

PESTEL ANALYSIS OF INDIAN TWO WHEELER INDUSTRY3 | P a g e

Political Aspects

Tax policies, trade regulation, political influence some of the rules and regulation of

government policies which is considered in political analysis.

The corrections in Excise duty on electric vehicles will enable the manufacturers take

CENVAT credit and exemption from customs duty on Electric vehicle parts and also weighted

deduction for in-house R&D to 200% from 150% and outsourced R&D from 125% to 175%.

This would encourage industry because this price hike isn’t expected to impact sales in a

significant way as a majority of two-wheeler buyers were prepared and ready to shell out extra

money for their favourite set of wheels.

Economic Aspects

The level of inflation Employment level per capita is appropriate. The Indian economy has

grown at 8.5% per annum.

Economic factor are those which is influenced by economic growth, interest rate, exchange rate

and inflation rate.

Abundant and low cost labour coupled with local availability of raw material like

steel, aluminium and natural rubber has placed India amongst the low cost producing centres of

two-wheelers.

Consequently, Credit Analysis and Research Ltd. (CARE) anticipate buoyant growth in two-

wheelers exports as well.

Abundance of low labour and raw material gives India an upper hand in the export.

Since many auto finance company laid easy instalment rules with less interest rate it makes

more segment people to go for it.

Social Aspects

Social aspects of two-wheelers industry are Popularity, Subculture, Mobility and safety.

In numerous cultures, motorcycles are the primary means of motorized transport.

Socially many motorcycle organization raise money for charities through organized ride

and events.

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Many people ride motorcycle for various reasons, those reasons are increasingly practical, with

riders opting for a powered two-wheeler as a cost-efficient alternative to infrequent

and expensive public transport system, or as a means of avoiding or reducing the effect of

urban congestion.

Motor-cycle gives a great advantage to the specified designation where other buses cannot

enter.

Since there is a rule in some of the main states and cities in India to wear helmet while riding

two-wheelers to make them safe from accidents makes two-wheeler riders to have a safe

journey.

Technological Aspects

Technical Aspects in Two-wheeler industry includes construction, fuel

economy, electric motorcycles, dynamics and accessories.

Technological solutions helps in integrating the supply chain, hence reduce losses and increase

profitability. Internet makes it easy to collect and analyse customer feedback.

Two-wheeler construction is the engineering, manufacturing, and assembly of components

and systems for two-wheelers which results in performance, cost and aesthetics desired by the

designers.

Construction of two-wheeler includes steel, aluminium frame, telescopic forks and disc brakes.

Motorcycle is the best fuel economy mode of transport. Nowadays, two-wheelers are

designed to give more than 80 km mileage per litter with low maintenance cost.

Invention of Electric motorcycle gives an added advantage since the two-wheeler users

can avoid using petrol.

Different types of two-wheelers have different dynamics and these plays a vital role in their

performance.

Since sufficient bike accessories are available in many place two-wheeler riders have a

privilege to change the broken parts very easily.

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Environmental Aspects

Physical conditions like environmental situation affect the use of two-wheelers. If the

environment is pleasant then it will lead to more use.

With the entry of global companies, advanced technologies; both in product and production

process have developed which cause less harm to the environment.

Provides for a healthy environment for R&D in India.

Legal Aspects

Legal provision relating to environmental pollution by two-wheelers and safety measures.

Confirms the government’s intention on harmonizing the regulatory standards with the rest of

the world

Indian government auto policy aimed at promoting an integrated, phased and conductive

growth of the Indian two-wheeler industry.

Ensure a balanced transition to open trade at minimal risk to the Indian economy and local

industry.

PORTER’S FIVE FORCES ANALYSIS OF TWO – WHEELER INDUSTRY

Industry Rivalry

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The industry rivalry is extremely high with any product being matched in a few months by

competitor.

This instinct of the industry is primarily driven by the technical capabilities acquired over years

of gestation under the technical collaboration with international players.

Entry Barriers

Entry barriers are high.

The market runs on high economies of scale and on high economies of scope.

The need for technical expertise is high.

Owning a strong distribution network is important and is very costly.

All these make the barrier high enough to be a deterrent for new entrants.

Supplier Bargaining Power

Suppliers of auto components are fragmented and are extremely critical for this industry since

most of the component work is outsourced.

Proper supply chain management is a costly yet critical need.

Buyer's Bargaining Power

Buyers in automobile market have more choice to choose from and the increasing competition

is driving the bargaining power of customers uphill.

With more models to choose from in almost all categories, the market forces have empowered

the buyers to a large extent.

