Professional Documents
Culture Documents
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. The Indian two-wheeler industry made a small beginning in the early 50s when Automobile Products of India (API) started manufacturing scooters in the country. Until 1958, API and Enfield were the sole producers.
In 1948, Bajaj Auto began trading in imported Vespa scooters and three-wheelers. Finally, in 1960, it set up a shop to manufacture them in technical collaboration with Piaggio of Italy. The agreement expired in 1971.
In the initial stages, the scooter segment was dominated by API; it was later overtaken by Bajaj Auto. Although various government and private enterprises entered the fray for scooters, the only new player that has lasted till today is LML.
Under the regulated regime, foreign companies were not allowed to operate in India. It was a complete seller market with the waiting period for getting a scooter from Bajaj Auto being as high as 12 years.
The motorcycles segment was no different, with only three manufacturers viz Enfield, Ideal Jawa and Escorts. While Enfield bullet was a four-stroke bike, Jawa and the Rajdoot were two-stroke bikes. The motorcycle segment was initially dominated by Enfield 350cc bikes and Escorts 175cc bike.
The two-wheeler market was opened to foreign competition in the mid-80s. And the then market leaders - Escorts and Enfield - were caught unaware by the onslaught of the 100cc bikes of the four Indo-Japanese joint ventures. With the availability of fuel efficient low power bikes, demand swelled, resulting in Hero Honda - then the only producer of four stroke bikes (100cc category), gaining a top slot.
The feeling of freedom and being one with the nature comes only from riding a two wheeler. Indians prefer the two wheelers because of their small manageable.
Chronicle Motor Cycle and 2 wheels An English man called EDWARD BULTER in the year 1848 invented the first motorcycle. It took the inventor to the public and that was in the year 1885. Soon this motorcycle attracted the industrialist and the first manufacturing unit has been at MUNCH in the year 1893. A close cousin of this machine was a motor scooter which was invented in ENGLAND by BRADSHAW in the year 1919. There two inventions emerged as the most popular two wheelers in the modern days and were developed in to even fine and sophisticated models for the needs of the common man. After that initial growth there was segment phase with recessionary trends in the early 1990s but the progress during 1993-1999 has been significant with total output rising by 69.64% to 29.8% from 17.55% lakhs units in 1993-1994.
The increase in sales was pronounced in 1994-1995 and 1995-1996.But there has been a declaration in 1996-1997 with the total rising by 11.48% against 20.32% and 25.73% in the two previous years. There is a steep escalating growth in the year 1999-2000 by 10.9% while compared to the sales in 1999-2000 by 10.9% while compared to the sales in 19981999 which amounts 34, 03,427. Even in absolute terms, sales well higher by only 3.05 lakhs units in 1994-1995. The sales were hitch hiked to a increase of 7,96,778 units in the year 1999-2000 from the sales in the year 1997-1998 which amounts 29,80,000 units.
A Growth Perspective
The composition of the two-wheeler industry has witnessed sea changes in the postreform 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 regionwise 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 2012-13.
Table 1: Demand Forecast for Motorcycles and Scooters for 2012-13 Regions 2-Wheeler Segment Motorcycle 2835 (12.9) 203 (2.6) 4327 (16.8) 219 (3.5) South West NorthCentral 2624 (12.5) 602 (2.8) East & NorthEast 883 (11.1) 99 (2.0) All India 10669 (14.0) 1124 (2.08)
Scooter
Note: Compound Annual Rate of Growth during 2004-05 and 2012-13 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 200405 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 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 second-hand car market by the reputed car manufacturers and easy loan availability for new as well as used cars, the twowheeler 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.
In terms of volume, 4,613,436 units of two-wheelers were sold in the country in 9MFY2005 with 256,765 units exported. The total two-wheeler sales of the Indian industry accounted for around 77.5% of the total vehicles sold in the period mentioned. After facing its worst recession during the early 1990s, the industry bounced back with a 25% increase in volume sales in FY1995. However, the momentum could not be sustained and sales growth dipped to 20% in FY1998 and further down to 12% in FY1997. The economic slowdown in FY1998 took a heavy toll of two-wheeler sales, with the year-on-year sales growth rate declining to 3% that year. However, sales picked up thereafter mainly on the strength of an increase in the disposable Income of middle-income salaried people (following the implementation of the fifth pay commissions recommendations), higher access to relatively inexpensive financing, and increasing availability of fuel efficient two wheeler models Nevertheless, this phenomenon proved short lived and the two wheeler sales declined marginally in FY2001.This was followed by a revival in sales growth for the industry in FY2002.Although, the overall two wheeler sales increased in FY2002, the scooter and moped segments faced de-growth. FY2003 also witnessed a healthy growth in overall two wheeler sales led by higher growth in motorcycles even as the sales of scooters and mopeds continued to decline. Healthy growth in two wheeler sales during FY2004 was led by growth in motorcycles even as the scooters segment posted healthy growth while the mopeds continued to decline. Even with a greater preference for motorcycles and large incremental sales, a net drop in total additional sales could not be avoided, as there was a slackening demand for mopeds. But the aggregate sizes of two wheelers have risen by 7.94% to 19.4% and 13.55 respectively in the years 1994-1995, 1996-1997. The trends in production and sales during 1993-1999 clearly indicate that motor cycles are being preferred to a greater extent that scooter and mopeds, through scooters for the largest market share of all over wheelers at 44.2% in 1996-1997 and 47.53% in 19992000. On the basis of the data for 1993-2000 total two wheeler sales may rise to nearly 50 lakhs units by 2005-2006.The new opportunities are being fully utilized by the existing major players like auto, LML, ESCORTS, HERO, HONDA, TVS, SUZUKI and ROYAL ENFIELD.
