LETTER OF TRANSMITTAL

TO
Mr. Keshav Singh

This is to the reference of project “Auto

mobile two wheeler” assigned by you on
date 19/08/08 to the group “F” section –B
(PGDM). This project basically deals in two
wheeler sector “Hero Honda” and the factors
affecting its business environment like current
happenings in the industry, government
policies, and competitor’s analysis. Basis of the
analysis is Porter’s five force model. Source of
the content for this project is internet. This
project also gives some light on other two
wheeler sectors in India. Due date for the
completion and submission of this project is
22/09/08.

Sincerely yours

MANISH KUMAR SAHOO

1
 PROJECT ON

TWO WHEELER COMPANY

HERO HONDA

SUBMITTED TO

MR. KESHAV SINGH

SUBMITTED
BY:

MANISH KUMAR
SAHOO
manishkumarsahoo@ymail.com

2
 ABSTRACT
Automobile is one of the largest industries in global market. Being
the leader in product and process technologies in the manufacturing
sector, it has been recognized as one of the drivers of economic
growth. During the last decade, well directed efforts have been
made to provide a new look to the automobile policy for realizing
the sector's full potential for the economy. Steps like abolition of
licensing, removal of quantitative restrictions and initiatives to
bring the policy framework in consonance with WTO requirements
have set the industry in a progressive track. Removal of the
restrictive environment has helped restructuring, and enabled
industry to absorb new technologies, aligning itself with the global
development and also to realize its potential in the country.

The two-wheeler industry has been in existence in our country since

1955. Two-wheeler segment is one of the most important
components of the automobile sector that has undergone significant
changes due to shift in policy environment in India. The composition
of the two-wheeler industry has witnessed sea changes in the post-
reform period. It consists of three segments viz. scooters,
motorcycles and mopeds. India is the second largest producer and
manufacturer of two-wheelers in the world. Indian two-wheeler
industry has got spectacular growth in the last few years.

Hero Honda, the ‘World No.1’ two wheeler manufacturer for past 5
years in row is a joint venture between India's Hero Group and
Honda Motor Company, Japan has not only created the world's
single largest two wheeler company but also one of the most
successful joint ventures worldwide.

3
 brief contents
executive summery

about the sector

• EVOLUTION OF TWO-WHEELER INDUSTRY IN
INDIA
• A GROWTH PERSPECTIVE

major players in the sector

• HERO HONDA MOTORS LTD:
• BAJAJ AUTO LTD
• TVS MOTORS:
• YAMAHA MOTOR PVT. LTD
• TYPES OF TWO-WHEELERS IN INDIA:

HERO HONDA
• HERO HONDA'S MISSION
• HERO HONDA'S MANDATE
• CORPORATE SOCIAL RESPONSIBILITY (CSR)

PORTER’S FIVE FORCE MODEL

• THREAT OF NEW COMPETITORS

• RIVALRY AMONG EXISTING FIRMS IN INDUSTRY
• THREAT OF SUBSTITUTE GOODS/SERVICES
• SUPPLIERS BARGENING POWER
• BARGAINING POWER OF CUSTOMERS:

4
 Recent happening on two-wheeler sector

Recent happening on hero Honda

KEY FACTORS INFLUENCING DEMAND OF TWO-

WHEELER

KEY FACTORS AFFECTING THE SALES OF

MOTORCYCLES:

CONCLUSION

Bibliography

EXECUTIVE SUMMERY

5
India is the second largest producer and
manufacturer of two-wheelers in the world. Indian
two-wheeler industry has got spectacular growth in
the last few years. Indian two-wheeler industry had a
small beginning in the early 50's. The Automobile
Products of India (API) started manufacturing
scooters in the country.

Bikes are a major segment of Indian two wheeler

industry, the other two being scooters and mopeds.
Indian companies are among the largest two-wheeler
manufacturers in the world. Hero Honda and Bajaj
Auto are two of the Indian companies that top the list
of world companies manufacturing two-wheelers.

The two-wheeler market was opened to foreign

companies in the mid 1980s. The openness of Indian
market to foreign companies lead to the arrival of
new models of two-wheelers into India. Easy
availability of loans from the banks, relatively low
rate of interest and the discount of prices offered by
the dealers and manufacturers lead to the increasing
demand for two-wheeler vehicles in India. This lead
to the strong growth of Indian automobile industry.

The two-wheeler industry in India has grown rapidly

in the country since the announcement of the
process of liberalization in 1991 by the then finance
minister Dr. Manmohan Singh, now Prime Minister of
India.
Previously, there were only a handful of two-wheeler
models available in the country. Currently, India is
the second largest producer of two-wheelers in the

6
world. It stands next only to China and
Japan in terms of the number of two-

wheelers produced and the sales of two-wheelers

respectively. In the year 2005-2006, the annual
production of two-wheelers in India stood at around
7600801 units.
The trend of owning two-wheelers is due to a variety
of facts peculiar to India. One of the chief factors is
poor public transport in many parts of India.
Additionally, two-wheelers offer a great deal of
convenience and mobility for the Indian family.

Hero Honda Motors Limited, based in Delhi, India,

is the world's largest manufacturer of motorcycles.
Hero Honda is a joint venture that began in 1984
between the Hero Group of India and Honda of Japan.
It has been the world's biggest manufacturer of 2-
wheeled motorized vehicles since 2001, when it
produced 1.3 million motorbikes in a single year.

Hero Honda's Splendor is the world's largest selling

motorcycle. Its 2 plants are in Dharuhera and
Gurgaon, both in India. Third plant at Haridwar,
Uttaranchal has also started production by April,
2008. It will have production facilities such as Lean
Manufacturing concept, more flexible lines & stream
line material flow, within & proximity (planning to set
vendors in nearby locations constituting HHML Park).
It specializes in dual use motorcycles that are low
powered but very fuel efficient.

7
 ABOUT THE SECTOR
Automobile is one of the largest industries in global
market. Being the leader in product and process
technologies in the manufacturing sector, it has been
recognized as one of the drivers of economic growth.
During the last decade, well-directed efforts have
been made to provide a new look to the automobile
policy for realizing the sector's full potential for the
economy. Steps like abolition of licensing, removal of
quantitative restrictions and initiatives to bring the
policy framework in consonance with WTO
requirements have set the industry in a progressive
track. Removal of the restrictive environment has
helped restructuring, and enabled industry to absorb
new technologies, aligning itself with the global
development and also to realize its potential in the
country. The liberalization policies have led to
continuous increase in competition which has
ultimately resulted in modernization in line with the
global standards as well as in substantial cut in
prices. Aggressive marketing by the auto finance
companies have also played a significant role in
boosting automobile demand, especially from the
population in the middle income group.

EVOLUTION OF TWO-WHEELER INDUSTRY IN INDIA

8
Two-wheeler segment is one of the most important
components of the automobile sector that has
undergone significant changes due to shift in policy
environment. The two-wheeler industry has been in
existence in the country since 1955. It consists of
three segments viz. scooters, motorcycles and
mopeds. According to the figures published by SIAM,
the share of two-wheelers in automobile sector in
terms of units sold was about 80 per cent during
2003-¬04. This high figure itself is suggestive of the
importance of the sector. In the initial years, entry of
firms, capacity expansion, choice of products
including capacity mix and technology, all critical
areas of

functioning of an industry, were effectively controlled

by the State machinery. The lapses in the system
had invited fresh policy options that came into being
in late sixties. Amongst these policies, Monopolies
and Restrictive Trade Practices (MRTP) and Foreign
Exchange Regulation Act (FERA) were aimed at
regulating monopoly and foreign investment
respectively. This controlling mechanism over the
industry resulted in: (a) several firms operating
below minimum scale of efficiency; (b) under-
utilization of capacity; and (c) usage of outdated
technology. Recognition of the damaging effects of
licensing and fettering policies led to initiation of
reforms, which ultimately took a more prominent

9
shape with the introduction of the New Economic
Policy (NEP) in 1985.

