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Overview
The Indian two-wheeler (2W) industry recorded sales volumes of 13.4 million units in 2011-121, a growth of 14.0% over the previous
year. In a year wherein growth in other automobile segments particularly, passenger vehicle (PV) and medium & heavy commercial
vehicle (M&HCV), slowed down to single digits - marred by demand slowdown due to northward movement of inflation, fuel prices and
interest rates - the 14% growth recorded by the 2W industry remained steady. However, the momentum in the 2W industrys volume
growth too has been losing steam lately as evident from the relatively lower volume growth of 11.0% recorded in H2, 2011-12 (YoY)
against a growth of 17.1% recorded in H1, 2011-12 (YoY). The deceleration in growth is largely attributable to the motorcycles segment
which grew at a much lower rate of 7.8% (YoY) in H2, 2011-12 vis--vis 16.4% in H1, 2011-12; even as the scooters segment continued to
post 20%+ (YoY) expansion during both halves of the last fiscal. With this, the share of the scooters segment in the domestic 2W industry
volumes increased to 19.1% in 2011-12 from 17.6% in 2010-11. Overall, ICRA expects the domestic 2W industry to report a volume
growth of 8-9% in 2012-13 as base effect catches up with the industry that has demonstrated a strong volume expansion over the last
three years at cumulative annual growth rate (CAGR) of 21.8%. Over the medium term, the 2W industry is expected to report a volume
CAGR of 9-11% to reach a size of 24-26 million units (domestic + exports) by 2016-17, as we believe the various structural positives
associated with the domestic 2W industry including favourable demographic profile, moderate 2W penetration levels (in relation to
several other emerging markets), under developed public transport system, growing urbanization, strong replacement demand and
moderate share of financed purchases remain intact.
Table 1: Trend in Sales Volumes of the Indian 2W Industry
Volumes (Units, Nos.)
Domestic
Motorcycles
Scooters
Mopeds
Total Domestic
2010-11
9,019,090
2,073,797
697,418
11,790,305
Exports
2010-11
Motorcycles
Scooters
Mopeds
Total Exports
Source: SIAM
1,480,983
52,312
6,295
1,539,590
Q1
2011-12
2,464,143
532,867
190,672
3,187,682
Q1
2011-12
ICRA LIMITED
482,566
20,949
1,461
504,976
Q2
2011-12
Q3
2011-12
Q4
2011-12
2,558,515
650,155
192,859
3,401,529
2,556,782
659,643
186,472
3,402,897
2,514,699
720,176
206,863
3,441,738
Q2
2011-12
Q3
2011-12
Q4
2011-12
492,408
24,696
3,478
520,582
448,090
23,950
2,796
474,836
434,521
21,010
1,341
446,872
2010-11
22.9%
41.8%
23.5%
25.8%
2010-11
34.3%
73.6%
-8.8%
35.0%
Q1
2011-12
17.5%
13.3%
21.0%
17.0%
Q1
2011-12
27.1%
100.4%
-44.0%
28.6%
Q2
2011-12
15.4%
29.0%
7.0%
17.3%
Q2
2011-12
31.7%
88.5%
159.2%
34.0%
Q3
2011-12
9.2%
21.6%
2.6%
11.0%
Q3
2011-12
21.8%
92.0%
188.0%
24.5%
Q4
2011-12
6.3%
29.4%
16.4%
11.1%
Q4
2011-12
18.1%
29.0%
-2.3%
18.5%
Corporate Ratings
Anjan Deb Ghosh
+91 22 3047 0006
anjan@icraindia.com
Analyst Contacts:
Subrata Ray
+91 22 3047 0027
subrata@icraindia.com
Jitin Makkar
+91 124 4545 368
jitinm@icraindia.com
Demographic Advantage
229
207
206
189
200
161
157
million
150
100
41 million youth
estimated to be
added to Indias
population mix
over the next five
years
50
0
2001
Male
2011E
Female
2016E
In the age bracket of 20-40 years, which is the key target segment for
2W, around 77 million youth got added to the Indian population mix
in the last decade, which has been the key contributor to the 2W
industrys volume growth over the last 10 years. Indias demography
continues to remain favourably on its side with average age of 25
years, which is 9 years younger than China, and more than 12 years
and 19 years younger than the US and Japan, respectively. Over the
next five years, the incremental addition in Indias youth population
is estimated to be ~41 million, a fairly large number that is likely to
sustain the strong demand for 2W. The 20-40 years age group is
characterized by a combination of earning power and high spending
propensity, which should increase the likelihood of conversion of
potential ownership into actual ownership.