Substitutes

There is no perfect substitute to this industry.

Cars, which again are a mode of transport, do never directly compete or come in consideration

while selecting a two-wheeler, but now new products like Tata Nano are targeting the

existing/potential 2-wheeler drivers.

Cycles do never even compete with the low entry level moped for even this choice comes at a

comparatively higher economic potential.

Summarizing the industry analysis, it can be said that the two-wheeler market is attractive as it scores

well on three out of five categories.

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KEY DEMAND DRIVERS

The key factors which strongly affecting the two-wheeler industry are:

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 recent change in GOI policy to reduce the subsidy, the

prices of petrol will remain constant at the current prices. This will have a positive effect on

purchases of two-wheelers.

Improvement in disposable income: With the increase in salary levels, due to entry of

multinationals following liberalization process and fifth pay commission, the disposable income

has improved exponentially over the years. This will have multiplier effect on demand for

consumer durables including two-wheelers.

Increasing urbanization: With the increase in need for personal transportation and changes in the

demographic profile, there is an increase in demand for two-wheelers.

Changes in prices of second-hand cars: The second hand car prices of small cars have come

down sharply in the recent past. This will shift the demand from higher-end two-wheelers to cars

and affect the demand for two-wheelers negatively. A further drop in second-hand car prices will

lead to pressure on the two-wheeler majors who plan to release higher-end scooters and

motorcycles.

Implementation of mass transport system: Many states have planned to implement mass

transport systems in state capitals in the future. This will have negative impact on demand for two-

wheelers in the long run. But taking into account the delays involved in implementation of such

large infrastructure projects 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- and three-wheelers as the trend for increased credit purchases for consumer

durables have increased over the years. Therefore, any change with respect to any of these two

parameters as a result of change in RBI policy has to be closely watched to assess the demand for

two- and three-wheelers.

Availability of fuel-efficient and low-maintenance models and increasing number of models

with different features to satisfy diverse consumer needs.

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EVOLUTION OF TWO-WHEELER INDUSTRY IN INDIA

The Two-Wheeler Industry in India has shown a tremendous evolution over the past two decades with

the total sales of two-wheelers doubling from 1999-00 to 2009-10.

Sales and Growth of Two-Wheelers in India during 1999-00 to 2009-10

http://www.icra.in/files/PDF/SpecialComments/2010-February-Two-Wheeler.pdf

15.86%

4.32%

3.58%

76.23%

Domestic Sales (India) in 2009-10

Passenger VehiclesCommercial VehiclesThree-WheelersTwo-Wheelers

http://www.siamindia.com/scripts/market-share.aspx

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http://www.siamindia.com/scripts/market-share.aspx


24.72%2.49%

9.60%

63.18%

Domestic Exports (India) in 2009-10

Passenger Vehicles

Commercial Vehicles

Three-Wheelers

Two-Wheelers

http://www.siamindia.com/scripts/export-trend.aspx

The factors for the growth of Two-Wheelers in India:

The Gross Domestic Product has grown to 7.2% and is expected to grow at 8.5% during fiscal

2010-11

Steady revival in economic activity

The average family income has increased with higher disposable incomes

The finance have become easier to access

The reduction in taxes and excise duties

Introduction of international standards in India

The economic and fuel-efficient engines

The teenager and the youth using more and more motorcycles

Shift in centers of growth with manufacturers repositioning products and

Manufacturers realigning their portfolios creating products to serve new market segments

Manufacturers placing greater emphasis on the rural and semi-urban markets to achieve

growth.

The factors for complementary supply push are:

Increase in the competitive intensity with launch of new products/ variants by manufacturers,

Targeted marketing spends

Expansion of customer touch points (not withstanding sharp decline in organized financing)

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http://www.siamindia.com/scripts/export-trend.aspx

Shift from Scooter and Moped to Motorcycle

The composition of the two-wheeler industry has witnessed sea changes in the post-reform period. Post

liberalization era saw a major shift from scooter and mopeds to motorcycles in two-wheeler segment

with consumer preferences changing and high demand more for motorcycles.

Advanced technology, larger wheelbase, higher ground clearance and the ability to ride on bad roads

with less effort and less danger of skidding and decreased maintenance cost were the other factors that

encouraged customers to choose motorbikes over scooters and mopeds.

In 1991, the share of scooters was about 50% 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.

http://www.coolavenues.com/mba-journal/strategy/company-analysis-bajaj-auto-ltd?page=0,1

From 1993 to 2000, shares of scooter and moped of the total automobile demand in India reduced from

47% to 24% and 2% to 1% respectively which is approximately half the share scooter and moped had

in 1993 whereas that of motorcycle increased from 25% to 58% which is more than double of the share

of motorcycle in 1993.