However, the major set of reforms was launched in

the year 1991 in response to the major
macroeconomic crisis faced by the economy. The
industrial policies shifted from a regime of regulation
and tight control to a more liberalized and
competitive era. Two major results of policy changes
during these years in two-wheeler industry were that
the, weaker players died out giving way to the new
entrants and superior products and a sizeable
increase 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.

A GROWTH PERSPECTIVE

The composition of the two-wheeler industry has

witnessed sea changes in the post-reform period. In
1991, the share of scooters was about 50 per cent of
the total 2-wheeler demand in the Indian market.

10
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-

11
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 stabilize 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.

India is the second largest producer and

manufacturer of two-wheelers in the world. Indian
two-wheeler industry has got spectacular growth in
the last few years. Indian two-wheeler industry had a
small beginning in the early 50's. The Automobile
Products of India (API) started manufacturing
scooters in the country.

Bikes are a major segment of Indian two wheeler

industry, the other two being scooters and mopeds.
Indian companies are among the largest two-wheeler
manufacturers in the world. Hero Honda and Bajaj
Auto are two of the Indian companies that top the list

12
of world companies manufacturing two-wheelers.

The two-wheeler market was opened to foreign

companies in the mid 1980s. The openness of Indian
market to foreign companies lead to the arrival of
new models of two-wheelers into India. Easy
availability of loans from the banks, relatively low
rate of interest and the discount of prices offered by
the dealers and manufacturers lead to the increasing
demand for two-wheeler vehicles in India. This lead
to the strong growth of Indian automobile industry.

MAJOR PLAYERS IN THE SECTOR

After facing its worst recession during the early

1990s, the two-wheeler industry bounced back with a
25% increase in volume sales in February 1995. The
scooters are considered as family vehicles. There are
many two-wheeler manufacturers in India. Major
players in the 2-wheeler industry are

O HERO HONDA MOTORS LTD (HHML)

O BAJAJ AUTO LTD (BAJAJ AUTO)
O TVS MOTOR COMPANY LTD (TVS)
O YAMAHA MOTOR PVT. LTD

HERO HONDA MOTORS LTD:

13
 HERO HONDA MOTORS LIMITED, BASED IN DELHI,
INDIA, IS THE WORLD'S LARGEST MANUFACTURER OF
MOTORCYCLES1. HERO HONDA IS A JOINT VENTURE
THAT BEGAN IN 1984 BETWEEN THE HERO GROUP
OF INDIA AND HONDA OF JAPAN. IT HAS BEEN THE
WORLD'S BIGGEST MANUFACTURER OF 2-WHEELED
MOTORIZED VEHICLES SINCE 2001, WHEN IT
PRODUCED 1.3 MILLION MOTORBIKES IN A SINGLE
YEAR. MORE DETAILS OF HEROHONDA WILL BE
DISCUSSED IN THIS PROJECT.

BAJAJ AUTO LTD:

BAJAJ AUTO IS A MAJOR INDIAN AUTOMOBILE
MANUFACTURER. IT IS INDIA'S LARGEST AND THE
WORLD'S 4TH LARGEST TWO- AND THREE-WHEELER
MAKER[CITATION NEEDED]. IT IS BASED IN PUNE,
MAHARASHTRA, WITH PLANTS IN AKURDI AND
CHAKAN (NEAR PUNE),WALUJ (NEAR
AURANGABAD) AND

PANTNAGAR IN UTTARANCHAL. BAJAJ AUTO MAKES

AND EXPORTS MOTORSCOOTERS, MOTORCYCLES
AND THE AUTO RICKSHAW.

THE FORBES GLOBAL 2000 LIST FOR THE YEAR 2005

RANKED BAJAJ AUTO AT 1946 [1].

OVER THE LAST DECADE, THE COMPANY HAS

SUCCESSFULLY CHANGED ITS IMAGE FROM A
SCOOTER MANUFACTURER TO A TWO WHEELER
MANUFACTURER. ITS PRODUCT RANGE
ENCOMPASSES SCOOTERETTES, SCOOTERS AND
MOTORCYCLES. ITS REAL GROWTH IN NUMBERS HAS

14
COME IN THE LAST FOUR YEARS AFTER SUCCESSFUL
INTRODUCTION OF A FEW MODELS IN THE
MOTORCYCLE SEGMENT.

THE COMPANY IS HEADED BY RAHUL BAJAJ WHO IS

WORTH MORE THAN US$1.5 BILLION

BAJAJ AUTO CAME INTO EXISTENCE ON NOVEMBER

29, 1945 AS M/S BACHRAJ TRADING CORPORATION
PRIVATE LIMITED. IT STARTED OFF BY SELLING
IMPORTED TWO- AND THREE-WHEELERS IN INDIA. IN
1959, IT OBTAINED LICENSE FROM THE
GOVERNMENT OF INDIA TO MANUFACTURE TWO-
AND THREE-WHEELERS AND IT WENT PUBLIC IN
1960. IN 1970, IT ROLLED OUT ITS 100,000TH
VEHICLE. IN 1977, IT MANAGED TO PRODUCE AND
SELL 100,000 VEHICLES IN A SINGLE FINANCIAL
YEAR. IN 1985, IT STARTED PRODUCING AT WALUJ IN
AURANGABAD. IN 1986, IT MANAGED TO PRODUCE
AND SELL 500,000 VEHICLES IN A SINGLE FINANCIAL
YEAR. IN 1995, IT ROLLED OUT ITS TEN MILLIONTH
VEHICLE AND PRODUCED AND SOLD 1 MILLION
VEHICLES IN A YEAR.

TVS MOTORS:
In 1980 TVS 50, India's first two-seater moped rolled
out of the factory at Hosur in Tamil Nadu, Southern
India. A byword for reliability, the TVS 50 had proved
itself promising and successful in

every test and paved a way for many successes for

TVS Suzuki. Likewise the TVS champ and super

15
Champ gave a reliable and sturdy two wheeler to
public, who wanted looks fused with economy. These
two wheelers together redefined the category of
mopeds in India. TVS later left its collaboration with
Suzuki and started to manufacture its own vehicles.

TVS Motors Company is currently the third largest

two wheeler company in India with sales of 107,117
units (as of June 2007). The company exported 9,133
units of two wheelers in June 2007.

YAMAHA MOTOR PVT. LTD

Yamaha made its initial foray into India in 1985.
Subsequently, it entered into a 50:50 joint venture
with the Escorts Group in 1996. However, in August
2001, Yamaha acquired its remaining stake as well,
bringing the Indian operations under its complete
control as a 100% subsidiary of Yamaha Motor Co.,
Ltd, Japan.

India Yamaha Motor operates from its state-of-the-

art-manufacturing units at Faridabad in Haryana and
Surajpur in Uttar Pradesh and produces motorcycles
both for domestic and export markets. With a strong
workforce of 2000 employees, India Yamaha Motor is
highly customer-driven and has a countrywide
network of over 400 dealers.

The company pioneered the volume bike segment

with the launch of its 100 cc 2-stroke motorcycle RX
100. Since then, it has introduced an entire range of
2-stroke and 4-stroke bikes in India. Presently, its

16
product portfolio includes Crux (100cc), Alba (106cc)
and Gladiator (125cc).

