Indian Two Wheeler Industry: a Report Essay Sample
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Indian Two Wheeler Industry: a Report Essay Sample
Indian two-wheeler industry is divided into three sub segments – motorcycles, scooters and mopeds. The total industrry is having a complete worth around Rs 650 billion and total sales volume of 15.4 million units as on 2011-12 [crisil].Motor cycle constitutes majority of the sector with market volume share of 75%, followed by scooters with a share of 19% and remaining for the mopeds Motor cycle segment is dominated by ‘Hero Moto corp’, largest two manufacturer in world. The sector grew by 12 percent in 2011-12.This subsegment is further divided on the basis of launch prices into premium , executive and economy. The executive segment is the major contributor of sales followed by economy. Scooter segment is dominated by ‘ Honda Motorcycles and Scooters India (HMSI)’, an Indian subsidiary of Honda Motor Company, Japan. It has 48 percent market share by volume of scooters.It is the fastest growing subsegment. Mopeds subsegment constitute around 6 percent by volume and is dominated by ‘TVS’.
Operating in India has given competitive advantage to the two wheeler manufacturers so that they are able to export to countries in Africa, Latin America and South Asia. Factor Conditions Firstly, availability of cheap labour has helped the companies to manufacture at lower costs as compared to Japan and Europe. Also , Indian companies has been able to get access to technology due to collaborations with International two wheelers manufacturers.Hero collaborated with Honda in 1983 which lasted till december 2010. Bajaj intially collaborated with Piaggio first and then Kawasaki. Similarly ,TVS had a venture with Suzuki motors,Japan. This has further helped in reduction of costs due to lesser spending on R&D leading to a competitive advantage.
Due to lower per capita income as comapred to Europe and America, the focus has been on cost by customers in India. Also due to growing middle class, the motorcycle manufacturers have focused heavily on executive segment. The similar demand condition in South asian countries like Srikanka and Bangladesh and Latin America has helped in growth exports of exports. The demand of Africa is also on cheaper motorcycles which presents a huge opportunity for Indian manufacturers, particularly in economy segment.
Related and Supporting Activities
The supporting industries mainly is divided into automotive components and tyres. The major players in automotive components have been Small and medium scale enterprises. Due to government support for SME’s, the industry has grown.This has helped the overall automobile industry. The tyre industry on the other hand is concentrated into seven major players.However strong growth of exports restricts the price of tyres. Firm Strategy,Structure and Rivalry
Indian manufacturers have followed a low cost strategy .Due to the high volumes, manufacturers have achieved economies of scale. To further support their low cost strategy,manufacturers have maintained an efficient supply chains. Efficiency in supply chain has been achieved to by consolidating vendors and helping vendors source technology from abroad Competition in the industry is high and will further intesify due to entry of new players and reentry of some other players. Global players like Yamaha, Suzuki and Honda have started direct presence in India. These players have diverse product portfolio and vast industry experience.Reentry of old players like LML and Piaggio will further intensify the battle.
Hero Motor Corp
The company was established intially as ‘Hero Honda Motors Company’ in 1984 as a result of Joint venture with Honda motor company of Japan in 1983. The collaboration ended in 2010 and it was renamed to Hero Motor Corp in 2011. It is the largest manufacturer of two wheelers in the world.The company has highest market share in Indian market owing to wide product portfolio and strong distribution network Under motorcycle subsegment, the company has been extremely successful due to success in executive segment (market share of 65% in motorcycle segment), in which it has a share of around 69 percent. The company has not been very successful in the premium segment In scooter subsegment which is the fastest growing subsegment, Hero has been successful in increasing the market share of its Model ‘Pleasure’ to 10 percent to 16 percent by April 2012. It is trying to further gain market share by the launch of another model ‘Maestro’. Exports
Hero was having limited presence in the export market due to restrictions on import by Honda Motor Company. So upto now, Hero motors exported primarily to Indian subcontinent i.e Srilanka,Bangladesh, Nepal and also to Colombia.With the end of Joint venture Hero is exploring options of going to venture into new markets like Africa and Latin america and increasing its foothold in south east asian countries HMSI Honda Motorcycles and Scooters India(HMSI)
HMSI is the wholly own subsidiary of Honda Motor Company Japan established in 1999. It is the third largest manufacturer of scooters in India. The major foothold of HMSI is in the scooter sector in which it has a market share of around 48 percent In motorcycle subsegment, company has a share of around 8 percent. It has tried to launch some new models to gain share but as been ineffective. It is not present in economy segment as of now due to the agreement with Hero Moto corps.With the end of Joint venture, the company is targeting to gain share in the economy segment Exports
HMSI exports scooters and motorcycle to Europe, Middle east, South East Asia Latin America, West Asia, Bangladesh, Srilanka and Latin America. However due to strong presence of its parent company, Honda in Europe and Latin America, the export to these regions are limited and the main focus of HMSI is to increase its domestic market share.