16.8
16
14
Underpenetrated Market
35%
30%
12
million
35%
13.8
40%
25%
25%
10
8
5.4
7.9
20%
14%
15%
10%
4
7%
5%
0%
2001
No. of Rural Households
2011
No. of Urban Households
2W Penetration - Rural
2W Penetration - Urban
million
20
Population of 22.5
million units, equivalent
to cumulative 2W sales
volumes from 1995 to
2001
Population of 51.8
million units,
equivalent to
cumulative 2W
sales volumes from
2007 to 2011
24.0
15
13.3
10
9.3
5
0
2001
2W Population - Rural
2011
2W Population - Urban
30%
39%
80%
70%
53%
17%
60%
50%
21%
40%
30%
35%
52%
20%
10%
0%
40%
11%
Motorcycle
> 10 years
Scooters
6-10 years
ICRA LIMITED
27.8
Mopeds
0-5 years
While the 2W population in India has more than doubled over the last
decade, the replacement cycle is estimated to have reduced from
around 7 years (in 2001) to around 5 years (in 2011). The reduction in
2W replacement cycle implies that the average annual mileage
covered per 2W has been on the rise, given that (distance run
multiplied by age) of 2Ws is unlikely to have changed much over the
years. As per industry estimates, around 50% of the total domestic
sales of 2W are now made to first-time buyers, 30% to customers
looking to upgrade from their existing vehicle, and 20% to buyers
seeking a second vehicle for the household. The break-up suggests
that currently around 50% of the sales in the domestic 2W market are
made to replacement buyers.
Considering that the industry has sold around 49 million 2W in the
domestic market in the last five years, the total replacement demand
works out to be a fairly large number. Add to this the healthy growth
in sales to first-time buyers in recent years, driven in particular by
sales to the rural market, the replacement opportunity could only
increase in the future. From the consumer perspective, although
replacement involves fresh capital spending, the inducement of
upgrading to an improved technology 2W, having better
performance, features and more attractive styling; complemented
with increased spending propensity are expected to be the prime
ingredients feeding replacement demand.
4.5%
12.0%
5.7%
5.8%
6.0%
5.9%
5.8%
45%
14.5%
15.5%
15.6%
17.6%
19.1%
35%
80%
70%
25%
60%
50%
40%
83.5%
15%
79.8%
78.7%
78.4%
76.5%
75.1%
30%
5%
20%
-5%
10%
0%
2006-07
Source: SIAM
2007-08
2008-09
2009-10
2010-11
Motorcycles
Scooters
Mopeds
2011-12
2006-07
2007-08
2008-09
2009-10
2010-11
2011-12
-15%
Motorcycles
Scooters
Mopeds
Source: SIAM
With sales volumes of 10.1 million units, the motorcycles segment is the largest sub-segment of the domestic 2W industry accounting for a bulk of its volumes.
However, over the last five years, the motorcycles segment has seen its volume share in the domestic 2W industry slide down to 75.1% in 2011-12 from the highs
of 83.5% recorded in 2006-07. Although domestic motorcycle volumes grew at 9.0% CAGR during the last five years, both the scooters segment as well as the
mopeds segment grew at a much faster CAGR of 22.2% and 17.0%, respectively; contributing to reduction in the motorcycle segments volume share.