The other key players in the two-wheeler industry are

KINETIC MOTOR COMPANY LTD (KMCL),
KINETIC ENGINEERING LTD (KEL), LML LTD
(LML), MAJESTIC AUTO LTD (MAJESTIC
AUTO), ROYAL ENFIELD LTD (REL) AND
HONDA MOTORCYCLE & SCOOTER INDIA
(P) LTD (HMSI).

TYPES OF TWO-WHEELERS IN INDIA:

There are mainly three types of two-wheelers

available in India. They are

o Scooters
o Scooterettes/Mopeds.
o MOTORCYCLES

SCOOTERS IN INDIA :

The scooter and the scooterette share in the

Indian two wheeler market is 13.4%. The main
models available in India are Bajaj Chetak, Honda
Eterno, Kinetic Blaze, LML NV SPL and LML Select II.

SCOOTERETTES/MOPEDS :

TVS Motors launched India's first 50cc, 2 seater

17
moped: TVS Moped 50. TVS also launched India's first
indigenous scooterette: Scooty in 1994. This
segment has about one-fourth share in the Indian
two wheeler industry. The major models available in
India are Bajaj Wave, Bajaj Kristal DTSi, Bajaj Blade
DTSi, Hero Honda Pleasure, Kinetic Kine, Kinetic 4S,
Kinetic Nova, Kinetic Zoom, Kinetic V2 Range, Kinetic
King 100, Kinetic Luna Super, Kinetic Luna TFR, Yo
Smart, Honda Dio, Honda Activa, TVS Scooty and TVS
XL.

MOTORCYCLES IN INDIA:

Bikes comprise a major segment of Indian two

wheeler industry.

Company : Bajaj
Company : HERO HONDA
Auto Ltd
* Hero Honda Achiever
* Bajaj Avenger * Hero Honda CD Dawn
* Bajaj CT 100 * Hero Honda CD Deluxe
* Bajaj Platina * Hero Honda Glamour
* Bajaj Discover * Hero Honda Glamour-Fi
DTSi * Hero Honda Karizma
* Bajaj Pulsar DTSi * Hero Honda Passion Plus
* Bajaj Wave * Hero Honda Pleasure
* Bajaj Wind 125 * Hero Honda Super Splendor
* Sonic DTSi * Hero Honda Splendor NXG
* Hero Honda CBZ X-Treme
Company : Company : Company :

18
Kinetic Motor Yamaha Motor
TVS MOTOR
Company India
* Kinetic Aquila
* Kinetic Boss * TVS Apache
* Yamaha CruxS
* Kinetic Challenger * TVS Centra
* Yamaha G5
* Kinetic Comet * TVS Fiero
* Yamaha
* Kinetic GF * TVS Star
Gladiator
* Kinetic Stryker * TVS Victor
* Kinetic Velocity

Hero Honda Motors Ltd (HHML), Bajaj Auto Ltd (Bajaj

Auto) and TVS Motor Company Ltd (TVS) - accounting
for over 80% of the industry sales as in 9MFY2005.

HERO HONDA
Hero Honda Motors Limited, based in Delhi, India,
is the world's largest manufacturer of motorcycles.
Hero Honda is a joint venture that began in 1984
between the Hero Group of India and Honda of Japan.
It has been the world's biggest manufacturer of 2-
wheeled motorized vehicles since 2001, when it
produced 1.3 million motorbikes in a single year.

During the 80s, Hero Honda became the first

company in India to prove that it was possible to
drive a vehicle without polluting the roads. The
company introduced new generation motorcycles
that set industry benchmarks for fuel thrift and low
emission. A legendary 'Fill it - Shut it - Forget it'
campaign captured the imagination of commuters

19
across India, and Hero Honda sold millions of bikes
purely on the commitment of increased mileage.

Over 20 million Hero Honda two wheelers tread

Indian roads today. These are almost as many as the
number of people in Finland, Ireland and Sweden put
together!

Hero Honda has consistently grown at double digits

since inception; and today, every second motorcycle
sold in the country is a Hero Honda. Every 30
seconds, someone in India buys Hero Honda's top
-selling motorcycle – Splendor. This festive season,
the company sold half a million two wheelers in a
single month—a feat unparalleled in global
automotive history.

Hero Honda bikes currently roll out from its three

globally benchmarked manufacturing facilities. Two
of these are based at Dharuhera and Gurgaon in
Haryana and the third state of the art manufacturing
facility was inaugurated at Haridwar, Uttrakhand in
April this year. These plants together are capable of
producing out 4.4 million units per year.

Hero Honda's extensive sales and service network

now spans over 3000 customer touch points. These
comprise a mix of dealerships, service and spare
points, spare parts stockiest and authorized
representatives of dealers located across different
geographies.

20
Hero Honda values its relationship with customers.
Its unique CRM initiative - Hero Honda Passport
Program, one of the largest programs of this kind in
the world, has over 3 million members on its roster.
The program has not only helped Hero Honda
understand its customers and deliver value at
different price points, but has also created a loyal
community of brand ambassadors.

Having reached an unassailable pole position in the

Indian two wheeler market, Hero Honda is constantly
working towards consolidating its position in the
market place. The company believes that changing
demographic profile of India, increasing urbanization
and the empowerment of rural India will add millions
of new families to the economic mainstream. This
would provide the growth ballast that would sustain
Hero Honda in the years to come. As Brijmohan Lall
Munjal, the Chairman, Hero Honda Motors succinctly
points out, "We pioneered India's motorcycle
industry, and it's our responsibility now to take the
industry to the next level. We'll do all it takes to
reach there.''

HERO HONDA'S MISSION

Hero Honda’s mission is to strive for synergy between

technology, systems and human resources, to
produce products and services that meet the quality,
performance and price aspirations of its customers.
At the same time maintain the highest standards of
ethics and social responsibilities.
.

21
HERO HONDA'S MANDATE

Hero Honda is a world leader because of its excellent

manpower, proven management, extensive dealer
network, efficient supply chain and world-class
products with cutting edge technology from Honda
Motor Company, Japan. The teamwork and
commitment are manifested in the highest level of
customer satisfaction, and this goes a long way
towards reinforcing its leadership status.

Hero Honda Motors Ltd.

Type Public company BSE: HEROHONDA MOTORS

Founded January 19, 1984 in Gurgaon, Haryana, India

Headquarte
New Delhi, India
rs

Brijmohan Lal Munjal, Founder

Mr. Brijmohan Lal Munjal, Chairman

Key people Mr. Toshiaki Nakagawa, Joint Managing
Director

Mr. Pawan Munjal, Managing Director, CEO

Industry Automotive
Products Motorcycles, Scooters
Revenue U$ 2.8 billion

22
 Websi www.Herohonda.com
te
CORPORATE SOCIAL RESPONSIBILITY (CSR)

Hero Honda Motors takes considerable pride in its

stakeholder relationships, especially ones developed
at the grassroots. The Company believes it has
managed to bring an economically and socially
backward region in Dharuhera, Haryana, into the
national economic mainstream.

An Integrated Rural Development Centre has been

set up on 40 acres of land along the Delhi-Jaipur
Highway. The Centre-complete with wide approach
roads, clean water, and education facilities for both
adults and children-now nurtures a vibrant, educated
and healthy community.

The Foundation has adopted various villages located

within vicinity of the Hero Honda factory at
Dharuhera for integrated rural development. This
includes:

• Installation of deep bore hand pumps to provide

clean drinking water.
• Constructing metalled roads and connecting
these villages to the National Highway (NH -8).

23
 • Renovating primary school buildings and
providing hygienic water and toilet facilities.
• Ensuring a proper drainage system at each of
these villages to prevent water-
logging.