TVS Moto Corp
It was started as the first Indo Japanese motorcycle venture in 1982 as TVS Suzuki Limited post a JV between TVS Group and Suzuki Motors. The Joint Venture ended in 2000-01 after which it was renamed as TVS Motor Co Ltd. TVS has fallen to 4th rank in terms of Market volume share and is loosing market share continously owing primarily to lacklusture performance in the executive and economical motor cyle segment. Even in the scooter subsegment, it is facing stiff competitions from HMSI and Hero which have launched heavy non-gear scooters.This has forced TVS to change its focus from lighter scooters to heavier ones and it has recently launched a new scooter ‘Wego’ in the segment. The major foothold of TVS has been in moped subsegment where it is the market leader. The segment is growing at a healthy speed of around 17 percent for the last 5 years. Exports
TVS has a manufacturing facility at Karawang (near Jakarta), Indonesia.It produces its premium segment model ‘ Apache’ and step thru motorcycles such as ‘Neo’. TVS is expected to start assembly plants and distribution centres in markets such as Turkey,Nigeria and Thailand to increase its global presence.
Bajaj Auto Limited’s market share has been loosing its market share continously from the past five years and it has declined to 23.2 percent in 2007 to 19.1 percent in 2011. The company has been loosing its foothold in the premium,its mainstay in the Indian market, mainly to Yamaha which has launched new bikes like Fazer,FZ 16 and SZ. BAL market share has declined to 45.5 percent in 2011 from 52.8 percent in 2007 in premium segment while market share of Yamaha has increased to around 15 percent. In order to counter this competition Bajaj has been focusing on increasing its reach by increasing dealerships in particular in rural and semi urban areas.Dealerships have been increased to 589 from 159 by the end of the year 2012. Also it has been comig up with new and innovative financing strategies to grow its market share. One of the scheme launched has been Direct Cash Collection (DCC).
Under DCC, Bajaj provides financing options to customers who do not have a bank account or salary slip based on his ration card or voter identity card. This scheme has been particularly helpful in increasing market penetration in rural areas where customers can pay lump sum or fixed amount any month depending upont their requirement. Other strategies adopted by Bajaj has been to increase its share in executive segment, which is the highest contributor in market sales by volume and is dominated by Hero Moto Corps. Bajaj was having only 22 percent market share in executive segment as compared to Hero’s share of around 65 percent. It launched ‘Boxer 150’ and ‘Platina 125’ , upgraded executive segment versions of its econmony segment models but had to discontinue model in domestic market due to dismissive sales.
It also launched Discover 125, executive model of its successful brand ‘Discover’. The model has received good response but it has cannibalized the sales of economy and premium models i.e Discover 100 and Discover 150. In order to maintain its position in premium segment ,bajaj intends to launch Pulsar 350 in its pulasr range of motorcycles which have been highly successsful in Indian as well as export market.Also it has formed a Joint Venture with KTM, an Austrian motorcycle manufacturer in 2008. As per the agreement, the two companies will jointly develop 4 stroke 125 cc and 250 cc engines for which KTM will be providing technical know how. Also as a part of the agreement Bajaj also has taken control of distribution of KTM products in India and some other Southeast Asian nations.
Bajaj started production of KTM 200, a premium segment 200 cc bike from India from January 2012 which is priced at around Rs 1.17 lakh. Bajaj plans to convert its pro-biking showrooms through which it currently sells Kawasaki Ninja bikes into KTM showrooms where it will be also selling premium KTM bikes along with Ninja. It has also started 40 service centers which are dedicated to KTM. Recently it also announced the launch of KTM 350 an off road bike in India.
This would have been profitable as government of India allowed a concessional import duty of only 10 percent on Completely Knock Down (CKD) units as compared to normal import duty of 60 percent.However in the union budget 2011-12, government of India narrowed down the definition of Completely Knock Down(CKD) units of vehicles and manufacturers have to completely assemble engines,gear boxes and transmission in India only to get the concessional duty. This will impact the cost as due to low volume of such high end bikes, it is unfeasible to produce such bikes in India. Exports
Although domestic share of Bajaj has been reduced, the share in export market has been increasing at a rapid pace. Export share in market has increased from 58.8 percent in 2007-08 to 65.1 percent in 2011.The export volume is expected to reach 1.5 million units by the end of financiak year 2011-12.Current export markets of Bajaj include Bangladesh,Srilanka, Colombia, Egypt, Peru,Phillipnes and UAE. In addtion to that it has a wholly owned subsidiary PT Bajaj Auto Indonesia in Indonesia from which it currently assembles Pulsar 135, Pulsar 180 and Pulsar 220.It has established an exclusive network of dealers to sell in markets of Jakarta, Bali, Java and Sulavesi. Bajaj has plans to increase the assembly capacity in Indonesia and launch other new variants in Indonesia. Also the company has penetrated into African countries like Angola, Sudan and Uganda.