MOTORCYCLE INDUSTRY (The Indian Scenario)
Total Page：16
File Type：pdf, Size：1020Kb
A PROJECT REPORT on MOTORCYCLE INDUSTRY (The Indian Scenario) GROUP ‘HONDA’ (08FT-091) Nitish Raut (08FT-103) Satwik Pattanayak (08FT-105) Shantnu Prakash (08FT-107) Soumyadip Pal (08FT-111) Sudarshan Shridhar CONTENTS IMT Ghaziabad Page 2 1. Overview India is the second largest market for two-wheelers in the world. It stands next only to China in terms of the number of two-wheelers produced and domestic sales respectively. This distinction was achieved due to variety of reasons like restrictive policy followed by the Government of India towards the passenger car industry, rising demand for personal transport, inefficiency in the public transportation system etc. The two wheeler industry (motorcycles, scooters and mopeds), with estimated sales of over Rs 280 billion during FYI 2007 accounted for close to 0.7% of the GDP. In volume terms, it is the largest segment in the Indian automotive industry. Commercial 4% 5% Vehicles 16% Passenger Vehicles 75% Two Wheelers Three Wheelers . Source: SIAM Figure 1 : Domestic Sales share automotive Industry IMT Ghaziabad Page 3 2. Historical perspective The first Motorcycle was first manufactured in India way back in the 1950s; after which the motorcycle industry has seen a considerable amount of demand in the country. It is amazing to note that Enfield bullet was among the first two wheelers to hit the Indian roads and it still is the passion for most motorcycle lovers. Another bike available at the time was Rajdoot, which was a close second to Bullet. Dharmendra was its brand ambassador promoting its sturdy image. Rajdoot went on to sell 1million bikes. After the huge hit in motorcycles, it was a scooter for Bajaj Auto that became widely popular in the Indian market. The scooter was named Bajaj Chetak dedicated to the brave horse of the legendary Rana Pratap, which till recently was one of the triumphant brands from the Bajaj Auto. LML also introduced scooters which were reasonably successful. Apart from heavy motorcycles and scooters, lighter bikes from TVS Suzuki named Ind Suzukia was another choice among the Indian two wheelers. However due to high import rates the bike couldn’t penetrate into the Indian market. The industry was opened to foreign investments in the mid 80s, which led to the entry of as many as four Japanese bike (100cc) manufacturers, in collaboration with Indian companies. As these 100cc bikes were more fuel efficient when compared to the available bikes, it soon led to their dominance and Hero Honda the only producer of four stroke bikes at that time (100cc category), gained a top slot, which it maintains to this day. The industry saw a sudden growth in the 80s due to foreign investments. The industry witnessed a steady growth of 14% leading to a peak volume of 1.9mn vehicles in 1990. In 1990, the entire automobile industry saw a drastic fall in demand. This resulted in a decline of 15% in 1991 and 8% in 1992, resulting in a production loss of 0.4mn vehicles. Barring Hero Honda, all the major producers suffered from recession in FY93 and FY94. Hero Honda showed a marginal decline in 1992. The reasons for recession in the sector were the incessant rise in fuel prices, high input costs and reduced purchasing power due to significant rise in general price level and credit crunch in consumer financing. Increased production due to new entrants, coupled with the recession, resulted in companies either reporting losses or a fall in profits. IMT Ghaziabad Page 4 3. Current Trends Post 2000, the Indian two-wheeler industry comprising of motorcycles, scooters and scooterettes opened up tremendously. With a 20% YoY growth, motorcycles captured almost 80% of the market primarily at the cost of the scooter segment. The scooter segment though has witnessed a revival with the launch of scooterettes aimed at young women and adolescents. The two wheeler market can be segmented into three categories on the basis of price – Entry segment (<35000), Executive segment (between 35000 and 50000) and Premium segment (>50000). Motorcycles are now sold as an “experience” rather than a product. New products are being introduced at a rapid pace and brands are gaining prominence. Thus there is an increased focus on the premium segment which has an increased scope for differentiation. Buyer Power is relatively high with buyers becoming more discerning. Reliability and economy have become more of a hygiene factor. Buyers now demand two-wheelers that fit their personality thus increasing the scope for differentiation and branding. Provision of easy financing through EMI’s has reduced the price sensitivity to a great extent. This has resulted in higher growth in the 125-150cc segment. High level of branding has also helped revive niche players like Royal Enfield. Supplier Power is low as most suppliers are exclusive and far more diffused than the industry itself. It is further reduced due to the threat of backward integration by the two- wheeler companies. Barriers to entry has reduced with the introduction