PORTER’S FIVE FORCE MODEL

Competitive Forces in the Task Environment

Threat
Of new
Competitors

Suppliers Rivalry among Buyers

Bargaining Existing firms Bargaining
Power In industry Power

Threat of
Substitute
Goods/services

THREAT OF NEW COMPETITORS-

24
M&M BUYS KINETIC, ENTERS 2-WHEELER BIZ:

Mahindra & Mahindra (M&M), India’s largest tractor

and utility vehicle maker is buying the business
assets of loss-making scooter maker Kinetic Motor
Company for Rs 110 crore to gain an entry into the
two-wheeler market.
M&M will buy the stake through a new joint
venture in which it will hold 80 per cent
and Kinetic the rest.

“There is strong evidence that two-wheelers are

going to enjoy a renaissance,” said Anand
Mahindra, vice-chairman and managing director,
Mahindra Group on Tuesday.

Mahindra said the group found it natural to “look at

all aspects of the transportation business.” To this
end, the group also plans to make heavy commercial
vehicles.

He added that the group plans to build its two-

wheeler business on the back of its global sourcing
expertise, experience in building differentiated
brands and utilising the strength of Mahindra
Finance.

Kinetic Motor Co, which used to have a tie-up with

Honda, revolutionised the scooter market two
decades ago by introducing the gearless scooter. The
company today has motorcycle and scooter
products, its well known brands being Kinetic 4s,
Kinetic Blaze, Kinetic Nova and Kinetic Flyte.

25
Kinetic Motor Company also has an option to sell its
20 per cent stake in the new joint venture after
seven years.

“The alignment with M&M will help Kinetic compete

with the big players in the two-wheeler business,”
said Ashim Bhuvania, vice-president (corporate
finance) at Ambit, the investment bank that advised
Kinetic Motor on the deal.

THE NANO EFFECT:

Nano is expected to be launched around Diwali and

may lead to a 20 per cent reduction in prices of two-
wheelers and a 35 per cent decline in prices of
second-hand cars, according to industry chamber
Assocham.

"Nano is expected to change the automobile market

in India. It would cater to a typical middle income
Indian family of four who wants to avoid rain, wind
and dust. Its freedom for four," says Dilip Chenoy of
the Society of India Automobile Manufacturers
(SIAM).

The 100-125 cc two-wheeler range, which comprises

90% of the two-wheeler market in terms of sales,
could be severely affected with the launch of Nano.
Bike makers Hero Honda and Bajaj have realised this
and have jumped into the bandwagon of ultra small
cars.

26
Rajesh an IT professional working with an MNC in
Gurgaon who, travels every day in a Bajaj Pulsar
says, "I would definitely consider buying the Nano as
the cost of the car fits my pocket and above all it
gives good mileage."

Industry research organization CRISIL, in a report,

stated that the Nano may bring 65 per cent more
families into the range of those who can now afford a
car. "The on-road price for a Nano is expected to be
in the region of Rs 1.3 lakh. This brings down the cost
of ownership of an entry level car in India by 30 per
cent, making a new car affordable to families with
income level of Rs 2 lakh," the Crisil research added.

HIGHER-END BIKES TO ENTER:

Towards the end of this year, in India for higher-end

bikes and few manufacturers are in the process of
unveiling such expensive bikes. Companies like
Yamaha, Suzuki, Kawasaki, Triumph, Harley
Davidson, KTM, Ducati and MV Augusta have
launched (or are planning to unveil) high-powered
bikes in India. Consumer response, however, has
been tepid.

NEW COMPETITOR FOR HERO HONDA:

Honda Motor Co., the world's biggest maker of

motorcycles and scooters, plans to start selling a
new motorcycle and a new scooter in India next year

27
as demand grows in the world's second-largest two-
wheeler market.

Honda plans to spend $76 million (2.4 billion Baht) in

the next three years on four to five new models and
increasing annual manufacturing capacity from 1
million vehicles to 1.2 million by 2010, said Shinji
Aoyama, president and chief executive officer of
local unit Honda Motorcycle & Scooter India Pvt.

Honda's plans to sell new models increases

competition for its affiliate Hero Honda Motors Ltd.,
India's biggest motorcycle maker, at a time sales of
motorcycles is slowing. Motorcycle sales have fallen
in India this year as five-year-high interest rates
deter buyers in a market where three-fifths of all
motorcycles and scooters are bought on credit.
The move could see Hero Honda Motors Ltd., India
receive new technology from its Japanese parent to
manufacture powerful bikes targeted at urban youth,
while Hero Honda would stick to the high-volume, but
low-margin, bikes in the 100-125cc segment.

RIVALRY AMONG EXISTING FIRMS IN INDUSTRY:

The main rivalry that HERO HONDA is facing is from
Bajaj Auto Ltd (Bajaj Auto) , TVS Motor Company Ltd
(TVS) Yamaha Motors India Ltd (Yamaha), Majestic
Auto Ltd (Majestic Auto), Royal Enfield Ltd (REL) and
Honda Motorcycle & Scooter India (P) Ltd (HMSI).

Bajaj, which at one time was closing in on Hero

Honda, has seen its grip on the bike market going

28
down by close to 6% in just 15 months. Its
share slipped to 28.7% at the end of 2007-
08 and

further down to 26% at the end of the first quarter

(April-June) of 2008-09, from 31.7% in 2006-07.
In the economy segment Bajaj is the leader with 46%
of the market share with boxer being the largest
selling bike in this segment. In the executive
segment Hero Honda is the clear leader with 67%
market share with splendor and passion leading the
market in this segment and will continue to do so in
the near future well now we come to the most
controversial segment which is the premium
segment since the current market leader according
to the sales of the past few months is CBZ but then
pulsar has arrived and the consumer choice clearly
shows that this place will be reserved for pulsar for
some time as a counter attack hero Honda too would
be launching a bike in this segment but it is too early
to comment on that.

THREAT OF SUBSTITUTE GOODS/SERVICES:

 The pulsar has taken the market by storm in the
premium segment it has clearly displaced the
CBZ and the other models of this segment and
looks like the things will remain this way for
some time but there are tough times ahead
since Hero Honda plans to launch a new bike in
this segment by the end of this year which
means that there is a lot to look ahead from a

29
 consumers point of view.

 Bajaj auto ltd is the second biggest

manufacturer of motorcycles. The companies
recent indigenous launch in 4-stroke segment
viz; the 150 / 180 cc pulsar which has practically
snatched the market share of the bikes like Hero
Honda CBZ, Suzuki Fiero, Lml adreno etc, and it
appears that pulsar would rule this segment till
the time there are some new launches in this
segment by other manufacturers, for
bajaj pulsar has been the major
contributor for the rise in its

motorcycle sales along with its other popular

models such as boxer, caliber croma etc.

 With the second-hand car market developing, a

preference for used cars to new two-wheelers
among vehicle buyers cannot be ruled out.

 "Nano is expected to change the automobile

market in India. It would cater to a typical middle
income Indian family of four who wants to avoid
rain, wind and dust. Its freedom for four. The
100-125 cc two-wheeler range, which comprises
90% of the two-wheeler market in terms of
sales, could be severely affected with the launch
of Nano. Bike makers Hero Honda and Bajaj have
realised this and have jumped into the
bandwagon of ultra small cars.

30
  The face of auto industry, that was redefined
with the invention of fuel-efficient four-stroke
engine technology, is all set to see dawn of a
new era in two-wheeler industry. It's not petrol
or diesel or any other fuel, but it's electricity
that have initiated a revolution in two-wheeler
industry in India. This will definitely give all the
major players a run for their money.

