P ag e N o .: 104
CHAPTER 6
GROWTH OF AUTOMOBILES PRODUCTION IN INDIA
6.01. INTRODUCTION. ... 105
6.02. PRODUCTION OF DIFFERENT PRODUCT SEGMENTS. 108
6.03. REVIEW OF PRODUCTS AND TECHNOLOGY. 110
A. FIRMS STILL IN PRODUCTION. ... 110
B. FIRMS WHICH HAVE STOPPED PRODUCTION. 114
6.04. CAPACITY UTILISATION OF TWO WHEELER FIRMS. 120
6.05. MARKET SHARE OF TWO WHEELER FIRMS. 123
6.06. SELECTION OF LEADER FIRM BASED ON 129 GROWTH OF TWO WHEELER PRODUCTION IN INDIA.
6.07. APPRAISAL OF THE LEADER FIRM. 133 P ag e No.: 105
CHAPTER 6
GROWTH OF AUTOMOBILES PRODUCTION IN INDIA
6.01. INTRODUCTION:
The automobile firms in India are producing various
types of vehicles such as cars, jeeps, heavy commercial vehicles, medium commercial vehicles, light commercial vehicles, three wheelers, motor cycles, scooters, mopeds,
sport and racing vehicles, tractors, agricultural equipments
etc. The automobile firms which first started production in
India in 1947, have multiplied manifold during last 50 years. Considering the number of firms and number of products, the study of any aspect of Indian automobile firms will have an unlimited scope.
All the product segments can not be studied together due to the fact that each product segment has got different facets such as amount of investment, class of buyers, manufacturing ^cycle, technology involved etc. and hence, taking the whole automobile industry for comparing production growth may give misleading results. The study of production of particular segment will be more useful to draw meaningful conclusions on growth of production, market share or capacity utilisation etc.
The production data of Indian automobile industry in broad product segments in 1994 is given in Table No. 6.01.
The percentage of each broad product range with total production is also shown in Table No. 6.01. P ag e N o .: 106
T a b le No.6.01
Product Segments based on production in 1994
Type of Product No-of Units Percent
Passenger Cars 2,49,280 9
Jeeps 48,764 2
Commercial Vehicles 1,88.819 7
Scooters 9,88,611 35
Motor Cycles 6,00,031 21 77 Mopeds 4.96.232 17
Three Wheelers 1,21,284 4
Tractors 1,54,379 5
Total 28,47,400 100
It is observed from the above table that about 77% automobile production is accounted for by two and three wheeler segment.
It is also interesting to note that the firms entering in the industry and stopping the line of production is significantly high in case of two wheeler segment as seen from Annexure 6.01. The annexure 6.01 is based on average production of each firm during last five, ten and fifteen years. Based on highest production during the above period, a firm is ranked as 1st and 2nd. Annexure 6.01 also shows the names of the firms not in leading position but are still continuing production. Annexure 6.01 also shows the firms which have stopped the production in the various product segments. The two wheeler segment shows that large P ag e No.: 107
number of firms have stopped the product line.
Considering the various aspects of different product segments, the study is restricted to those product segments in which the growth of production as well as capacity utilisation is erratic. The analysis of production of various firms in each type of automobile reveals the fact that two wheeler industry shows large variation in production, capacity utilisation and market share. It is also seen that the number of firms stopping production in this segment are much more than those continuing production.
It is therefore felt necessary to go into the details of production, capacity utilisation and market share of two wheeler industry only. It is planned to analyse following aspects of various firms and choose a leader firm from two wheeler sector based on these aspects and then study in detail the strategies of a leader firm. Before going into details of the above aspects, it is thought necessary to review in brief the historical background and production of the two wheeler firms in Indian automobile industry.
1. Product and Technology used
2. Trend in Capacity Utilisation
3. Relative Market share.
4. Selection of leader firm based on
Rate of growth in production/sales
5. Appraisal of the leader firm. P ag e N o .: 108
6.02. PRODUCTION OF DIFFERENT PRODUCT SEGMENTS:
The production trend of two wheelers in various segments such as Scooters, Motor Cycles and Mopeds in past period is given in Annexure 6.02. The latest trend for past fifteen years is given in Table no. 6.02. It is observed that during
1980-85, the share of scooter production declined while that of mopeds increased. During last decade, the share of scooter production increased and moped production declined.
The share of motorcycle production remained almost constant.
Table 6.02
Trend of Production of Scooters, Motor Cycles & Mopeds
YEAR SCOOTERS MOTOR CYCLES MOPEDS % % %
1980 50 24 26
1981 41 22 37
1982 42 22 36
1983 36 21 43
1984 35 21 44
1985 38 22 40
1986 44 23 33
1987 45 22 34
1988 42 26 32
1989 49 24 27
1990 52 26 22
1991 49 27 24
1992 46 26 28
1993 47 26 27
1994 47 29 24 P ag e No.: 109
The two wheelers so far produced by Indian automobile firms in each segment is given in Annexure 6.03. The firms having long standing in the particular segment naturally will have highest production. The review shows following picture as given in table 6.03. The segraentwise growth rate of selected firms shows that some firms have achieved higher production during a short period. Ranking is given based on average annual production during the period or production of the particular product segment. Table No. 6.03 Productwise production of selected firms
NAME OF THE FIRM NO.OF YEARS UNITS IN LAKH RANK
SCOOTERS: TOTAL AVERAGE
BAJAJ AUTO LIMITED 35 59.42 1.70 1
MAHARASHTRA SCOOTERS LTD 19 12.25 0.64 3
LML LIMITED 12 11.56 0.96 2
MOTOR CYCLES:
ESCORTS LIMITED 33 18.40 0.56 3
HERO HONDA MOTORS LTD 15 10.19 0.68 1
BAJAJ AUTO LIMITED 17 10.03 0.59 2
MOPEDS:
KINETIC ENGINEERING LTD. 23 22.35 0.97 2
MAJESTIC AUTO LIMITED 17 11.41 0.67 3
TVS SUZUKI LIMITED 7 10.56 1.51 1
The above table shows that long standing of the firm does not necessarily give lead in total production but certain other factors are responsible. The external forces and inner strengths of the firm are two main areas affecting the rate P ag e N o .: 110
of production.