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1993-94

1994-95

1995-96

1996-97

1997-98

1998-99

1999-00

2000-01

2001-02

2002-03

2003-04

0

5000001000000150000020000002500000

30000003500000400000045000005000000

Demand

MotorcyclesScootersMopeds

Year

Units sold

http://www.fadaweb.com/itw_industry.htm

In 2003-04, the share of motorcycles increased to 78% of the total two-wheelers while the shares of

scooters and mopeds declined to the level of 16% and 6% respectively showing the change of the

status of Two-wheeler industry from more Scooter and Moped oriented to Motorcycle oriented.

1993-94

1994-95

1995-96

1996-97

1997-98

1998-99

1999-00

2000-01

2001-02

2002-03

2003-04

0

10

20

30

40

50

60

70

80

90Change in status within Two-Wheeler industry


Year

Share (

%)


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Firstly, one of the reasons for the tremendous change in the 90s was the motorcycle market which was

filled with options. Secondly, bikes having four-stroke engines are thought to be more fuel efficient

motorbikes. They are the main reason for the growth of motorbikes in India as a segment over scooters

and mopeds.

1993-94

1994-95

1995-96

1996-97

1997-98

1998-99

1999-00

2000-01

2001-02

2002-03

2003-04

-50

-40

-30

-20

-10

0

10

20

30

40

50Annual Growth in demand


Year

Growth

%


In 2003-04, Motorcycle segment showed approximately 15% growth whereas Scooter had 10% growth

followed by negative growth for last five years and Moped segment showed negative growth 0f 10%

which again shows the shifting of consumer preferences to Motorcycle segment.

MOTORCYCLE INDUSTRY IN INDIA

It has been more than 50 years now that bikes have been ruling the Indian automobile sector. In 1955,

the Indian government needed sturdy and reliable motorcycles for its Army and police to patrol the

western part of the country with rugged border highways and craggy terrains. The 350 cc 'Bullet'

manufactured by the Royal Enfield Company of United Kingdom was the first batch of motorcycles in

India. These motorcycles were put together in Chennai. This was the beginning for the Indian two-

wheelers industry. Since then, bikes in India have been flourishing as a two wheelers segment, and

Indian bikes gaining on popularity all across the world. The motorcycles in India cater to a variety of

needs of the consumers. The motorcycle has become one most popular modes of transportation, and is

preferred by the daily commuters. Exports are made mainly to South East Asian and SAARC nations.

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http://auto.indiamart.com/two-wheelers/


India is the manufacturer of some of the best bikes in the world. Hero Honda , Bajaj and TVS Motor

are some of iconic bike manufacturers in India. There are cheap motorcycles in the commuter bikes

segment, as well luxury bikes like sports bike in India for the new age bikers.

Due to economic downturn in 2008 leading to decreased spending by consumers, motorcycle industry

faced high negative growth of 13% with a large decrease in demand. The major reason for the small

growth of 1% in 2009 was the high inflation rate of 8.03-11.89% during 2009. But 2010 showed the

high growth of 26% in motorcycle segment showing the revival of the economy and increased

consumer spending predicting bright future for this segment.

Indian Motorcycle Industry (Domestic + Exports)

Source: http://www.bajajauto.com/images/investor/Analyst%20Presentation%20-%20BAL%20for

%2013th%20May%2010.pdf

Domestic Motorcycle Industry

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http://www.bajajauto.com/images/investor/Analyst%20Presentation%20-%20BAL%20for%2013th%20May%2010.pdf


http://auto.indiamart.com/motorcycles/

http://auto.indiamart.com/motorcycles/


%2013th%20May%2010.pdf

Market share of different Two-wheelers during 1999-00 to 2009-10

Source: http://www.icra.in/files/PDF/SpecialComments/2010-February-Two-Wheeler.pdf

Motorcycles have always been the major contributor to the two wheeler industry in India. From a share

of about 48% in 1999-00, it has steadily grown to about 80% in 2009-10. The share of scooters has

gone down from 33% in 1999-00 to 13% in 2009-10.