SUPPLIERS BARGENING POWER:

Two-wheeler manufacturer Hero Honda are into

discussions with Energtek, a provider of absorbed
natural gas products, for technology that would
enable two-wheelers to run on gas instead of petrol
Energtek, which offers absorbed natural gas (ANG)
technology, has initiated discussions to supply the
new technology and claims that ANG will reduce fuel
cost by more than 50%. here as the supplier is lone
player in the market so there will be some what
monopoly in the market.

But usually it is Low, due to stiff competition In

the market.

31
BARGAINING POWER OF CUSTOMERS:

Very high, due to availability of options.

For example in 4-stroke segment viz; the 150 / 180

cc pulsar compete with bikes like Hero Honda CBZ,
Suzuki Fiero, Lml adreno .

Recent happening on two-wheeler

sector

IMPACT OF HIGH OIL PRICE:

New Delhi, two-wheelers hit upraised prices between

assorted models of the arrange of R 800-2000. They
cited the escalation of prices of nakedness materials
cod to higher prices.

32
Hero Honda declared weekday a toll process of up to
Rs 850 on its models. Bajaj Auto accumulated prices
on its 100 cc cycle Platina and another models much
as XCD and Pulsar, with gist from the terminal
hebdomad of July.

Mr. Amit Nandi, evilness chair of Sales and

Marketing, Bajaj Auto, said: We upraised prices on
non-metallic var. of Platina by R 500. A kindred
process was locate in place, modify on 125 cc cycle
XCD. In housing of Pulsar, 150 and 180 cc, the toll
process was accumulated Rs 1500.

TVS Motor Company has also upraised prices of

models early this month.

We hit already accumulated prices to Rs 1800 on the

assorted models, “said HS Goindi, the nous of the
company’s marketing and sales.

This would be the ordinal ammo of toll increases

during the assemblage after the prototypal was
conducted during April-May

E-BIKES: ON THE RIGHT TRACK!

Undoubtedly, it's economy, convenience and zero

emission that are the prime drivers for the electric
two-wheeler category in major parts of the world.
Today, with the prices of fuel spiralling to scary

33
heights, there's unwieldy pressure on corporate as
well as business groups to ease the stress on the
environment that's already buckling under the
pressure. E-Bikes, as a natural consequence, are
here not just to provide a solution...they're here for
keeps!

"In comparison to (ICE) Internal Combustion Engine-

based two wheelers running on petrol, electric two-
wheelers run on electricity, leading to huge savings.
With running cost as low as 10 per cent of
conventional petrol driven two-wheelers, consumers
stands to gain undoubtedly,"

One litre of petrol gives you 50 km of transportation.

One unit of power gives you 70 km to 100 km of
transportation. One litre of petrol cost approximately
Rs 50. And one unit of power in India cost
approximately Rs 4 to Rs 5. This makes it less than
10 paise per km in an electric two-wheeler compared
to almost 1 rupee per km in a petrol two-wheeler. If
you extrapolate this over a month, it leads to a
saving of almost Rs 1,350 per month in a situation
where a person rides his bike for 50 km every day.
And in 24 months, the savings made enable the user
to recover the cost of the vehicle! The consumer
virtually is assured of a clean form of mobility, that
too free, when he is opting for an electric two-
wheeler.

Hero Electric's managing director Naveen Munjal

feels that there are four basic compelling reasons for
e-bikes to stay - viz. the depleting stocks of non
renewable crude oil; the ever-increasing prices of

34
petrol; their utility as a viable non-polluting
economical means of transport, and lastly, their
comfort by way of lower sound emissions,
convenience of doing away with petrol
pump visits, and lack of maintenance costs.

As Chairman and CTO, Electrotherm, Mukesh

Bhandari puts it "The Electric 2 Wheelers category
will grow exponentially over the next few years with
large national level players investing substantial
amount of money in manufacturing facility,
technology, indigenization, product development,
brand and quality improvement thereby making
available electric vehicles suitable for Indian Roads".

Avinash Bhandari, Director Operation of Electrotherm

adds, "The launch of high speed / high powered
electric two wheelers have brought electric vehicles
in the main stream scooter category. With the
availability of such high powered vehicles, people
have started switching over from petrol two wheelers
to electric two wheelers. This trend will gain
momentum with the launch of further higher power
electric vehicles.

In fact, a much-needed Government support has

already started coming in from a few
environmentally conscious states like Rajasthan,
Karnataka, West Bengal, Chhattisgarh, Madhya
Pradesh, Pondicherry, Orissa, Andhra Pradesh,
Chandigarh to name a few, in the form of RTO
exemption / reduction, VAT reduction and subsidies
to customers in order to promote electric / battery
powered vehicles. A similar move by other

35
Governments will go a long way in supporting this
green vehicle."

M&M ARM BUYS ITALIAN TWO-WHEELER DESIGN CO

MUMBAI: Mahindra & Mahindra’s (M&M) component

arm Systech has acquired a controlling stake in
Italian design firm Engines Engineering (EE) for an
undisclosed amount. The Bologna-based firm, with
annual revenues of about $12 million, develops
motorcycle prototypes and two-wheeler designs. The
acquisition further underscores reports that the
Mahindras are interested in the growing two-wheeler
market.

ET had recently reported that the Anand Mahindra-

led company, that is a market leader in tractors and
sports-utility vehicles, has been talking to Indian and
overseas players to shape its two-wheeler plans. The
company is reportedly keen on high-end Italian
design companies MV Agusta and Cagiva, while also
showing more than a passing interest in Kinetic
Motors and China’s Lifan.

M&M through Systech has been looking at acquisition

of reputed design houses. “Engines Engineering has
been operative for the last three decades and a
partnership with M&M will fuel growth,” said Engines
Engineering chairman Alberto Strazzari. “I have great
comfort level with M&M, having worked together with
them for the last two years. We can combine our

36
technological strengths, customer base and lower
cost engineering excellence to fuel growth in Europe
and India,” he added.

About 70% of the acquisition cost will be paid in cash

and the selling shareholder Strazzari will continue to
hold 30% and will combine his business with
Mahindra Engineering Services. This indicates our
model of partnering and leveraging on each other
strengths, Mr Luthra said.

OVER 1000 TWO-WHEELER WORKSHOP CLOSED

COIMBATORE: Over 1,500 two-wheeler workshops in

and around the city downed their shutters, to
"protest the opening" of 'Bike Zone,' by Multi-
National Castrol, across the State.

According to K S Mani, president, Coimbatore Zone

two wheeler Workshop workers union, the Castrol
outlets, would directly hit hundred of small time
workers, as the company was giving 'unnecessary
concessions,' to lure the customers.
The government should immediately intervene and
stop mushrooming of such workshops, and protect
small workshop owners, Mani said.

Castrol, which was opening 'bike zone', has now

entered the 'four-wheeler garages' also, which would
seriously affect the livelihood of hundreds of workers,
the union said.

37
ICICI DISCONTINUES 2-WHEELER LOANS AT DEALER'S
END

MUMBAI: ICICI Bank, the country’s largest two-

wheeler financier, is discontinuing such loans offered
at the dealer’s end from August 15. This model
accounts for the bulk of the two-wheeler business for
ICICI Bank. The bank has already transferred 200
employees in this unit to other departments.

ICICI Bank executive director V Vaidyanathan

confirmed this to ET, “The bank has decided to
reorient the two-wheeler business through branches
rather than at dealerships,” he said. ICICI Bank has a
network of around 1,400 branches.

The two-wheeler business in India has been facing a

major upheaval, with many financiers exiting the
market due to rising defaults and collection issues.