6.03 REVIEW OF PRODUCTS AND TECHNOLOGY:
The growth of production depends on the technology used in production and the product itself. The consumer demand is directly related to the value of the product which comes from the quality, fuel efficiency, safety etc. These aspects are in-built in the product by using advanced technology at lower cost to the customer. The various firms in two wheeler industry are mostly using imported technology. There are very few firms which have developed the product using inhouse technology. In the following paragraphs, a brief review of various products and technology is taken.
A. FIRMS STILL IN PRODUCTION:
1. Bajaj Auto Limited:
The firm started Scooter production in 1960 in technical collaboration with M/s. Piaggio & Company, Italy. The scooters were marketed under the name ”Vespa". After the expiry of collaboration agreement, the firm started marketing its product under the name ”Bajaj". In 1961, the firm also started production of Three Wheelers with the technical collaboration of above company. In 1978, the firm developed with inhouse technology of Motor Cycle and introduced a 50cc brand called M50 which was latter upgraded as M80. In 1983, the firm entered into a technical collaboration agreement with Kawasaki Heavy Industries,
Japan for manufacture of 100 cc Motor Cycles. In 1990, the firm developed with inhouse technology, a 50cc Moped P ag e N o .: 111
marketed under the brand name "Sunny". The firm is unique having four product segments.
2. Enfield India Limited:
In 1954, the firm entered into collaboration agreement with M/s. Enfield Cycle Co. U.K. for manufacture of Motor
Cycles. The production of Motor Cycles started in 1955 and were marketed under the name "Royal Enfield" and "Crusader".
In 1962, the firm started producing scooters which were marketed under brand name "Fantabulus". The scooters were made in collaboration with M/s.Villiers Engineering Co. U.K.
The production of scooters was stopped in 1975. The firm also manufactured Three Wheelers during 1962 and 1967. In
1984, the firm entered into technical collaboration agreement with M/s. Zundapp Werke GmbH, Gernamy. The firm started producing Mopedis under the brand name "Silver Plus" and "Explorer". Presently the firm is marketing "Bullet 350 cc" Motor Cycles.
3. Escorts Limited:
The firm is producing various engineering products. In automobile sector it produces Motor Cycles, Scooters and
Agricultural Tractors. The firm markets its motor cycles and scooters under the name "Rajdoot" and "Yamaha" respectively and tractors under the name "Escorts". The firm started manufacture of Scooters in 1969 and stopped in 1979. The production of Motor Cycles was started in 1962. In 1960, the firm obtained technical and financial collaboration with
M/s. CHKOP of Poland. In 1978, the firm entered into P ag e N o .: 112
technical collaboration with M/s. Yamaha of Japan for
manufacture of 350cc Motor Cycles. In 1985, the firm entered
into another collaboration agreement with Yamaha of Japan
for manufacture of lOOcc Motorcycles. These Motor Cycles are
marketed under the brand name "RXlOO".
4. Hero Honda Motors Ltd.:
The firm started producing 100 cc Motor Cycles in 1985.
It had entered into financial and technical collaboration agreement with M/s. Honda Motor Co.Ltd. Japan in 1984. The
Motor Cycles are marketed under the brand name ”CD100" and
"CDIOO SS". Recently new model "Sleek" has been introduced.
5. Ideal Jawa Private Limited:
The firm manufacturers Motor Cycles in 350cc and 250 cc range. The firm entered into technical collaboration with
Motokov and Polytechna of Czechoslovakia in 1960 and 1970 respectively for manufacture of Motor Cycles. The firm is producing Motor Cycles since 1961 and are marketed under the brand name "Yezdi". The firm also produced 60cc motorcycles which were marketed under the brand name "Colt".
6. Kinetic Engineering Limited:
In 1970, the firm started manufacturing Mopeds. The development of the product was done by the firm in inhouse
R. and D. The Mopeds of the firm are marketed under the brand name "Luna". In 1980, the firm obtained technical know how on Moped Engines from M/s. Morino Franco of Italy. P ag e N o .: 113
7. Kinetic Honda Motor Limited:
The firm produces scooters since 1986 and are marketed under name "Kinetic". The firm entered initially into technical and then financial collaboration agreement with
M/s. Honda Motor Co. Ltd. Japan in 1984. The firm also undertook production of Kinetic Mopeds for some time.
8. LML Limited:
Formerly Lohia Machines Limited, the firm is producing
Scooters since 1983. The firm entered into collaboration agreement and latter financial collaboration with M/s.
Piaggio & CSPA, Italy. The firm markets its product under the brand name "LML Vespa". The scooters are produced in the range of lOOcc and 150cc. The technology of Piaggio supplied to LML is supposed to be latest as compared to that supplied to M/s. Bajaj Auto Limited 35 years ago.
9. Maharashtra Scooters Limited:
The firm produces scooters since 1976. It obtained the technology from M/s. Bajaj Auto Limited. M/s. Bajaj Auto supplies major critical parts to Maharashtra Scooters Ltd.