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Motorcycle models with a sticker price of up to Rs. 40,000 comprise the “Commuter

Standard (STD)”, comprising of Bajaj Auto’s Platina; Hero Honda’s CD series; and TVS’

Star.”. The entry segment has suffered volume declines during the last two to three years, being

hit the worst by the tightening of credit; being a relatively small ticket item, its customers

usually belong to the most vulnerable section economically within the universe of motorcycle

buyers. The segment’s profitability has also declined over this period, with volumes falling and

price competition getting more intense. Sales in this category have declined from 44% in 2005-

06 to 16% in 2010-11 whereas volumes have declined from 2.09 lakhs in 2005-06 to 1.08 lakhs

in 2010-11.

The Rs. 40-50,000 “Commuter Deluxe (DLX)” consisting of Bajaj Auto’s Discover; Hero

Honda’s Splendor, Passion and Glamour; Honda Motorcycle & Scooters India’s (HMSI’s)

Shine; and TVS’ Fiero and account for bulk of the volumes (~63%) in motorcycles. Sales in

this category have increased from 48% in 2005-06 to 65% in 2010-11 whereas volumes have

increased from 2.8 lakhs in 2005-06 to 4.4 lakhs in 2010-11.

The “Sports” which includes Bajaj Auto’s Pulsar; Hero Honda’s CBZ, Hunk and Karizma;

HMSI’s Unicorn and Stunner; TVS’s Apache; and Yamaha’sR15 and FZ16” and accounts for

Rs. 55,000 and above. Sales in this category have increased from 9% in 2005-06 to 19% in

2010-11 whereas volumes have increased from approx. 43,000 in 2005-06 to 1.28 lakhs in

2010-11.

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Category Share Projections


%2013th%20May%2010.pdf

Category Share Volumes


%2013th%20May%2010.pdf

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Motorcycle Market Information

The major players in Indian Motorcycle Industry are as follows:

BAJAJ AUTO

HERO HONDA

TVS MOTORS

HONDA MOTORCYCLES (HMSI)

It is evident from the table (below) that HERO HONDA is still the market leader in this segment with

market share of 47% but it is also observed that BAJAJ AUTO share has also increased from 25% to

34% which is due to its Discover model. Also, Bajaj Auto has taken away a nine per cent share in the

motorcycle market from leader Hero Honda during the quarter ended June.

While Bajaj's market share went up from 25% to 34% between April and June, Hero Honda's share fell

from 56% to 47% during this period. Other players like TVS Motors and Honda Motorcycle

& Scooters have retained their share.

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Hero Honda

Bajaj

TVS Motors

Honda Motorcycles

Others

5% 15% 25% 35% 45% 55%Hero Honda Bajaj TVS Motors Honda Motorcycles Others

Q4 (2009-10) 56% 25% 8% 5% 6%

Q1 (2010-11) 47% 34% 8% 5% 6%

56%

25%

8%

5%

6%

47%

34%

8%

5%

6%

Market Share of the major players in Motorcycle Industry for Q4( 2009-10) and Q1(2010-11)

Discover was a bike first launched in 2004 and extended to the 100cc segment last year. Bajaj claims

the Discover (with sales of 114,000 bikes in June) has emerged as the second-largest selling brand in

motorcycles, overtaking Hero Honda's Passion (106,000 units/month) but trailing its market leader,

Splendor (160,000/month).

If the Discover sustains its momentum, it could overtake Splendor in three to six months, said S

Sridhar, Bajaj Auto's CEO for two-wheelers. There's a good chance of it managing to do so, unless

Hero Honda spoils the party by dropping prices for Splendor or Passion.

Bajaj is expanding motorcycle capacity by 300,000 per annum and from July; it will be able to produce

170,000 a month of Discover bikes. Bajaj has also launched a 150cc variant of the bike and hopes to

sell 35,000 of these every month, once it's available across India. For several months, Bajaj has been

reporting 60-80 per cent jump in volumes. In the past five months, its domestic sales jumped 98 per

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cent, while the industry grew at 30 per cent and Hero Honda grew at 12.1 per cent, albeit on a much

higher base.

This is partly due to a low-base effect. Bajaj's domestic sales had slipped to 110,000 units a month last

year as consumer financing dried up during the downturn but rival Hero Honda continued to do well,

as consumers in rural areas bought in cash.

HERO HONDA

For the sixteenth consecutive month, India’s largest two wheeler manufacturer, Hero Honda has

registered sales of over 3 lakh units in April 2010 with a very marginal increase of 0.2 percent over

April 2009. Hero Honda achieved such a huge figure despite a severe shortage of batteries for over two

weeks due to an agitation at Exide’s Bawal facility. And for the same reason around 50,000 fully built

two wheelers were left stranded at company’s facilities devoid of batteries. Hero Honda recently

launched a souped up version of its premium seller Passion with digital console and refreshed graphics.