Incidentally, some of the newer players are also said

to be cutting back on disbursements. The move will
impact the two-wheeler business, which is already
seeing a slowdown. Currently, ICICI Bank disburses
around Rs 180 crore of two-wheeler loans every
month.

Interest rates for two-wheelers are currently at

around 24%. The average ticket size for these loans
is quite small at around Rs 33,000, while the required
income is Rs 5,000-15,000 a month. One out of four
repayment cheques in two-wheeler loans bounces,
but the backlash against the use of recovery agents

38
has made repossession and recovery through agents
difficult for lenders.

ITALIAN TWO-WHEELER DUCATI FORAYS INTO INDIA

NEW DELHI: Italian two-wheeler maker Ducati Motor

Holding on Wednesday announced its foray into the
Indian automobile market with the launch of five
motorcycles, priced in the range of Rs 15 lakh to Rs
50 lakh.

"We will be launching four different models in

multiple variants. These bikes will be available
starting at Rs 15 lakh to Rs 50 lakh in the Indian
market," said Ashish Chordia, Chief Executive Officer
of Precision Motor India Pvt Ltd, sole distributor of
Ducati bikes in India.

The company would import sixty units this year from

its Italian manufacturing unit, he added.

BIKE PRICES SET TO ZOOM BY 2-3%

MUMBAI: Bike makers seem to be a caught in a

catch-22 situation since the past few months.
Despite a bleak demand, bike prices are slated for a
price mark-up for a second time this year. According
to motorcycle majors, the hike this year in April was
too small to counter the rapid rise in input costs.
Prices are set to increase by 2-3% for the mid-range

39
and premium bikes; the entry-level 100cc bike is
priced at around Rs 35,000 and the premium bikes
are at Rs 45,000 per unit.

After taking a price cut in March, bike makers were

forced to increase prices in the range of Rs 500-
1,000 in April 2008. Fierce competition had
prevented the companies from hiking the prices of
motorcycles in 2007. “The manufacturers have been
absorbing the hike in the prices of steel, plastic and
metal. Now, the industry is trying to protect its
margins to maintain profitability. Discounts and
incentives have also reduced,” said an auto analyst
from a Mumbai-based brokerage.

“To absorb the increase in input costs, we are

looking at a price hike, which is yet to be decided,”
said Bajaj Auto GM (marketing) Amit Nandi. The
major increase in input costs is coming from steel,
which is up by Rs 13,000 per tonne, and plastics,
which is up by Rs 1,800 per tonne.

BAJAJ AUTO, HERO HONDA WANT MORE CUT IN EXCISE

DUTY

NEW DELHI: The Nano effect was too apparent to

ignore at Finance Minister P Chidambaram's post-
Budget conference on Monday with two-wheeler
manufacturers, including Bajaj Auto and Hero Honda,
demanding a further cut in excise duty for a level-
playing field with small car makers.

The duty for two-wheelers and small cars has been

brought down to 12 per cent in the Budget proposals,

40
a move, two- wheeler manufacturers feel, would lead
to unfair competition.

"Two-wheelers are used by real aam aadmi (common

man)," Hero Honda Managing Director Pawan Munjal
said at the conference while making a case for lower
excise duty on two-wheelers.

The excise duty on two-wheelers and three-wheelers

should be brought down to 8 per cent," Chairman of
Bajaj Auto Rahul Bajaj said.

BAJAJ, HERO HONDA, KINETIC PLAN GAS-BASED 2-

WHEELERS

MUMBAI: After buses, cars and auto-rickshaws, two-

wheeler manufacturers are looking at models that
would run on gas. Fearing that the Nano would eat
into their marketshare, two-wheeler manufacturers
such as Bajaj, Hero Honda and Kinetic are
considering launching models that can
run on gas.

Energtek, an Israel-based company and world leader

in absorbed natural gas (ANG) technology, has
initiated discussions with Indian

two-wheelers manufacturers to supply the new

technology. This company claims that ANG will
reduce fuel cost by over 50% compared to petrol.

41
Bajaj Auto has decided to develop a dual-fuel two-
wheeler which can run on gas and will also have the
option of running on petrol, company sources said.
Honda, TVS, LML and Kinetic are also believed to be
considering this.

Energytek has entered into a 50:50 joint venture with

Nagpur-based LPG bottling company Confidence
Petroleum to launch Confi Energtek Asia Ltd, a
company that will market Energytek’s ANG
technology in India and other Asian countries.

M&M ACQUIRE BUSINESS ASSETS OF KINETIC MOTOR

Mumbai: Mahindra & Mahindra Ltd. (M&M), one of

India's leading automotive companies, today
announced that its Board of Directors has approved
the acquisition of business assets of Pune-based
Kinetic Motor Company Ltd. (KMCL). The acquisition
will be done through a New Company to be formed.
(New Co). The consideration for the acquisition is a
sum of Rs. 110 crores (subject to closing due
diligence) plus 20 percent stake to KMCL in the New
Co. M&M will hold the balance 80 per cent of the
equity.

The deal will enable Mahindra to design and market a

range of
scooters, value engineered motorcycles and high-
end motorcycles for the Indian and global markets,
helping it establish a robust, end-to-end two-wheeler

42
business in every segment of the industry.

CAR SALES IN REVERSE GEAR, TWO-WHEELERS BACK IN

BLACK

NEW DELHI: It’s a reversal of fortunes in Motown. Car

sales, which were clocking double-digit growth in
August last year, have now turned negative while
two-wheeler sales are back to showing strong
positive growth this August compared to a negative
drive last year.

The slump in car sales mainly came from rising

inflation and interest rates coupled with high fuel
prices which continued to dissuade customers from
any fresh purchases.
In contrast, the two-wheeler sector posted positive
sales in August. Hero Honda Motors, the world’s
largest two-wheeler manufacturer, saw its sales
growing 27% to 3.05 lakh in August compared to
2.40 lakh last year. Country’s second-largest two-
wheeler maker Bajaj Auto posted a 5% rise in its
motorcycle sales in August at 1.75 lakh against 1.67
lakh in the same month last year. TVS Motors posted
a 11.28% rise in sales.

HERO ELECTRIC TO FORAY INTO OVERSEAS MKT

CHANDIGARH: Bike maker Hero Electric has decided

to foray into overseas market starting with exports of
e-bikes to SAARC countries this year and also plans
to set up a new Greenfield assembly unit.

43
"We have plans to export 4,000-5,000 units of bikes
this year to SAARC countries to tap overseas
markets," Hero Electric Managing Director Naveen
Munjal said here.
Stating that the company would have exclusive
dealers in the neighbouring countries for its exports
project, he said, "Initially export will account for 15-
16 per cent of total sales."

Recent happening on hero

Honda
HERO HONDA OPENS MOTORCYCLE PLANT AT
HARIDWAR

Haridwar – The country's largest two-wheeler maker

Hero Honda Motors India will invest Rs. 150 crore to
balance of its facility at Haridwar. Hero Honda has
started operations at its new plant in Haridwar,
Uttrakhand on Tuesday. The company has so far
invested Rs. 450 crore in the plant.

The company has invested Rs 450 crore so far in the

plant. The plant would have an initial installed
capacity of half a million bikes annually and the
company would increase it to one million units by
2008. A total investment of Rs 1,900 crore would be
made in the project, which would have an overall
production of 1.5 million units by 2010.

44
HERO HONDA PLANS RETAIL FINANCE
BUSINESS
New Delhi: To maintain its leadership position in the
decelerating two-wheeler industry, Hero Honda, the
largest two-wheeler company in the world, plans to
enter the retail finance market. According to sources
in the automobile industry, it is looking for a joint-
venture partner in the new business.