The three 2W sub-segments are targeted at distinct consumer categories. The motorcycles are targeted at the male population in both rural areas as well as
urban areas (with further segmentation based on usage pattern family bike or individual bike, consumer profile - commuter Vs performance seeker etc); the
scooters are more of an urban phenomenon targeted at the female population (TVS Scooty, Hero Pleasure), male population (Hero Maestro) as well as unisex
offerings (Honda Activa, TVS Wego); mopeds are targeted at the lower middle-class segment and derive a large part of their volume share from the rural sector
where they are used as a utility vehicle bearing heavy loads on rough village roads. While each of the three sub-segments has distinctive growth drivers, we
expect the scooters segment to maintain its pace of growth faster than that of the 2W industry as a whole. The faster volume growth of the scooters segment is
expected to be driven by (a) growing acceptability of gearless scooters, particularly by women; (b) rising urbanization and increasing proportion of working
women; (c) expanding product offerings in the scooters segment; and (d) comparatively lower base. Accordingly, ICRA expects the scooters segment to gradually
increase its share in the domestic 2W market from 19.1% in 2011-12 to ~27% by 2016-17E. With this, the volumes in the domestic scooters market are estimated
to get doubled by 2016-17E over the current levels.
ICRA LIMITED
million units
25%
9.0
20%
7.3
30%
15%
5.8
5.8
10%
5%
0%
-5%
-10%
0
-15%
2007-08
2008-09
2009-10
Motorcyle Volumes
2010-11
2011-12
Growth (YoY)
3.6%
4.4%
8.7%
4.3%
4.3%
7.3%
7.0%
4.8%
6.2%
7.9%
4.4%
6.2%
6.7%
28.7%
21.9%
24.3%
26.8%
25.4%
54.5%
59.8%
58.5%
54.6%
56.0%
2007-08
2008-09
2009-10
2010-11
2011-12
Hero MotoCorp
Bajaj Auto
TVS
Honda Motorcycles
7.6%
6.2%
Others
45%
2.6
2.5
35%
2.1
million units
2.0
30%
25%
1.5
1.5
1.1
1.1
20%
1.0
15%
10%
0.5
5%
0.0
0%
2007-08
2008-09
2009-10
Scooter Volumes
2010-11
Growth (YoY)
2011-12
40%
0.0%
2.3%
9.8%
23.8%
0.0%
7.5%
13.3%
20.9%
4.8%
9.6%
14.3%
7.7%
11.1%
5.2%
11.3%
16.5%
16.3%
20.5%
21.6%
58.9%
2007-08
Honda Motorcycles
57.0%
2008-09
TVS
ICRA LIMITED
50.6%
2009-10
Hero MotoCorp
19.4%
43.1%
47.8%
2010-11
2011-12
Suzuki
Mahindra
Sales
Volumes Analysis
Segment-Wise
Analysis- Scooters
Barring
2011-12,
the growth
in scooter
has
TheQ1,
strong
double-digit
volume
growthsegments
recorded sales
by thevolumes
motorcycles
generally
outperformed
that of(Refer
the motorcycles
segment,
partly due
to theall
segment
in Q1, 2011-12
Chart 1) was
not consistent
across
formers
smaller- Entry,
base. Executive
In 2011-12,
sales volumes
of the
domestic
segments
andthe
Premium.
The volume
growth
was a
scooters
segment
at 2.6 million units recorded a growth of 23.6% (YoY),
blend
of:
higher than
11.9%
growth
in motorcycle
sales.
With (bikes
this, the
shareprice
of
The the
flattish
growth
(~3%)
of the entry
segment
having
the scooters
the total
domestic
two-wheeler
volumes
less segment
than Rs. in
40,000)
which
accounts
for around
16% ofincreased
the total
to 19.1%domestic
in 2011-12
from 17.6%sales
in 2010-11.
motorcycles
volumes
The steady growth (~17%)of the executive segment (bikes in the Rs.
Market Share
Trends price range) which accounts for around 65% of the
40,000-50,000
Overall, Honda
continues
to maintainsales
its leadership
total domestic
motorcycles
volumes position in the scooters
segment
through
its flagship
brand
Activa segment
(besides (bikes
Aviatorhaving
and Dio)
The
fast growing
(~30%)
premium
price
enjoying greater
a market
share
of
47.8%
in
2011-12
(43.1%
in
2010-11).