Hero Honda achieved highest ever monthly sales of 4,35,933 units in may 2010. These figures are

13.92% more than 3,82,678 units which Hero Honda managed to sell during May 2009. May’s figures

are 20,796 units greater than the previous best sales performance of 4,15,137 units set in August 2009.

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Hero Honda also revealed that May became the 17th consecutive month where the company has sold

more than 3 lakh units and the 4th month where company has recorded sales of 4 lakh and more units.

Company’s share in the 100cc market has reduced from 69% in August 2009 to 64% in May 2010

majorly gulped by Bajaj’s Discover 100 and HMSI’s Twister. This shift also brings a positive forward

that company’s other segments are also increasing dominance and the dependency on 100cc segment is

reducing in overall sales.

BAJAJ AUTO

India’s second largest two wheeler manufacturer registered their highest ever monthly sales figures in

April 2010 registering a growth of 84. Bajaj posted a huge growth of 63% in May 2010 from May

2009. The most important part is the fact that Bajaj’s concentration on more profit yielding Pulsar and

Discover brands is paying off big time. These two brands constituted 68% of total sales with Pulsar

brand chipping in with 75,974 units and Discover registering 1,07,076 units in the overall sales for the

company. Bajaj also registered growth of 64% in exports. Bajaj’s latest masterstroke Discover 150,

which is a 150cc motorcycle launched recently at a shattering price, registered 12,377 units during its

initial month of sale.

TVS MOTORS

TVS witnessed a growth of 28% in April 2010 over April 2009 whereas domestic sales increased by

22%.

Motorcycles also displayed a great show in April 2010 growing at 24% over April 2009. Innovative

110cc clutch-less Jive has also witnessed a very good response from the market helping the company

achieve such growth figures. TVS also managed growth of 90% in export in April 2010 from April

2009.

TVS registered an increase of 30% in overall two wheeler sales for the month of May 2010. Domestic

sales also saw an upsurge of 27% gaining from May 2009 to May 2010. Independently, motorcycle

sales grew by 27% in May 2009. Exports have started generating consistent growth for the company as

they managed to carve out 62% increase in May 2010 from May 2009. These figures reflect the

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positive outlook of the company and the launch of Jive has definitely helped the company bringing in

more volumes.

HONDA MOTORCYCLE AND SCOOTER INDIA (HMSI)

Japanese auto maker Honda’s Indian subsidiary Honda Motorcycle & Scooter India also continued

their good run at the figures tally registering an overall growth of 41% in April 2010 against April

2009. Motorcycle sales jumped 51.02% in April 2010 from last April. Clearly, company’s latest

upgrades were received well by the customers with the 110cc Twister adding a bit of ‘twist’ to the

overall tally. Launch of 100cc twister in the volume segment is expected to further propel the growth

for the company.

HMSI motorcycle sales jumped 52% from May 2009 to May 2010. The impact of Twister and Dazzler

is clearly reflecting in the growth pattern for the company.

SEGMENTS IN MOTORCYCLE INDUSTRY

Indian Motorcycle industry in divided into segments based on their “cc” as it is a widely accepted

classification. cc or cubic centimeters refers to engine capacity. Specifically it refers to the amount of

air/fuel mixture able to fit into the cylinders (where combustion occurs) at full expansion. The market

can be also divided into segments based on their prices. The 3 segments are Entry level, Middle level

and Premium level. For our study we have considered the classification based on “cc” or cubic

centimeters, as price levels are observed to be changing continuously because of stiff competition in

the industry.

90-120 cc

121-140 cc

141-179 cc

180< cc

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Different product of different companies based on market segments

90-120 cc

BAJAJ HERO HONDA TVS HMSI

PLATINA CD- DAWN STAR CITY TWISTER

DISCOVER-DTS-Si CD- DELUXE STAR SPORT

SPLENDOR JIVE

PASSION PLUS

PASSION PRO

121-149 cc


PLATINA 125 GLAMOUR FLAME DS STUNNER-CBF

PULSAR 135 LS SPLENDOR-NXG FLAME SR SHINE

XCD- DTS-Si-135

150-179 cc


PULSAR DTSI-150 ACHIEVER APACHE-RTR-150 UNICORN

DISCOVER-150 CBZ-XTREME

HUNK

180< cc

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PULSAR DTSI-180 KARIZMA APACHE-RTR-180 NONE

PULSAR DTSI-220 KARIZMA-ZMR

AVENGER-200 HUNK

AVENGER-220

NINJA 250R

BAJAJ AUTO

SWOT Analysis

Strengths

Highly experienced management.