The firm marketed its product under brand name "Priya". The firm presently produces same brands as "Bajaj".
10. Majestic Auto Limited:
The firm produces Mopeds since 1978. The Hero Group first introduced the Majestic Moped which was not much successful. Later, "Panther" and "Hero Puch" picked up the markets. The firm obtained technical collaboration from M/s. Page No.: 114
Steyr Dailmer PUCH AG Austria in 1986.
11. Scooters India Limited:
The firm is producing Scooters and Three Wheelers since
1975 and 1977 respectively. The firm had obtained technical know how from Innocenti, Milano, Italy in 1972.
The collaborators also gave rights for distribution of Three wheelers. The Lambretta brand products were made by the firm during initial period. The Scooters are marketed under the brand name "Vijay” and Three Wheelers under "Vikram”. The production of both the product was not continuous.
12. TVS Suzuki Limited:
The firm manufactures Motor Cycles since 1984. The firm entered into collaboration agreement with M/s. Suzuki Motor
Company Ltd. Japan in 1982 for manufacture of lOOcc Motor
Cycles. The firm markets its product under the brand name
"AXlOO". The firm took over the operations of Moped from
M/s. Sundaram Clayton Limited in 1988. The Mopeds are marketed by the firm under the brand name '’TVS-SO". The firm has recently launched new bike called "TVS-Scooty”.
B. FIRMS WHICH HAVE STOPPED PRODUCTION:
The two wheeler sector of automobile industry in India has witnessed large scale failure of firms in public sector enterprises. In 1973, when Bajaj Auto Limited and Automobile
Products of India Limited were only firms operating in scooter sector, Government wanted itself compete these two firms. The Government not only started production of Page No.: 115
scooters of its own but also gave collaborations to seven other scooter manufacturers. Unfortunately, none of these seven could continue production. The major reason of failure was the outdated technology and inefficiency of the firms.
The following chart gives an idea of technology flow.
All the above firms plus some more have stopped vehicle production. There are various other reasons which led these firms to discontinue the production. The information on the strategies of these firms is briefly given in the following p a g e s . Page No.: 116
1. Andhra Pradesh Scooters Limited:
The firm was in production of Scooters from 1976 to 1990.
The technical collaboration was obtained from Scooters India
Limited. The scooters were marketed under the brand name
"Allwyn Pushpak". In 1980, the firm entered in another collaboration agreement with M/s. Piaggio & Co. SPA, Italy for manufacture of Vespa scooters. The product was marketed under the brand name of "Vespa PL170.
2. Automobile Products of India Ltd.
The firm started scooter production in 1955. The know how was obtained from M/s. Innocenti S.G., Milano, Italy.
The firm was first to introduce scooters, Mopeds and Three
Wheelers on Indian roads. The firm started producing Mopeds and Three Wheelers from 1955. The products of the firm were marketed under the brand name "Lambretta" and "Lamby”. The firm has stopped the production of Mopeds in 1968 and scooters in 1988. Three wheeler production is stopped in 94.
3. Arawali Svachalit Vahan Limited:
The firm was in scooter production only four years i.e. from 1976 to 1979. The firm obtained technical consultancy from M/s. Kirloskar Consultants Limited. The scooters were marketed under the brand name "Aravalli”.
4. Atlas Auto Cycles Limited:
The firm was in Moped production for 3 years i.e. from
1976 to 1978. The main business of the firm was cycles. The firm entered into technical collaboration with M/s. S. A. C. Page No.: 117
E .M. of France which was producing powered bicycles under the brand name "Velosolex". The firm got merged with Atlas
Cycle Industries Limited.
5. Chamundi Mopeds Limited:
The firm was in production for two years i.e. 1985 and
1986. In 1981, the firm entered into collaboration with M/s.
Cycles Peugeot of France for manufacture of 50cc Mopeds. The
Mopeds were marketed under the brand name "Sportif”.
6. Gujrat Narmada Auto Limited:
The firm was in scooter production during the period from
1987 to 1993. The product was marketed under the name
"Narmada Prince". The firm had taken over Girnar Scooter
Plant, a sick unit. The scooters manufactured were having
Vespa engine and looking like Bajaj Scooters. The firm was promoted by Gujrat Narmada Fertilizer Corporation, a joint sector company of Government of Gujrat.
7. Gujrat Small Industries Corporation:
The State Government undertaking firm was in production of "Girnar" Scooters from 1971 to 1976 when the plant was taken over by Gujrat Narmada Auto Limited. The firm remained sick due to low capacity utilisation.
8. India Automotive:
The firm produced mopeds during the period 1975 to 1981.
The Mopeds were marketed under the brand name "Hitodi". Page No.: 118
9. Karnataka Scooters Limited:
The firm produced Scooters from 1976 to 1984 and Motor
Cycles from 1982 to 1985. The firm had collaboration with
M/s. Scooters India Limited. The scooters and motor cycles were marketed under brand name "Falcon".
10. Karnawati Auto Limited;
The firm produced Mopeds during the period 1985 to 1988.
11. Kelvinator India Limited:
The firm was in Scooter production from 1985 to 1987 and
Moped production from 1985 to 1994. The firm has been producing variety of engineering products. The scooters were marketed under brand name "Avanti”. The Mopeds were marketed under the brand name "Avanti VIP". The firm had technical collaboration with M/s. Agrati Garelli SPA, Italy.
12. Kirloskar Ghatge Patil Auto Limited:
The firm produced Mopeds during the period from 1975 to
1987. The firm obtained technical know how from Automobile
Products of India Limited. The Mopeds of the firm were marketed under the brand name "Laxmi 48".