While
than Rs. 50,000) which accounts for around 19% of
total
capacity domestic
shortfall motorcycles
at the companys
plant at Manesar (Haryana) had
sales volumes
restricted its volume growth in the recent past, the company began
commercial
production
its new plant at Tapukara (Rajasthan) in July
Short to Medium
termatOutlook
2011.
This
allowed
the
company
to consolidate
its marketmarket
position
ICRA expects the entry segment volumes
in the domestic
to during
grow at
the
last
three
quarters
of
2011-12.
However,
Hero
MotoCorps
a much slower pace than the overall 2W industry and volume growth to be
demonstrated
in improving
market the
share
(through
its sole
driven mainlysuccess
by exports.
This is because
segment
is not
a keybrand
focus
Pleasure)
coupled
with
new
scooter
models
launched
by
Hero
MotoCorp
area of OEMs due to limited scope for margin expansion and high
interest(Maestro),
TVS (Wego),
Suzuki
(Swish)
in the isrecent
pasttocould
implyits
rate sensitivity.
While the
executive
segment
expected
maintain
shrinkage
of
market
share
gap
between
the
market
leader
and
others
over
steady growth, competition is likely to intensify following aggressive
time.
existing model refurbishment and new model launch plans of most OEMs.
The premium segment is expected to remain the fastest growing over the
Medium
mediumTerm
term,Outlook
given the disproportionate growth in purchasing power in
ICRA
scooters segment
gradually in
increase
shareofin20-30
the
the expects
hands ofthe
middle-class
urbanites,toespecially
the ageitsgroup
domestic
2W
market
from
19.1%
in
2011-12
to
~27%
by
2016-17,
growing
years. This should also translate into superior profit margins for players
atthat
16%are
CAGR
during
With
this, the domestic scooters market is
stronger
inthis
the period.
premium
segment.
estimated to nearly double in size by 2016-17 over the current levels. Thus,
even
as aShare
multitude
of brands already dot the segments landscape and
Market
Trends
more
are
expected
to
follow,
the likely
expansion
in the
pie should
The Indian motorcycles
segment
continues
to be
dominated
byoffer
Hero
sufficient
volumes
for
the
industry
to
grow
profitably.
For
the
new
MotoCorp (erstwhile Hero Honda) which has been recording sequential
entrants,
a fastershare
gainover
in market
hasten
the three
process
of
gains in market
the last share
three could
quarters.
The top
players
profitability
accounted improvement.
for 88.2% of the industrys volumes in Q1, 2011-12 (92.0% in
2007-08), with Honda Motorcycles having overtaken TVS since Q1, 2010-11
as the third largest player after Hero MotoCorp and Bajaj Auto.
MARKET SEGMENTATION
100cc Motorcycle Segment
As 2W Original Equipment Manufacturers (OEMs) attempt to segment the market, the endeavour so far has borne mixed results
Table 2: Snapshot of 2W models in 75-110cc segment of Motorcycles
Entry Segment
Executive Segment
Price (Rs.) bhp@rpm
Price (Rs.)
Hero CD
36,000-42,000 7.7@7,500 Hero Splendor
43,000-46,000
Dawn/ Deluxe
Bajaj Platina
39,000
8.2@7,500
bhp@rpm
7.7@7,500
Hero Passion
45,000-50,000
7.7@7,500
Bajaj Discover100
43,000-45,000
7.6@7,500
TVS Sport
41,000-44,000
TVS Star City
44,000-47,000
Honda Twister
45,000-51,000
Honda Dream Yuga
45,000
Yamaha Crux/ YBR110 38,000-45,000
Suzuki Hayate*
38,000-40,000
*Hayate: 112.8 cc engine; Note: Prices mentioned are ex-showroom, Gurgaon (Haryana)
Source: ICRA Research, Company websites
7.4@7,500
8.2@7,500
9.0@8,000
8.5@7,500
7.5@7,500
NA
Remarks
CD Dawn, Platina, Crux and Hayate are in the lowest
price segment of Rs. 35,000-40,000
Splendor, Discover100 and YBR110 are in the next
higher price segment of Rs. 43,000-45,000
Passion, Star City and Twister are in the next higher
price segment of Rs. 45,000-50,000
Going by the traditional segmentation approach based on engine capacity of bikes, the 100cc segment is by far the largest segment that accounted for 64% of
motorcycle sales volumes in April 2012. The 100cc segment of bikes could be further classified into three sub-segments based on price (a) Rs. 35,000-40,000; (b) Rs.