This comes at a time when many financial

institutions, including GE Money, Centurion Bank of
Punjab and Citibank, have exited the two-wheeler
finance market. Others like the market leader ICICI
Bank and HDFC Bank have reduced their financial
exposure in the sector.

The two-wheeler industry has been hit hard by the

prevailing high interest rates as well as the credit
squeeze in the market. Hero Honda is looking at the
non-banking finance company (NBFC) route to get
into the retail finance market, on the lines of its rival
two-wheeler companies — Bajaj Auto’s Bajaj Auto
Finance and TVS Sundaram Finance of TVS Motors.

When contacted, the Hero Honda spokesperson said:

“There is nothing concrete at this stage. We are
looking at various possibilities to increase financing
options for our products in the market.”

45
Two-wheeler sales have been hugely impacted by
the high interest rates and non-availability of finance
from banks. The industry sales through retail finance
has dropped to 60% from 75-80% a year back.
Industry sales have declined 8% to 72.48 lakh units
in the financial year 2008.

Hero Honda managed to buck the trend of

decelerating sales and maintained flat sales in the
same period. Its sales grew 0.23% to 32.46 lakh two-
wheelers. Through its own finance company Hero
Honda wants to rectify the liquidity crunch in the
retail finance market thereby generating sales for its
products.

HERO HONDA MARCH SALES RISE; BAJAJ, TVS MOTOR

SEE FALL

Chennai, April 2 Hero Honda has reported 15 per

cent increase in sales for March, despite continuing
sluggish trend primarily due to higher cost of finance.

The company sold 3,20,594 units in March 2008

against 2,77,915 units in March 2007. In the full year
2007-08, the company sold 33,37,142 units against

46
33,36,756 in fiscal 2007. Till February the total sales
witnessed a dip against previous year — it was March
that helped the company post at least a marginal
increase in annual sales.

HERO HONDA SALES UP 9.54% IN MAY

Country's largest two wheeler maker Hero Honda
Motors Ltd (HHML) today reported a 9.54 per cent
rise in its motorcycle sale in May at 3,12,317 units
compared to 2,85,109 units in the same month last
year.

The company attributed this rise to its latest launch

of new Splendor NXG and the 150cc executive
segment bike Hunk.

"While Hunk has contributed largely to doubling our

volume and share in the premium segment, the
refreshed Splendor NXG has been driving the
volumes in the deluxe segment," Hero Honda Motors
Senior Vice President (Marketing & Sales) Anil Dua
said in a statement.

HERO HONDA HIKES 100CC BIKE PRICES BY UP TO RS

850

NEW DELHI: Country's largest two-wheeler maker

Hero Honda today increased the prices of its 100cc
bikes by up to Rs 850 on account of rising input
costs.

"In view of consistently rising input costs, we have

raised the prices of our product range to partially
offset this increase, for example

47
in 100cc range, the price increase is limited to Rs
850," the company said in a statement.

The company, however, maintained the price hike

has been restricted only to its 100cc bikes as of now.

HERO HONDA AUG SALES UP 27 PC

NEW DELHI: Country's largest two-wheeler maker
Hero Honda today reported a 26.84 per cent jump in
its domestic sales in August at 3,05,516 units,
against 2,40,875 units in the corresponding month
last year.

The cumulative sales for the April-August period this

year stood at 14,81,077 units, compared with
12,44,919 units in the corresponding period last
year, reflecting a 18.97 per cent growth, the
company said in a statement.

The company said it has strengthened its share in

the domestic motorcycle market by over 55 per cent.

"Our strategy is yielding results... however, the

industry continues to face uncertainty on account of
high interest rates and overall credit squeeze," Hero
Honda Motors Senior Vice President (Marketing and
Sales)

HERO HONDA IN-HOUSE TEAM TO STUDY CAPACITY

CUTS

48
Haridwar: Top two-wheeler maker Hero Honda Motor
Ltd said that it has set up an in-house team that
would look into whether the company needs to cut
capacity at any of its existing plants vis-a-vis its
future requirements. This, even as the company
announced investments of an additional Rs 150 crore
in the current fiscal to scale up capacity at its facility
here, which was inaugurated on Tuesday. A sum of
Rs 450 crore had been invested earlier in
the plant.

“We have undertaken project Samadhan within the

company that will come out with a solution for
utilisation of full capacity. Right now we want to
maximise production at the Haridwar plant to gain
from the excise duty benefits,” said Mr Pawan
Munjal, Managing Director and CEO, Hero Honda. The
move would help the company counter the enormous
pressure being created by increasing input prices.

However, he declined to comment on whether that

would mean having to cut production at its other two
facilities in Dharuhera and Manesar. Mr Munjal was
talking in context of the company’s ability to utilise
the capacity of its three plants at a time when the
two-wheeler industry has been seeing a declining
trend.

NEW DELHI: Fullerton India Credit Co Ltd, one

of the fastest-growing NBFCs, on Tuesday
signed an MoU with Hero Honda Motors Ltd to

49
offer consumer finance for buying two-
wheelers at Honda dealerships.

"Our understanding of the small credit market in

India and our international experience in the mass
market segment will be beneficial in servicing the
wide spread network of Hero Honda Motors. We see a
lot of synergies in this tie-up. Hero Honda India’s
leading brand of two-wheelers targets customers in
the same mass market as we do in urban, semi-
urban and rural areas," said G S Sundararajan,
managing director & CEO, Fullerton India Credit
Company Ltd.

"Our tie-up with Fullerton India is timely as we are

expanding our reach to newer markets in smaller
towns, besides consolidating our positions in the
traditional markets. Fullerton India is a unique
financial partner with its focus only on the mass
market segments in urban and semi-urban
areas. It is primarily engaged in providing
loans to the salaried and self-employed. It
already enjoys a good
equity with the customer base and has an enviable
network of 800 branches across 380 centres. We
hope their direct presence in each of our dealer
locations will greatly enhance customer service,
making it easy for our customers to buy our
products. This will further strengthen our dealerships
and help us garner a greater market share," said
Ravi Sud, chief financial officer, Hero Honda Motors
Ltd.

50
The tie-up will enable Fullerton India to offer Hero
Honda customers access to its financial services at
Hero Honda’s extensive dealer network. Through this
MoU, Fullerton India will set up its counter in each
Hero Honda dealership to offer finance to Hero
Honda customers. This will be like an extension
counter of the local branch of Fullerton India.

HERO HONDA NOT TO RAISE BIKE PRICES IN '08

NEW DELHI: Hero Honda Motors has decided not to

increase the prices of two-wheelers till the end of this
year.

"We will not increase the prices of our vehicles till the
end of this year," Hero Honda Motors Chairman
Brijmohan Lall Munjal told reporters on the sidelines
of an auto industry event here today.

Asked if the rising cost of raw materials will put

pressure on the profit-margin of the company, he
said, "I don't think so. We will have to tighten our
belts."

HERO HONDA VIE FOR STAKE IN UCO BANK ARM

MUMBAI: Hero Honda are in talks with UCO Bank for

acquiring a 25% stake in the proposed financial
services subsidiary of the bank. While the state-
owned UCO Bank will hold 49% in the entity, it has
short-listed four foreign firms for the remaining 26%.
This is likely to be a top UK-based investment firm,
said a person familiar with the development.

51
HERO HONDA'S DHARUHERA PLANT CLOSED AS
WORKERS STIRKE WORK
3 MAY, 2008, 1658 HRS IST, PTI

NEW DELHI: Country's largest two-wheeler maker

Hero Honda Motor has been hit by workers' strike
forcing the closure of its manufacturing unit at
Dharuhera in Haryana.