13. Mopeds India Limited:
The firm was in Moped production from 1965 to 1986. The
Mopeds were marketed under the brand name "Suvega".
14. Pearl Scooters Limited:
The firm produced Mopeds during the period from 1962 to
1972. The firm had collaboration with Yamaha of Japan. The Page No.: 119
Mopeds were marketed under the brand name "Pearl Yamaha".
15. Punjab Scooters Limited:
The firm was in production of scooters during the period from 1977 to 1979. The scooters were marketed under the brand name "Kesri". The firm had obtained technical know how from M/s. Scooters India Limited.
16. Ramona Engineering Limited:
The firm was in Moped production during 1976 to 1980.
The Mopeds were marketed under the brand name "Ramona".
17. Saund Zweirad Union (I) Pvt. Ltd.:
The firm produced Mopeds from 1964 to 1984 and Motor
Cycles from 1973 to 1982. The mopeds were marketed under the brand name "Vicky" and Motor Cycles under the brand name
"Saund".
18. Sen & Pandit Engineering Products Ltd.
The firm produced mopeds from 1974 to 1983. The Mopeds were marketed under the brand name "Dart".
19. Sundaram Clayton Limited:
The firm was in production of TVS 50 mopeds during the period from 1980 to 1987 after which the moped division of the firm was transferred to TVS Suzuki Limited. The firm had technical collaboration with M/s. Clayton Dewandre Holdings
Ltd. U.K.
20. Tamilnadu Mopeds Limited:
The firm produced mopeds during 1976 to 1981. The mopeds Page No.: 120
of the firm were marketed under the brand name "Mayuram”.
Apart from the above firms, there were few more firms which started production in two wheelers but could not progress. Following are some of the firms in this category.
Sooraj Automobiles, Vespa Car Company, Kerala State
Engineering, U.P. Scooters Limited, J.& K. State Industrial
Development Corporation, Bihar State Industrial Development
Corporation, Bharat Electricals, L. S. Agrawal, Scooters
Kerala, R. S. Oswal, Elgi Equipments, W.Bengal Scooters etc.
Conclusion:
Based on the above analysis of technology used and branding of products, it is proved that the technology does not pay itself. It has to be sophisticated which has been done by Bajaj Auto Limited. Other firms are slowly adopting this strategy.
6.04. CAPACITY UTILISATION OF TWO WHEELER FIRMS:
The installed capacity casts long term fixed cost burden on the firm. The capacity of production is, in the normal course, increased from time to time based on market demand for the product. Adding capacity from time to time sometimes creates imbalance and thus idle capacity. If a firm is efficient in production, the utilisation of Plant &
Machinery will be higher. This results in lowering down the costs of depreciation, maintenance, interest, manpower etc. per unit of product. In a competitive markets where the prices are determined by demand and supply, there is major Page No.: 121
scope for increase in margins by higher capacity utilisation. The technology used may by mass production or latest lean production. Both gives benefit of lower fixed costs per unit.
It is observed by many authorities that the capacity utilisation in Indian automobile sector is very much lower.
The vicious cycle is created by low capacity utilisation resulting in higher cost per unit of product which results in higher price and lower demand. The table No. 6.04 gives the capacity utilisation of those firms which are still producing.
Table No. 6.04
CAPACITY UTILISATION OF GROWTH FIRMS
NAME OF THE FIRM INSTALLED^ UTILISED % YEAR LAKH UNITS LAKH UNITS
BAJAJ AUTO LTD 11.82 9.21 78 1994
TVS SUZUKI LIMITED 2.50 2.68 107 1994
L.M.L. LTD. 2.00 1.82 91 1994
MAJESTIC AUTO LTD 3.10 1.13 36 1994
HERO HONDA MOTORS 1.50 1.74 116 1994
ESCORTS LIMITED 2.10 1.52 72 1994
MAHARASHTRA SCOOTERS 1.05 1.10 105 1994
IDEAL JAWA P.LTD 0.42 0.05 12 1994
SCOOTERS INDIA LTD 0.63 0.07 11 1994
KINETIC ENGG.LTD 2.50 1.23 49 1994
ENFIELD INDIA LTD 0.96 0.15 16 1994
KINETIC HONDA MOTORS 1.00 0.83 83 1994 Page No.: 122
The capacity utilisation of Indian automobile firms for
different years will be different. However, taking a cross
section of a particular period will throw light on this
aspect. The firms which are still producing and those which
have stopped production can be studied separately.
The above table shows that Hero Honda Motors, TVS-
Suzuki Limited, Maharashtra Scooters Limited have achieved
production more than their installed capacities. This could
be operating on extra shift during the period.
The capacity utilisation figures of the firms not in
production presently is given for the year of highest
achieved production during the firms production period. The
rest of year's capacity utilisation is much less than this.
Annexure 6.04 gives the information of capacity utilisation.
It could be seen from the figures of capacity utilisation of
these firms that they are very low. Out of 20 firms for
which capacity utilisation data is available, 9 firms were
having less than 10% capacity utilisation and 4 firm were
having utilisation between 11 and 20%.
Conclusion:
The low capacity utilisation of various firms have made their operations costly and hence resulted in their failure.
The quality and price of the product is of prime importance
for getting higher market share thereby higher capacity utilisation. Many firms faced the vicious cycle of low demand, low capacity utilisation and higher costs. Page No.: 123
6.05. MARKET SHARE OF TWO WHEELER FIRMS:
The Growth/Share matrix model^ suggests that every firm
tries to maximize its market share by formulating various
strategies. When the markets also grow such firms are called
as "star" and when markets do not grow, the firms are called
as "cash cows". The study of market share is necessary to
understand the relative strength of the firms in two wheeler
sector of Indian automobile industry.