40,000-45,000; and (c) Rs. 45,000-50,000; representative of a wide price range with presence of features (or lack thereof) appealing to a diverse set of customer
needs. For instance, Hero MotoCorp, the market leader in this segment, offers 20 variants distributed amongst its three brands - CD Dawn, Splendor and Passion.
Apart from styling differences, the price ladder is mainly influenced by the presence of kick start or self start option; spoke wheel or alloy wheel option; and drum
brake or disc brake option. Although all major 2W OEMs in India have a presence in this segment, none have been able to challenge the dominance of Hero
MotoCorp that remains a clear leader with a market share of 76.4% in April 2012 (Refer Table 3). In fact, in 2008-09, Hero MotoCorps market share in this segment
had touched the highs of 80%, due to subdued competition in that period following lowering of Bajajs focus on the 100cc segment and the absence of contemporary
products in TVS portfolio. Since then, both Bajaj Auto and TVS have introduced new products - Bajaj launched the Discover100 in July 2009; and TVS launched the
Jive (110cc bike) in December 2009. While the market share of Bajaj Autos Discover100 in the 100cc bike segment has hovered between 15-20% over the last two
years, the volumes of TVS Jive have not scaled up much, even as it is uniquely positioned as the only auto-clutch bike in the country. Honda too, had launched the
Twister (110cc) model in December 2009, but its monthly volumes have generally remained below 14,000 units. Still, the strong opportunity provided by this
segment due to its large size is likely to continue to draw regular new product introductions from all players. In the last one month, two new bikes have been
launched in this segment Suzuki Hayate and Honda Dream Yuga. While Hayate marks Suzukis maiden entry into the mass segment; with Dream Yuga, Honda now
has a second offering in the mass commuter segment, a product having austere looks and styling, to go along with the sportier-looking Twister.
ICRA LIMITED
Suzuki Hayate
Launched in May
2012; Like in other
2W segments,
Suzuki has priced
this new model
also lower than
competition.
ICRA LIMITED
Hero MotoCorp: Going forward, although competition for Hero MotoCorp is likely to intensify,
we do not expect its market leadership status in the 100cc segment to come under threat any
time soon. The target segment for 100cc bikes are largely commuters and families, with the
purchase meant to address the consumers basic transportation needs at high fuel economy
and low operating costs. Despite being amongst the oldest 2W brands in India, Hero
MotoCorps CD Dawn/ Deluxe, Splendor and Passion models continue to enjoy strong brand
equity in both rural as well as urban markets, supported by regular product upgrades even as
the fundamental platform of these models has remained largely unchanged. The Splendor
brand alone has sold some 17 million units since its launch in 1994; a testimony that
familiarity breeds consumer confidence, not contempt.
Bajaj Auto: Bajaj Auto had lowered its focus on the lower cc motorcycle segment in 2008-09
to focus more on the Pulsar brand in the higher cc performance bike segment. However, the
exit from the 100cc segment lasted only for a brief while as the company staged a comeback
soon thereafter through the launch of Discover100 realizing that the market for lower-priced
commuter bikes was unlikely to fade away at the pace envisaged. Although the Discover100 is
now amongst the top three selling bikes in India, Bajaj Auto remains a distant second ranker in
the 100cc bikes segment. The company has recently initiated a fresh marketing campaign
positioning the Discover100 as a superior product to challenge the leadership of Hero
MotoCorp; however, its ability to grow market share and sustain it thereafter remains to be
seen in the backdrop of its past record of strategy flip-flop and multiple product portfolio
realignments. Adopting a clear product and brand strategy is all the more imperative for Bajaj
Auto now given that it may be difficult for it to compete with the likes of Hero MotoCorp and
Honda on the basis of other factors such as product strength, distribution network strength or
lower price. If it could do so, Bajaj Auto would enhance its ability to remain a relevant
competitor in the 100cc segment.