Product design and development capabilities.

Extensive R & D focus.

Widespread distribution network.

High performance products across all categories.

High export to domestic sales ratio.

Great financial support network (For financing the automobile)

High economies of scale.

High economies of scope.

Weaknesses

Hasn't employed the excess cash for long.

Still has no established brand to match Hero Honda's Splendor in commuter segment, still a

long way for Discover-Dts-Si.

Not a global player in spite of huge volumes.

Not a globally recognizable brand (unlike the JV partner Kawasaki)

Threats

The competition catches-up any new innovation in no time.

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Threat of cheap imported motorcycles from China.

Margins getting squeezed from both the directions (Price as well as Cost)

Entry of Electric/Eco-Bikes being attractive to the mileage concerned target group.

Opportunities

Double-digit growth in two-wheeler market.

Untapped market above 180 cc in motorcycles.

More maturity and movement towards higher-end motorcycles.

The growing gearless trendy scooters and scooterette market.

Growing world demand for entry-level motorcycles especially in emerging markets.

The Inevitable Change

Bajaj on internal analysis found that it lacked -

1.The technical expertise to deliver competitive goods

2.The design know-how.

3. And the immediate inability to support the onslaught of competitors.

All these forced Bajaj to look for an international partner who could bring in technology and also offer

some basic platforms to be manufactured and marketed in India. Kawasaki of Japan is a world-

renowned manufacturer of high performance bikes. Bajaj entered into a strategic tie-up with Kawasaki

in late 1990s to enhance its product line and knowledge up-gradation to support long-term strategies.

This served the purpose of sustaining the market competition for a while. From 1996 to 2000, Bajaj

invested hugely in infrastructure while simultaneously developing product design and innovation

capabilities, which is the prime reason behind the energetic Bajaj of 21st century. Bajaj introduced a

slew of products right from entry-level motorcycle to the high premium segment right from 2001

onwards, and since then its raining success all the way for Bajaj. BAL has been the pioneer in

stretching competition into providing latest features in the price segment by updating the low price

bikes with the latest features like disk-brakes, anti-skid technology and dual suspension, etc.

25 | P a g e

2005-06 06-07 07-08 08-09 09-10 Q1 10-110%

10%

20%

30%

40%

50%

60%

70%

Market Share Over The Period

Hero HondaBajaj AutoTVS MotorsHonda Motors

Bajaj’s overall volumes and growth


%2013th%20May%2010.pdf

Bajaj’s volumes and growth in Commuter Standard segment

26 | P a g e


%2013th%20May%2010.pdf

Bajaj’s Commuter Standard segment consists mainly of Platina which shows a decline from 36% in

2005-06 to 30% in 2009-10.

Bajaj’s volumes and growth in Commuter Deluxe segment


%2013th%20May%2010.pdf

27 | P a g e

Bajaj’s Commuter Deluxe segment consists mainly of Discover which shows a growth from 15% in

2005-06 to 17% in 2009-10.

Bajaj’s volumes and growth in Sports segment

http://www.bajajauto.com/images/investor/Analyst%20Presentation%20-%20BAL%20for%2013th

%20May%2010.pdf

Bajaj’s Sports segment consists mainly of Pulsar which shows a decline from 72% in 2005-06 to 46%

in 2009-10.

Market share of Bajaj in 100 CC segment

April '09

June '09

Aug '09

Oct '09

Dec '09

Feb '10

Mar '10

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

Market Share in 100 cc segment

Hero HondaBajaj AutoTVS Motors

28 | P a g e

There is a top gear race in the two wheeler market between Hero Honda and Bajaj. The track is 100 cc

segments wherein Hero Honda has been the stalwart for years. While Bajaj's market share went up

from 25% to 34% between April and June, Hero Honda's share fell from 56 per cent to 47 per cent

during this period. But the track is assisting well for Bajaj now that whatever share that

Hero Honda slipped down (around 6%) has been wrapped by Bajaj in this financial quarter ended June

2010. Hero Honda rules the rooster with its premium brands in 100 cc, Splendor and Passion but Bajaj

had the gunshot in the form of its Discover 100 cc. The sale volume for the 100 cc bikes during the

second half of the 2009-10 was an addition of 33264 units a month, than those of the first half. In the

period when Hero Honda faced a fall, Bajaj’s sale grew with a volume of 34867 monthly units, much

prior to the launch of its Discover.