of Government policies such as reduction in excise duty from 24% to 16% and allowing for 100% FDI. However, the investment required for setting up large distribution channels and service stations can be a major entry barrier. Another significant entry barrier is the brand building required. Thus, initially foreign players set up Joint Ventures with indigenous companies. After establishing their brand they have launched their own line of products, eg.: Honda with Hero Group and Yamaha with Escorts. IMT Ghaziabad Page 5 Threat from Substitutes such as the Tata 1 Lakh car looms large over the two-wheeler industry. For the first time, a car has been positioned at a price point that fills the vacuum between a motorcycle and a low-end car such as the Maruti 800. Previously, the price of even a low end car (2.5 – 3 Lakhs) was too high to attract the customers from the entry and executive two wheeler segment. Since brand loyalty is lower for these segments vis-à-vis the premium segment, these segments may be threatened by the Tata car. Their buyers will consider the convenience and status associated with owning a car, which is reasonably priced and therefore a viable substitute. Current Competition has intensified thus requiring greater branding and marketing. Also due to the presence of relatively undifferentiated products, advertising and promotions have gained importance. The product has moved from a commodity to a branded product. However, there is still tremendous growth potential especially in the rural markets due to the under developed road infrastructure for which motorcycles are highly suitable. The figure below shows the growth of sales of motorcycles and scooters. Source: ICRA Figure 2: Growth in two wheelers Motorcycle and scooters IMT Ghaziabad Page 6 4. Major Players Following are major players in the Indian motorcycle market. Θ Bajaj Auto Ltd. Θ Hero Honda Motors Ltd. Θ TVS Motor Company Ltd. Θ Honda Motorcycle & Scooter India (Pvt.) Ltd. Θ Kinetic Motor Company Ltd. Θ Royal Enfield (Unit of Eicher Ltd.) Θ Suzuki Motorcycle India Pvt Ltd. Θ Yamaha Motor India (Pvt.) Ltd. In this project, we limit our study to understanding the marketing strategy of 3 of the Top players, namely Bajaj Auto Ltd., Hero Honda Motors Ltd. and TVS Motor Company Ltd. Θ Hero Honda Motors Ltd. Hero Honda has a reputation of being the most fuel-efficient and the largest selling Indian motorcycle. Its commitment of providing the customer with excellence is self-evident. A rich background of producing high value products at a reasonable price led the world's largest manufacturer of motorcycles to collaborate with the world's largest bicycle manufacturer. It was this affinity in working cultures of Honda Motor Company of Japan & the Hero Group that resulted in the setting up of Hero Honda Motors Ltd. Their relationship is so harmonious that Hero Honda has managed to achieve indigenisation of over 95 percent, which is a Honda record worldwide. Tactical promotions and excellent marketing helped Hero Honda establish itself as an intelligent purchase. Its unique features like fuel conservation, safety- riding courses and mobile workshops helped the group reach in the interiors of the country. Finance services helped facilitate purchase, as did an efficient dealer network across the country. Well-entrenched in the domestic market, Hero Honda Motors Ltd. turned its attention overseas, and exports have been steadily on the rise. Over the years, the Company has received its share of accolades, including the National Productivity Council's Award (1990-91), and the Economic Times - Harvard Business School Association of India Award, against 200 contenders. It is the market leader with 49% market share. Θ Key Milestones IMT Ghaziabad Page 7 Year Event 1983 Joint Collaboration Agreement with Honda Motor Co. Ltd. Japan signed Shareholders Agreement signed 1984 Hero Honda Motors Ltd. Incorporated 1985 First motorcycle "CD 100" rolled out 1989 New motorcycle model - "Sleek" introduced 1991 New motorcycle model - "CD 100 SS" introduced 1994 New motorcycle model - "Splendor" introduced 1997 New motorcycle model - "Street" introduced Hero Honda's 2nd manufacturing plant at Gurgaon inaugurated 1999 New motorcycle model - "CBZ" introduced 2000 Splendor declared 'World No. 1' - largest selling single two-wheeler model 2001 New motorcycle model - "Passion" introduced New motorcycle model - "Joy" introduced 2002 New motorcycle model - "Dawn" introduced New motorcycle model - "Ambition" introduced Appointed Virender Sehwag, Mohammad Kaif, Yuvraj Singh, Harbhajan Singh and Zaheer Khan as Brand Ambassadors 2003 Becomes the first Indian Company to cross the cumulative 7 million sales mark Splendor has emerged as the World's largest selling model for the third calendar year in a row (2000-2002) New motorcycle model - "CD Dawn" introduced New motorcycle model - "Splendor +" introduced New motorcycle model - "Passion Plus" introduced New motorcycle model - "Karizma" introduced 2004 New motorcycle model - "Ambition 135" introduced Hero Honda became the World No.