The figures of production and sale will be slightly different in respect of each firm depending on the opening and closing stocks of finished goods. However, when the study is for a very long period of 10 to 15 years, the
figures of production figures themselves can be considered as sale and used for calculating the market share. The market share of various firms based on production was as u n d e r :
Market Share of Motor Cycles:
Table No. 6.05 shows market share of firms producing
Motor Cycles during the period from 1981 to 1994. The Motor
Cycles were introduced in Indian market by Enfield India in
1955 and since then upto 1960, it was only firm producing this product. During 61-62, the market was shared by Ideal
Jawa with Enfield India. During the period 1963 to 1980, the market was shared by Enfield India, Escorts and Ideal Jawa.
From 1981, the scenario changed due to entry of Japanese
Motor Cycles. Honda, Suzuki, Yamaha and Kawasaki entered in
Indian markets through collaborations with Indian two Page No.: 124
wheeler firms-
Table No.6.05 MARKET SHARE OF MOTOR CYCLES 1981 TO 1994 PERCENTAGES
YEAR BAJAJ ENFIELD ESCORTS HERO HONDA IDEAL TVS AUTO INDIA LTD MOTORS JAWA SUZUKI
1981 1 24 47 0 28 0
1982 8 23 47 0 22 0
1983 16 18 45 0 21 0
1984 16 18 46 0 17 3
1985 15 16 36 6 11 16
1986 14 8 32 20 6 20
1987 13 8 37 21 5 16
1988 20 6 35 23 2 14
1989 22 5 38 22 2 11
1990 28 6 33 24 2 7
1991 27 6 28 31 0 8
1992 27 5 27 33 0 8
1993 31 3 23 33 0 10
1994 29 2 25 29 2 13
During the period 1981 to 1994, it is observed that the Enfield India and Ideal Jawa lagged behind and Hero
Honda, Escorts and Bajaj Auto dominated this segment. The share of Bajaj Auto is presently equal with Hero Honda and more than Escorts. In the category of Indian Motor Cycles,
Bajaj Auto is leading in market share.
Market Share of Mopeds:
The market share of Mopeds during the period from 1981 Page No.: 125
to 1994 is given in Table No. 6.06.
Table No.:6.06 MARKET SHARE OF MOPEDS 1981 TO 1994 PERCENTAGES
YEAR BAJAJ KINETIC MAJESTIC SUNDARAM TVS OTHERS AUTO ENGG. AUTO CLAYTON SUZUKI
1981 0 39 28 12 0 20
1982 0 27 37 25 0 11
1983 0 40 33 21 0 5
1984 0 42 25 27 0 6
1985 0 40 21 28 0 10
1986 0 47 14 33 0 6
1987 0 41 12 38 0 8
1988 0 38 10 0 38 14
1989 0 43 13 0 35 10
1990 0 40 17 0 25 19
1991 5 32 19 0 32 12
1992 14 28 19 0 33 7
1993 15 26 23 0 31 4
1994 14 25 23 0 38 0
In Moped segment, Automobile Products of India was only
firm during the period from 1955 to 61 after which Pearl
Scooters shared around 40% market share. After 1965, Pearl
Scooters lagged behind and Saund captured almost 75% market
share of Mopeds. From 1966, Mopeds India joined with Saund
and shared the market in the ratio of 1:3. From 1972
onwards. Kinetic Engineering made a dent in the market and got 30% share. After 1974, Many players entered in the Page No.: 126
market. Mopeds India was leading with 45% during 1979-80.
The market share of different firms changed during the
period 1981-1994. Kinetic Engineering having highest share
in initial period, moved to second position (25%) after the
entry of TVS Suzuki (38%) which is presently in leading
position in this segment. Majestic Auto and Bajaj Auto are
two other players sharing the market with 23% and 14%
respectively. While Bajaj has entered the market four years
back, the other firms are having quite long standing in this
se g ment.
Market Share of Scooters:
The Scooter market was dominated by Automobile Products
of India during 1955 to 1960 after which the market was
shared by Bajaj Auto. From 1966, Bajaj Auto took major
share in the Scooter segment and remained in leading
position till today. The new players entering in the segment
did not make much impact.
The market share of Scooters during the period from
1981 to 1994 is given in Table No. 6.07. The figures clearly
indicate Bajaj Auto as Leader with 62% share. The other 3 players are: LML Limited -18%, Maharashtra Scooters -11% and
Kinetic Honda Motors -9%. At present there are only four players in this segment.
Bajaj Auto Limited is leader in scooter market share due to quality, lower price and better customer service. Page No.: 127
Table No.: 6.07 MARKET SHARE OF SCOOTERS 1981 TO 1994 PERCENTAGES
YEAR BAJAJ KINETIC LML MAHA. OTHERS AUTO HONDA LTD SCOOTERS
1981 53 0 0 12 35
1982 56 0 0 13 31
1983 62 0 0 20 18
1984 63 0 3 19 15
1985 61 0 10 14 15
1986 62 2 17 15 4
1987 66 3 12 15 4
1988 55 5 21 14 5
1989 62 6 17 11 4
1990 61 8 17 11 3
1991 63 11 12 12 2
1992 63 11 12 14 0
1993 61 9 16 14 0
1994 62 9 18 11 0
Market Share of Three Wheelers:
The Three Wheeler segment is part of two wheeler firms.