Sources said work at the Dharuhera factory stopped

since Saturday morning and all the workers are
staging protest inside the plant.

The strike broke out after the management

discontinued services of about 50 contract workers,
the sources said, adding the workers had also
opposed to being shifted from one production line to
another.

The number of contract workers removed by the

company could not be ascertained as Hero Honda
officials were not available for comments.

The sources said workers have been opposing the

company's move to shift a bulk of production to its
newly opened third plant at Haridwar, where Hero
Honda plans to produce its high volume models,
including Splendor and Passion.

The contract and casual workers feared losing their

jobs after the planned shift in production to
Uttarakhand. They have been joined by the regular
workers in the strike.

52
Hero Honda manufactures Splendor Plus and CD
Deluxe models from the plant, which has a total of
about 6,500 workers. The plant has a production
capacity of about 5,000 units per day.

HERO HONDA'S DHARUHERA PLANT RESUMES

WORK
5 May, 2008, 1800 hrs IST, PTI

NEW DELHI: Country's largest two-wheeler maker

Hero Honda on Monday said it has resumed work in
its Dharuhera unit in Haryana following an
agreement with the striking workers.

On May 3, the unit was hit by workers' strike forcing

closure of the plant.

"Normalcy has been restored at our Dharuhera plant

following a mutually amicable resolution of certain
concerns raised by some contract labourers due to
instigation by external elements," the company said
in a statement.

They have agreed to resume work so that the

flexibility of operations within the plant is ensured, it
added.

"It has been explained to them that this exercise

would not adversely impact their work and wages. As

53
always, Hero Honda gives utmost priority to the
welfare of its workers and will continue to carry on a
dialogue with them towards that objective," the
company statement said.

Earlier after the strike broke out in the plant last

week, Hero Honda said as a part of routine practice
the company had moved some contract labourers
from one area to another within the Dharuhera plant
keeping in view the flexibility of operations.

The workers had also opposed to the company's

move to shift a bulk of production to its newly
opened third plant at Haridwar, where Hero Honda
plans to produce its high volume models, including
Splendor and Passion.

The contract and casual workers feared losing their

job after the planned shift in production to
Uttarakhand. They were joined by the regular
workers in the strike.

HERO HONDA TO FOCUS ON RURAL INDIA

NEW DELHI: Hero Honda has worked out a major

expansion strategy for the rural markets and is
planning to strengthen retail financing to support the
initiative, that could lead to setting up of its own
finance arm.

Pawan Munjal, MD of Hero Honda, told TOI that rural

market would be a special focus area for the
company as it is looking at new growth areas to

54
maintain sales momentum in a shrinking market “We
have created a special ‘rural vertical ’ to push growth
and this would spearhead our expansion in the rural
market,” Munjal said.

Two-wheeler penetration in rural belts is still very low

with data shows that less than 10% of households
own a two-wheeler . “So there is a large market to be
tapped. The objective is to reach out to as many
potential customers as possible ,” he said.

As part of its strategy, Hero Honda is mapping the

demographic landscape to formulate region-specific
modules to tap customers at a very local level. “For
example , distinct strategies are being evolved to
leverage regional festivals such as Pongal and Onam
in the south, Gudi Padwa in Maharashtra, Durga Puja
in the eastern region , Dhanteras and Diwali in the
north,” Munjal said.

The company is also reaching out to ‘opinion leaders’

. Village haats and mandis are also being targeted to
reach customers. “We already have a strong
presence in the rural markets. We have had several
initiatives and now we have created a dedicated
‘rural

vertical’ , with which we are consolidating all these

initiatives and looking ahead,” Anil Dua, senior V-P
said.

55
Munjal added that the company is tying up with new
partners, including local cooperative banks and
financing units to have a robust financial model.
Setting up of an independent retail financing arm is
an option, though Munjal said, no final decision has
been taken. “If necessary, we can do it. It is
something we have to look at closely. Hero Honda
already has a company ‘Hero Honda Finlease’. This is
currently not in consumer finance and we might even
look at this if the need be,” he said.

The company is also expanding its distribution

network to support the rural initiative. It has grown
its network by over 50% over the last two years from
2,000-3,000 ‘touch points’, that include authorised
dealerships, service and spare parts outlets, and
dealer-appointed outlets across the country. This
would be further expanded to 3,500 this year.

KEY FACTORS INFLUENCING DEMAND OF TWO-

WHEELER

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-wheeler
industry are as follows:

▪ inadequate public transportation system, especially in

the semi-urban and rural areas;
▪ Increased availability of cheap consumer financing in
the past 3-4 years;
▪ Increasing availability of fuel-efficient and low-
maintenance models;

56
▪ Increasing urbanization, which creates a
need for personal transportation;

▪ Changes in the demographic profile;

▪ Difference between two-wheeler and passenger car
prices, which makes two-wheelers the entry level vehicle;
▪ Steady increase in per capita income over the past five
years; and
▪ Increasing number of models with different features to
satisfy diverse consumer needs.

KEY FACTORS AFFECTING THE SALES OF

MOTORCYCLES:

Government policy impact on petrol prices : petrol prices

determine the running cost of two wheelers
expressed in rupees per kilometer. Petrol prices are
the highest in India as GOI subsidizes kerosene and
diesel.

Improvement in disposable income: With the increase in

salary levels due to entry of multinationals following
liberalization process the disposable income has
improved exponentially over the years. This will have
a multiplier effect on demand for consumer durables
including two wheelers. This is already witnessed in
improved demand two wheelers.

Implementation of mass transport system: many states

have planned to implement mass transport systems
in state capitals in the future. This will have a
negative impact on demand for two wheelers in the
long run. But taking into account the delays involved
in the implementation of such large infrastructure

57
projects, we expect the demand to be affected only
five to seven years down the line.

Availability of credit for vehicle purchase: The availability

and cost of finance affects the demand for two
wheelers as the trend for increased credit purchases
for consumer durables have increased over the past
few years.

CONCLUSION
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 size, low maintenance, pricing and easy
loan repayments. Indian streets are full of people of
all age groups riding a two wheeler. Motorized two
wheelers are seen as a symbol of status by the
populace. Thus, in India, we would see swanky four
wheels jostling with our ever reliable and sturdy
steed: the two wheeler.

Since the first car rolled out on the streets of Mumbai

(then Bombay) in 1898, the Automobile Industry of
India has come a long way.

India is the second largest producer and

manufacturer of two-wheelers in the world. Indian
two-wheeler industry has got spectacular growth in
the last few years.

In India there are 7 scooter manufacturers, 9

motorcycle manufacturers, 3 moped manufacturers.

58
Bajaj Auto, Hero Honda, TVS, etc are the leading
manufacturers.

HEROHONDA has been the world's biggest

manufacturer of 2-wheeled motorized vehicles since
2001, when it produced 1.3 million motorbikes in a
single year.

Hero Honda's Splendor is the world's largest selling

motorcycle. Today Hero Honda has an assembly line
of nine different models of motorcycles available. It
holds the record for most popular bike in the world
by sales for Its Splendor model.

Bibliography

WEBSITE:
 WWW.HEROHONDA.COM
 WWW.HEROCYCLES.COM
 WWW.WEKIPEDIA.COM
 WWW.TIMESOFINDIA.COM
 HTTP://WWW.THEHINDUBUSINESSLINE.COM

 HTTP://ECONOMICTIMES.INDIATIMES.COM/SEARCH.CMS

 WWW.INDIAINFOLINE.COM

 HTTP://WWW.FADAWEB.COM/INDIANTYRESINDUSTRY.H
TM

BOOKS:

 AUTOCARE

59
 OVERDRIVE
 INDIAAUTO

60