Bajaj has witnessed a growth of 6% in 100 cc segment making the point to 23% in the phase of

October 2009 to May 2010; whereas Hero Honda’s sale tune was down from 69% to 64% during the

mentioned period. Bajaj admits that it has tasted the difference in the matter of profit too. The

company plans to reduce the entry level share from the 42% found in 2009-09 to 16% currently for

more profitability. Hero Honda’s shake is not only to the aggressive drive of Discover, but also due to

the strengthening strategy of its sibling Honda Motorcycles and Scooters India. The industry experts

anticipate a growth of 13% in the industry of which Hero Honda is expected to snatch 10% CAGR for

the ensuing three financial years from 2010.

Bajaj claims the Discover (with sales of 114,000 bikes in June) has emerged as the second-largest

selling brand in motorcycles, overtaking Hero Honda's Passion (106,000 units/month) but trailing its

market leader, Splendor (160,000 a month).

It is predicted by the industry expert that if the Discover sustains its momentum, it could overtake

Splendor in three to six months. There's a good chance of it managing to do so, unless Hero Honda

spoils the party by dropping prices for Splendor or Passion.

The notion prevailing in the market, Hero Honda dominates in the rural sector, too would be broken

since there is a smiling over Discover, for a change of fashion and style from this segment. The irony

is Discover costs Rs 4000 more than Hero Honda Splendor. But money does not matter for the playful

customers.

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MARKET SHARE OF BAJAJ IN 125CC SEGMENT

Hero Honda shares a majority in 125cc segment while Bajaj regains its lost momentum in 100cc with

the launch of Discover. Hero Honda lost 6% from its 80% share accrued in the fiscal of 2008-09 while

Bajaj increased almost similar volume – to 17% from 10.5% in the 125cc segment. Hero Honda

secured an increased sale volume of 40.55lakh while Bajaj could muster a whooping 9.28 lakh units.

2005-06 2006-07 2007-08 2008-09 2009-100%

10%

20%

30%

40%

50%

60%

70%

80%

Market Share in 125 cc segment

Hero HondaBajaj AutoTVS MotorsHonda Motors

Brand and Category

Portfolio Composition

30 | P a g e


%2013th%20May%2010.pdf

Discover and Pulsar shows a growth of 76% in 2009-10 from 58 % in 2008-09 whereas Platina and CT

100 shows a decline from 42% in 2008-09 to 24% in 2009-10.

The resurgence in Bajaj's sales is driven by the Discover and the company's renewed focus on the 100

cc commuter segment. Bajaj made the mistake of trying to move away from 100 cc bikes, hoping

commuters would upgrade to more powerful and higher-displacement bikes, which are its strength.

That's when Bajaj adopted a flanking strategy to counter Hero Honda, trying to attack it from the top as

well from the bottom. The bigger and sportier Pulsar created a niche at the top, now leading the

segment, while it’s price-driven, entry-level strategy worked till rival Honda dropped prices and Bajaj

saw it as a zero-sum game.

In 2007, Bajaj had launched XCD, a sleek bike in 125cc, which sold 20,000 a month but wasn't good

enough. Bajaj then developed a 100cc bike on the XCD platform (using its chassis, engine and

gearbox), allowing it to price attractively.

Source: http://autos.in.msn.com/autonews/article.aspx?cp-documentid=4119724&page=3

LEARNING CURVE

But Bajaj had learnt a few lessons from its past failures and tried to incorporate them in the new bike

package. For instance, it had understood that it was not enough to harp on features; the starting point

for a customer was the brand, which reassures him.

Bajaj had a good brand in Discover (until then available in 125cc and 135cc), which enjoyed the image

of a bigger and sportier bike and priced at Rs 50,000. Bajaj felt a customer's familiarity with a brand

was important, and hence settled for this one for its new 100cc bike that delivered an on-road mileage

of 80 km to a liter.

These include a longer wheel base, a five-speed gear box, auto choke and gas-filled shock absorbers,

which are found in performance bikes but come in more than handy in negotiating bumpy rural roads.

31 | P a g e

http://autos.in.msn.com/autonews/article.aspx?cp-documentid=4119724&page=3

To complete its 4-F strategy for Discover (familiarity, frugal, features, and fun), it introduced it in a

peppier, 150cc variant.

This product was complemented well with a Discover India campaign, where the key message was that

there are many India's within one India -- a village of Afghans called Jambur near Jamnagar, a village

in Karnataka where people speak only in Sanskrit, or a village in Maharashtra where houses have no

doors. More important, the ads tried to communicate that many of these villages are located less than

100 km from different cities, and you can reach these in a Discover with one liter of petrol.