The Table No. 6.08 gives the market share of this segment for the period from 1981 to 1994. The Automobile Products,
Scooters India and Bajaj Auto are only players in this segment. Presently Bajaj Auto dominates the market with 95% market share. Page No.: 128
Table No.:6.08 MARKET SHARE OF THREE WHEELERS 1981 TO 1994 PERCENTAGES
Market Share of all Active Firms:
The market share of all active firms in two wheeler
industry is given in annexure 6.05, 6.06 and 6.07 for the periods of 1981 to 1985, and 1986 to 1990 and 1991 to 1994 respectively. Considering all active firms, it is clearly established that Bajaj Auto is in leading position in two wheeler industry. The annexure 6.07 shows industry share of
44% is taken up by Bajaj Auto followed by 12% by TVS Suzuki.
Rest of the firms in the industry account for less than 10% Page No.: 129
e a c h .
6.06.SELECTION OF LEADER FIRM BASED ON GROWTH OF TWO WHEELER PRODUCTION IN INDIA:
The annual production data of two wheelers since 1955 is given in annexure 6.08. The production of each firm in two wheeler sector is given in annexure 6.09. A firm is treated as two wheeler firm if its main product falls under the category of two wheelers.
The production growth of various firms can not be straight away compared due to the reason that all the firms in two wheeler segment are not currently in production.
Therefore, for study of growth of the two wheeler industry, the firms are divided in two groups i.e. those which are still producing and those which have stopped production.
Some two wheeler firms are producing other automobile products. For the purpose of study of overall leadership the firm is considered as a unit irrespective whether it produces any other product or not.
Measurement of Growth:
The measurement of growth of production of various firms is carried out using method of least squares. The method is very popular in analysis of growth when data is available for different points of time. The straight line trend is given by the following formula.^
y = a + bx
Here y is dependent variable i.e. production and x is independent variable i.e. time period in year. a is Page No.: 130
intercept on y axis when x is zero, b denotes the slope or
g r o w t h .
The values of a and b are proposed to be calculated
using the normal equation method. The two equations required
for finding out values of a and b are as under:
eY = Na + bex
eXY = aex + beX^
The above method of measuring trend is free from subjectiveness. However, if the data is showing erratic behavior, the results obtained by this method may not be reliable. Since the production data of the firms does not show erratic behavior, the above method of analysis has been used.
ACTIVE FIRMS:
Using the above formula, the growth of 12 firms which are still in production is given in Table No. 6.09. The figures represent annual average growth in absolute number of vehicles during each of the periods.
Based on the growth figures in number of units during the three periods i.e. 1981 to 85, 1986 to 90 and 1991 to 94 each firm is ranked from 1 to 12. In production growth,
Bajaj Auto Limited is leader. TVS-Suzuki Limited and LML
Limited have obtained 2nd and 3rd rank respectively. Page No.: 131
Table No. 6.09
Rate of annual growth in No. of Units
NAME OF THE FIRM -GROWTH- 81-85 86-90 91-94 RANK
BAJAJ AUTO LTD 47752 90094 93736 1
TVS SUZUKI LIMITED 8650 31780 33870 2
L.M.L. LTD. 9294 19617 30523 3
MAJESTIC AUTO LTD 10674 2915 14570 4
HERO HONDA MOTORS 2732 13459 14049 5
ESCORTS LIMITED 9844 19164 6674 6
MAHARASHTRA SCOOTERS 9195 4539 6503 7
IDEAL JAWA P.LTD -658 -2113 1482 8
SCOOTERS INDIA LTD -1676 -1734 1433 9
KINETIC ENGG.LTD 31811 -7186 -778 10
ENFIELD INDIA LTD 8380 -823 -6071 11
KINETIC HONDA MOTORS 0 24987 -8498 12
NON-ACTIVE FIRMS:
The production data of the firms which have stopped
production is not strictly comparable. The growth formula is
not useful to get meaningful results. It is therefore
proposed to study these firms in comparison with the leader
firm by comparing the production of non-active firms with the leader firm. Table No. 6.10 shows the production of non active firms and the same is compared with the production of leader firm for the corresponding period during which the non-active firm was in production. The production of non active firms as a percentage of the production of leader Page No.: 132
firm is also given in the table in descending order.
Table No. 6.10
Production of Leader firm v/s. Non-Active firms
NAME OF THE FIRM PERIOD PRODUCTION UNITS % OF LEADER NON-ACTIVE 4 TO 3
1 2 3 4 5
SUNDERAM CLAYTON 1980-87 2184052 705066 32. 28
MOPEDS INDIA LTD 1965-85 2005267 211466 10.55
AUTOMOBILE PRODUCTS I . 1955-93 8061658 665252 8.08
SAUND Z.UNION 1964-83 1439978 76858 5.34
ANDHARA PRADESH SCOOR 1976-87 2550774 109241 4.28
PEARL SCOOTERS LTD 1962-71 191259 5948 3.11
CHAMUNDI MOPEDS LTD 1985-85 329440 9858 2.99
KELVINATOR INDIA LTD 1985-93 5384461 157844 2.93
GUJRAT MARNADA AUTO 1987-92 3846887 110636 2.88
PUNJAB SCOOTERS 1977-78 195286 4296 2.20
KIRLOSKAR GHATGE PAT 1975-86 2117835 44538 2.10
SEN & PANDIT AUTO 1974-82 932420 15134 1.62
INDIA AUTOMOTIVE 1975-80 568925 8409 1.48
GUJRAT S.INDL.CORP. 1971-85 1879066 25641 1.36
KARNATAKA SCOOTERS 1976-84 1265623 14918 1.18
RAMONA ENGG. 1976-79 366722 3682 1.00
TAMILNADU MOPED 1976-80 498255 4500 0.90
ARAVALI S.VAHAN 1976-78 291840 1587 0.54
ATLAS AUTO CYCLES 1976-77 197176 884 0.45
WEST BENGAL SCOOTERS 1976-77 197176 727 0.37
KARNAWATI AUTO LTD. 1985-87 1285151 662 0.05 Page No.: 133
It is seen that the production of non-active firms is
less than 11 percentage except for Sundaram Clayton Limited.