Bajaj auto has been increasing the capacity of its factories atwaiuj and akrudi and is implementing a new project at third site in pune with an eventual capacity of 3.5millinon units annually. Hero has been making considerable head way in recent years. Besides increasing the capacity of its daluhjeia plant to 3.5lakhs unit per annum it is setting up a new project in gorgon with a yearly output of 3lakhs units. Royal Enfield is in a plan to establish a new plant near to Chennai due to the increase in demand of its products and make avail the products to customers in a short span of time. ESCORTS has been creating separate division for trying out tractors and two wheelers and a joint venture in collaboration with Yamaha of Japan has been promoted with equal sate in the equity capital and the complex in suljpur in UP. Which will be the biggest of its kind in the county? Kinetic Honda and kinetic engineering have been creating new facilities in the existing plant while TVS Suzuki is executing a new plant in tumkur, Karnataka with capacity of 3 lakhs units yearly. LML for its part has completed its first phase of expansions in the year 1996 at a cost 200 cores, which resulted in an increase in its production capacity from 2 lakhs units to 3 lakhs unit annually. The second phase of expansion would engage the company to increase its production to six units eventually.
In 1940s, automobile industry started. India is the 2 nd largest manufacturer in the world. In the year 2011 India stands at 7 th position. Now it ranks 4th place in Asia, succeeding to Japan, South Korea, Thailand. According to figures released by the Society of Indian Automobile Manufacturers (SIAM) on Wednesday, motorcycle sales in the country grew by 14.94% during the month to 7, 47, 818 units from 6, 50, 633 units in the same month last year. Total two-wheeler sales in January increased by 17.55% to 9, 80, 752 units from 8, 34, 343 units in January, 2012.
Present the statistics of sales made in automobile sector from India Production (2 & 4 wheelers) Sales Exports 11 million units 8.69 million units 1.5 million
Demand Drivers
The demand for two wheelers has been influenced by a number of factors over the past five years. The key demand drivers for the growth of the two wheelers industry are as flows: Inadequate public transportation system, especially in the semi urban and rural areas. Increase in availability of cheap financing schemes in past 3-4 years. Increasing availability of fuel-efficient and low-maintenance models. Incensing urbanization, which creates a need for personal transportation.
Changes in the demographic profile. Deference between two wheelers and passenger car prices. Entry-level models in two wheelers. Steady growth per-capita income in past five years. Increase in number of models with different features to satisfy diverse consumer needs.
Future
(IANS) Ratings company Credit Analysis and Research (CARE) said the two wheeler industry is expected to grow at 19.4 percent this fiscal. Longer term outlook is also expected to be healthy, with the domestic sales projected to grow in double-digits over the next five years, the company said in a statement. CARE also said that it expects investment for capacity expansion of about Rs.900Rs.1, 000 Crore in the sector over the next two-three years. The investment would also be focused towards product development. Around 1.6 crore two-wheelers are aged above 10 years, as against the domestic sales of 93 lakhs in the fiscal 2012. The demand for replacing old two-wheelers is a huge growth potential for the industry in coming years, said D.R Dogra, chief executive and managing director, CARE Ratings.
The industry showed considerable growth in the last year with cumulative growth of 26.4 percent over the corresponding financial year. The acceleration continued in fiscal 2012-2013 with the first five months (Apr-Aug 2012) registering a growth of 27.2 percent, the statement added.
There seems to be an early mix shift underway - favoring scooters over bikes (beneficial to Honda) and favoring executive segment over premium (benefits Hero over Bajaj) has been seen. While growth in scooters appears structural (driven by appeal of the scooter as a vehicle that cuts across gender and age biases), while the growth in executive segment appears cyclical as consumers baulk at high fuel prices and downshift to more fuel efficient products. A long-term trend of consumers preferring premium bikes should resume volumes should recover, though timing will remain uncertain - maybe in FY14, but potentially after that too. To understand deeper on the available segments (Motorcycles) and the respective offerings
1) Economy Segment -
2) Executive Segment
3) Premium Segment
Even though the number of offerings in the premium segment seems high, maximum volume churners still remain the products in executive & economy segments. With an aggressive pricing for Pulsar 200 NS & Duke 200; Bajaj plans to gain strategically in terms of volumes over the period of time. Bajaj's dominance in Executive segment is the the primary reason for its high operating margin and thus emerge as one of the most profitable 2-wheeler OEMs.