Hero Honda's Splendor had a great run. For 15 years, it had built a strong pedigree, with 11.5 million

sold. But in less than a year of launch, Discover is the second-largest selling bike after Splendor and

has a good chance of over-taking the latter.

A GROWTH PERSPECTIVE

India is emerging as one of the world’s fastest growing and second largest two wheeler

manufacturer.

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.

Indian two-wheeler industry has got spectacular growth in the last few years.

According to the International Yearbook of Industrial Statistics 2008 released by United

Nations Industrial Development Organization (UNIDO), India ranks 12th in the list of the

world’s top 15 automakers.

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In order to make India a power to reckon with in the automotive sector the government launched the

Automotive Mission Plan (AMP) 2006-2016. As per the AMP, it is estimated that the total turnover of

the automotive industry in India would be in the order of USD 122 billion - USD 159 billion in 2016.

It is expected that in real terms, India would continue to enjoy its eminent position of being the world's

second largest two-wheeler manufacturer. Further, by 2016, the automotive sector would double its

contribution to the country's GDP from current levels of five per cent to 10 per cent.

Demand Forecast for Motorcycles and Scooters for 2011-12

Two-Wheeler

Segment

Regions

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

Motorcycle 2835

(12.9)

4327

(16.8)

2624

(12.5)

883

(11.1)

10669

(14.0)

Scooter 203

(2.6)

219

(3.5)

602

(2.8)

99

(2.0)

1124

(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 Growth of Two-wheeler segment 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.

Demand Forecast for Motorcycles

33 | P a g e



%2013th%20May%2010.pdf

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 prioritized 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 focused 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.

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OUTLOOK FOR THE ENTRY SEGMENT

Competitive intensity in this segment is likely to increase.

The launch of new products in the entry segment augurs well for the enrichment and expansion

of the segment. However, the already high rate of penetration in the urban markets is likely to

remain a moderating factor.

Increased competition in this segment is expected to lead to an increase in below-the-line

promotions, thereby squeezing profit margins; this may get accentuated further by a likely

increase in raw material costs in the near term.

OUTLOOK FOR THE EXECUTIVE SEGMENT

Investment in brand-building assumes far greater significance now than earlier with Indian

customers turning more demanding and competition also intensifying.

Since bikes in the upper end of the executive segment also have an aspirational value attached,

the ability of OEMs to build strong brands in this space could have a positive rub-off on their

entry-segment offerings as well. Thus, going forward, the executive segment is expected to

claim a greater share of marketing spends.

Increased activity is expected at the higher end of the executive segment, in which global

majors are likely to leverage their global portfolios to launch models in India. The executive

segment is expected to be able to maintain its volume growth over the the medium term, which

should translate into superior profit margins for players that are stronger in this segment.

OUTLOOK FOR THE PREMIUM SEGMENT

This market offers large scope for segmentation in terms of price points and performance

characteristics.

Also, the premium segment is expected to get crowded as new players like Harley Davidson

and Ducati gear up to expand their presence in it.

35 | P a g e

Given the premium and niche character of these bikes, the volume base is likely to remain

small over the medium term.

The low volumes of products in this segment do not justify investments in localization of parts.

Hence, most of the new products planned to be launched are either likely to be imported as

completely built units (CBUs) or they would have a high import content.

Thus, product prices are likely to remain high over the medium term, which in turn could

curtail growth prospects.

While it is true that these products are not meant for the mass market, considering the increase

in customer awareness levels, OEMs cannot afford to ignore the price-value equation

altogether.

FUTURE PROSPECT OF THE BAJAJ AUTO IN PRODUCTION

Bajaj is expanding motorcycle capacity by 300,000 per annum and from July; it will be able to produce

170,000 a month of Discover bikes. Bajaj has also launched a 150 cc variant of the bike and hopes to

sell 35,000 of these every month, once it's available across India.

For several months, Bajaj has been reporting 60-80% jump in volumes. In the past five months, its

domestic sales jumped 98%, while the industry grew at 30% and Hero Honda grew at 12.1%, albeit on

a much higher base.

FUTURE PLAN OF ACTION

Identification of most important attributes of motorcycles in the Indian market context. Use of quantitative tools such as MDS and Conjoint Analysis for BAJAJ Auto Recommendations for the market challenger (BAJAJ Auto) to take on the Market Leader Hero

Honda. Data collected will be organized in tabular and graphical form for quick reference

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Indian Two Wheeler Industry_Group 7 Repaired)

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