The firm Sundaram Clayton has sold its moped plant to TVS-
Suzuki Limited.
The table clearly shows that the production of the
non-active firms was negligible when compared with the
leader firm in growth category. The production of leader
firm given in the above table is for the firm having first
rank under growth category. The production of leader firm
and that of non-active firm is given side by side in the
said table.
6.07.APPRAISAL OF THE LEADER FIRM IN TWO WHEELERS:
From the study of technology, growth in production,
capacity utilisation and market share it is observed that
Bajaj Auto Limited has long established its leadership in
two wheeler sector of Automobile Industry in India. The
sustainable growth in production has led the firm to become
2nd largest automobile producer in the World. The factors
that helped the firm to achieve this position are discussed
below.
a) Technology:
At the beginning of the chapter (6.03), information on
the technology used by various firms is given. The
technology used by Bajaj Auto Limited was supplied by M/s.
Piggio of Italy. The same technology has later been supplied to M/s. LML Limited and Andhra Pradesh Scooters Limited. Page No.: 134
However, Bajaj Auto only could progress. The history reveals
that, after 1971, when the collaboration agreement of Bajaj
Auto ended, the firm developed the products further with its own R. & D. efforts. The product was made superior by the
firm. This gave better value to the customer. The firm believes in "Value for money for years”. The firm spends sizable amount of Research and Development. The comparable
figures of other firms are given in table no. 6.11.
The expenditure on R.& D. in respect of other firms is negligible. Kinetic Honda Motors and TVS Suzuki Limited are having equity participation of Foreign collaborator and as such the efforts on inhouse R.& D are lower.
Table No. 6.11 1 R.& D. EXPENDITURE OF TWO WHEELER FIRMS 1991-92'^ Rs. Lakhs % to sale
Bajaj Auto Limited 1220 0.95
Escorts Limited 320 0.30
Kinetic Engineering Ltd. 90 0.80
TVS Suzuki Limited 80 0.48
Kinetic Honda Motors Ltd. 20 0.11
Enfield India Limited 10 0.16
Automobile Products India Ltd. 10 0.17
Bajaj Auto spends approx. 1 percent of turnover on R.&
D.Thus Bajaj Auto has further enriched the technology originally obtained. This effort is still continuing. When
Bajaj Auto obtained Motor Cycle technology from Kawasaki of
Japan, the firm further developed the product to give Page No.: 135
highest fuel economy which even Kawasaki could not achieve.
The 4s Champion Motor Cycle has a record of more than 200
K.M. per litre fuel consumption under ideal conditions.
The technology used by Automobile Products of India was from Innocenti, Italy- The firm did not spend much on improvement of the product. Though "Polo" model was a new version of Lambretta, it also did not make much impact on the consumers. The firm claimed the advantage of centralised position of engine compared to Vespa of Piaggio.
However, the greater advantage of Vespa technology was its direct drive against chain drive. The Vespa had advantage of pick up, low engine noise, light weight and fuel economy.
When Scooters India Limited started the production of
Vijay scooters, the same technology of Innocenti, Italy was used. Scooters India gave technical collaboration to 7 other
State Governments for manufacture of Scooters. All the 7 state enterprises failed to produce due to direct competition with superior technology of Bajaj Auto. Same thing happed with Three Wheelers. Scooters India Limited and
Automobile Products India Limited started three wheelers with Innocenti Technology while Bajaj Auto adopted Piaggio
Technology. The result is seen. Bajaj Auto holds 95% market share today.
The products of Bajaj Auto initially claimed heavy premium in the market. Latter when other players entered, the premium vanished. But the demand for its products did Page No.: 136
not get reduced. The market growth was fast due to increased
use of two wheelers by people. This was due to increase in
employment and thereby increase in demand for personal
transport. The firm not only maintained its market share in
the growing markets but, in fact, increased the same.
b) Superior Quality:
Bajaj Auto believes in high quality of the product. The
firm continuously monitors the product quality right from
the stage of supply parts, manufactured parts and the final
product. The firm gets benefits of high quality product due
to lower rejection costs. Thus the quality costs are lowered
indirectly.
The fact that quality of the product is superior is
witnessed by the resale value of the product. No other
product has good resale value. Many customers have realised
more price on resale than their original investment on
purchase of the Bajaj vehicles. The customer purchasing
second hand vehicles value the product more due to its
superior quality.
The product life cycle is more than 15 years. Many
customers own vehicles purchased even more than 20 years.
The superior quality counteracts on low demand as customers
do not change the vehicle in short time. However, the established brand and quality made the firm achieve higher growth rate in production and markets. Page No.: 137
c) Larger Dealer Network:
Many vehicle manufacturers could not succeed due to non availability of proper distribution network. Bajaj Auto from the beginning established its dealer network for sale of
Bajaj Vehicles. The firm has more than 1000 vehicle and service dealers all over the country. The vehicles are made available to the customer with each dealer with choice of colour and model. Bajaj Auto produces Chetak, Super, Cub,
Classic, Super FE, both in normal and metallic colours. The dealers also render after sale service to the customers.
