PEST & Porter’s five force analysis on two wheeler industry

Two Wheeler Industry(100cc - 150cc two wheelers)

Introduction

• India is the second largest producer of two wheelers in the world. The country stands next to China and Japan in terms of production and sales respectively.

• Majority of Indian especially youngsters prefer bike rather than car.

• Capturing a large segment in two wheeler industry bike and scooter cover a major segment.

• Indian two-wheeler industry had a small beginning in the early 50's.

Major PlayersCompanies Products

Hero Motocorp Glamour, Passion, Splendor Plus, Hunk

Honda Unicorn, Shine, Twister, Activa, Dio, Aviator

Bajaj Auto Ltd. Discover, Pulsar, Platina, Avenger

TVS Motors Ltd. Victor, Flame, Jive, Star city, Spot, Wego, Scooty pep, Scooty streak

Yamaha Motor India (P) Ltd.

Crux, YBR 110, SS 125, Majesty, Vino, Zuma

Company wise 2-wheeler Market Share

Others

Yamaha

TVS

Bajaj

Honda

Hero

2%

4%

12%

14%

24%

44%

Others : Suzuki, Mahindra, Piaggio

Data Source : SIAM (Society of Indian Automobile Manufacturers), CIRSIL, Other Industry sources

Annual 2 Wheeler Production in India

FY 09 FY 10 FY 11 FY 12 FY 13 FY 14

8.410.5

13.315.5 15.7 16.9

Data Source : SIAM (Society of Indian Automobile Manufacturers), CIRSIL, Other Industry sources

(figures in million units)

Annual 2 Wheeler Sales in India

14.8

13.7

13.4

2013 - 20142012 - 20132011 - 2012

(figures in million units)

Data Source : SIAM (Society of Indian Automobile Manufacturers), CIRSIL, Other Industry sources

PEST Analysis

Political

• Indian government auto policy aimed at promoting an integrated, phase and conductive growth of the Indian Automobile industry.

• Allow automatic approval for foreign investment, with no minimum investment criteria.

• Assist development of vehicles propelled by alternate energy sources.

Economic

• Low cost labour coupled with local availability of raw material like steel, aluminium and natural rubber has placed India amongst the low cost producing centers of two wheelers.

• Many auto finance company laid easy installment rules with less interest rate it makes more segment people to go for it.

Social

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

• Two wheelers gives a great advantage to the specified designation where other cannot enter.

• Indian customers are highly discerning, educated and well informed. They are price sensitive and put a lot of emphasis on value for money.

Technological

• Two wheeler construction is the engineering, manufacturing, and assembly of components and systems for two wheelers which result in performance, cost and aesthetics desired by the designers.

• Best fuel economy of transport.• New innovations.

Porter’s 5 Force Analysis

THREAT OF NEW ENTRANTS• Entry barriers are high.• Huge investment• Capital investment is very huge in two wheeler industry.• The biggest challenge is setting up sales & service center,

which is very hard for a new entrant.• Well established players are already existing.• Industry is consolidated.

Threat of new entrance is Very low.

THREAT OF SUBSTITUTE

• Faces direct competition from the automobile sector. • Substitute products for two wheeler industries are:

– Bus, Auto, Cars and other public transports.

• Reasons for choosing substitutes may:– Relative quality of substitutes is higher.– Switching costs is lower.

Threat of substitute is High.

RIVALRY AMONG COMPETITORS

• Price, Quality of the products plays an important role for rivalry among competitors.

• Methods adopted to attract customers - Discounts, availability of loans, low rate of interest and long-term warranties to attract customers.

• Each company in industry change the model on going basis to show differentiation in their competitors.

Rivalry among sellers are High.

BARGAINING POWER OF SUPPLIERS

• Since they change their model on going basis they create good relationship between their suppliers.

• Some of the components in two wheeler industry sellers have bargaining power:

• Steel• Batteries• Tyres & Tube etc.

• The automobile supply business is quite fragmented.

Bargaining power of suppliers are Low.

BARGAINING POWER OF BUYERS

• There are 5 to 6 big popular brands of two- wheelers are

available.

• Nowadays people go to unique brands because of good

service they provide after purchase.

Bargaining power of buyers are High.

Thank You