Hero Honda got the benefit of Majestic Auto dealership. LML had to establish the network as the firm was not in vehicle field earlier. Kinetic Honda and Kinetic Engineering had common dealers. Maharashtra Scooters got the benefit of
Bajaj Dealer network. Other firms in the two wheeler sector could not establish sales outlets. Many firms were not even able to produce vehicles to call for a wide dealer network. d) Lowest Prices:
The prices of Bajaj vehicles are lowest compared to other firms producing similar models. Kinetic Honda Motors have priced its scooter the highest in the scooter segment. Bajaj
Motor Cycles are also cheaper compared to others. In Moped segment, Bajaj sunny has lower price compared to its near competing product. The other manufacturers in the two wheeler segment find the costs of production very high. All the Japanese vehicles made in India faced problems of yen appreciation. The Motor Cycles in 100 cc category and Page No.: 138
Kinetic Honda Scooter was initially made out of imported CKD parts from Japan. The prices of the vehicles were high due initial high cost of production. Bajaj Auto got the benefit of established infrastructure. Any new comer in the two wheeler sector will find that its initial cost of production is very high due to heavy investment required on initial infrastructure.
Bajaj Auto got the benefit of mass production economy and the experience effect. Its plant at Akurdi, Pune was not planned properly for mass production. The capacities were added in piecemeal as and when Government of India permitted increase in licenced capacity. However, the plant at Waluj,
Aurangabad is well laid out to take care of mass production.
As the plant became older, the burden of fixed costs came down and so the cost per vehicle. Bajaj Auto believes in low profit per unit but high volume. This strategy helped keeping the prices of vehicles at lower level and yet getting reasonable return to the shareholders. The capacity utilisation of other firms was very low resulting in high costs and hence the high prices. The prices comparison of
Bajaj vehicles and others are given in Chapter 8. e) High Productivity:
The use productive resources efficiently gave benefit to
Bajaj Auto to produce more and become market leader. The firm got productivity awards in Engineering Industries. The manpower productivity and machine utilisation are closely watched by the management. The firm believes in modern Page No.: 139
methods of production. Highly productive machines with
flexible production technique has been helping the firm to
achieve the spectacular growth.
The other firms which could not continue production
were not having latest production methods. The firms
established in financial collaboration with Japaneses two
wheeler giants are following modern methods of production.
Hero Honda Motors has already achieved a very high
production level. LML is planning to produce three times
more than the present capacity. Thus the other firms are
following the latest manufacturing techniques much later
than the leader firm Bajaj Auto Limited. There is still
scope to increase production as the firms capacity is not
fully utilised in 1994.
f) Cheaper Spare parts:
The vehicles produced by Bajaj Auto are not required
repaired for a long time due to their high quality. In case
of maintenance, the spare parts are available at various
places which are near to customers place. The prices of
spares are comparatively cheaper than those of other vehicle
manufacturers. This has resulted in gaining customer
confidence in the product. Some observers feel that Bajaj
Auto is producing 50 year old models. There is definitely
advantage of continuing the same model as the customer need
be educated for maintenance and the spares can be made available for a long period of time. Page No.: 140
The vehicle manufacturers who phased out their models very fast faced problems in supplying spares for old models.
There are large number of firms in two wheeler industry who produced vehicles and stopped the same after some time.
These vehicles could not be serviced for want of spares.
Vijay Kesri, Falcon, Saund, Cento are names of historical vehicles for which spares are not available and hence the vehicles have also gone behind the curtain of history. This gave the customers new sight to look at the established brand and available warranty for considerable long time.
Bajaj Auto has satisfied this customer requirement. The
Kinetic Engineering and Majestic Auto are having quite long standing. But the product produced by them needs often maintenance and the spares are also costly.
The vehicles manufactured by Bajaj Auto Limited can be maintained by road side mechanics due to its ease of servicing. The other models of scooter are having more features which make the maintenance complicated. g) Fuel Efficiency:
The vehicles manufactured by Bajaj Auto are fuel efficient as compared to other models. The scooter produced by Kinetic Honda gives better facilities of self start but it has drawback of lower fuel efficiency. Hero Honda motor cycle is fuel efficient but Bajaj four stroke Motor Cycle is more fuel efficient. Page No.: 141
h) Customer Satisfaction:
Managing Director of Bajaj Auto says, "A company should have the objective to meet the needs of its customers in the most satisfactory manner. The objective of a company should not be to maximise profits, as many people believe. Profits are not an objective of the company. They are the need of a company. A company needs profits to reward its shareholders and to plough back in the company's operations so that the company can grow. To satisfactorily meet the needs of the customers should be the basic objective of a company. If a company successfully achieves this objective, it simultaneously ensures that it also maximises its profits, at least in the long run."^
The above objective has been pursued by Bajaj Auto
Limited to remain in leading position in the areas of latest technology, higher production growth, better capacity utilisation and highest market share.
Having chosen the leader firm on the basis of growth in production, it is proposed to study the financial strength of the firm in comparison with other two wheeler firms in chapter no. 7. Page No.: 142
References:
1. Annual Reports, Association of Indian Automobile Manufacturers 1992, 1993, 1994.
2. Johnson, Gerry and Scholes, Kevan, Exploring Corporate Strategy, Text and Cases, Pentice-Hall of India, New Delhi, 1994, pp.103-105.
3. Gupta, S.P., Statistical Methods, Sultan Chand & Sons, New Dehli, 1978, pp.E.14.21
4. Annual Report, Association of Indian Automobile Manufacturers, 1992-93, p.33.
5. Bajaj Auto Limited, Mileage Challenge competition.
6. The Economic Times, Bombay:3-11-1990, Bajaj urges companies to export more.