Honda: When Honda had launched the Twister (110 cc) in December 2009, it was expected to
redefine the 100cc segment of motorcycles on the back of its aggressive styling, higher horse
power, better power-to-weight ratio and competitive pricing. However, the target consumer
segment (lower-middle to middle income group) perhaps preferred to attach greater
preference to conventional looks, lower overall cost of ownership and higher resale value than
the attributes which the Twister stood for. Honda seems to have drawn on these consumer
insights to have launched a second bike in the commuter segment, Dream Yuga a model
that has plane looks but is priced Rs. 2,500 higher than the entry level Splendor NXG. While it
remains to be seen to what extent this new model from Hondas stable grows its volumes, the
biggest challenge for Honda would be to strengthen its distribution network, brand and mind
share, particularly in the rural market which is expected to be the primary growth driver for
100cc bikes over the medium term.
The 125cc segment of motorcycles accounted for 19% of total motorcycle sales volumes in April 2012. Like the 100cc segment of motorcycles, the 125cc segment too is
targeted at the commuter category but those commuters who desire superior performance characteristics compared to typical 100cc bikes (in terms of power,
acceleration and ride quality) and are willing to compromise on fuel economy to an extent. In this segment, the top three players are Honda, Hero MotoCorp and Bajaj
Auto, each having a market share in the region of ~30% (Refer Table 5).
Honda: The company has two product offerings in the 125cc motorcycles segment viz., Shine and Stunner. While the Honda Shine is more of a commuter bike, the Honda
Stunner has attributes of a performance bike reflected in its aggressive styling and higher engine power than other bikes in the segment. Thus, each of the two Honda
products in this segment has a distinct product positioning.
Hero MotoCorp: Hero MotoCorps offerings in the 125cc segment - Super Splendor and Glamour also have limited conflicting overlap in terms of product positioning. In
ICRAs view, one of the key benefits enjoyed by the 125cc and >125cc bikes of Hero MotoCorp is the large pool of customer footfalls in the sales showrooms of Hero
MotoCorps dealers for the companys 100cc bikes Splendor and Passion. Even if a small proportion of these customers up-trade from Splendor/ Passion to Super
Splendor and Glamour, it could translate into a steady demand pattern for the companys higher cc bikes, which highlights the statistical advantage that favours market
leaders.
Bajaj Auto: Bajaj Auto had first launched the Discover brand in 2004 as a replacement of its Wind125 and Caliber125 brands. The company followed it up with six line
extensions, out of which three models currently remain and are offered with 100cc, 125cc and 150 cc engine configurations (the rest having been discontinued). Each of
the existing Discover models are priced more competitively than other models in respective segments; yet Bajaj Autos EBITDA margins remain industry leading,
highlighting the companys ability to effectively manage product development and operating costs. Notwithstanding the multiple product portfolio rejigs done by Bajaj
Auto in the past, the company has been successful in going beyond conventional customer segmentation approach. This is evident from Bajaj Autos introduction of the
Discover 150cc, targeted as a family bike for the commuter segment wishing to ride a higher displacement bike. Likewise, the Pulsar 135cc is also targeted at the
commuter segment aspiring to experience sports biking.
ICRA LIMITED
The >150cc segment of motorcycles accounted for 17% of total motorcycle sales
volumes in April 2012. These premium segment bikes are characterized by greater
visual appeal, higher speeds, heady acceleration and superior ride, handling and
braking attributes. The price point of these bikes starts from Rs. 60,000 (although
there are few exceptions) and runs into lakhs of rupees as one goes up the engine
capacity, power rating and technology ladder. This category is the most segmented
and includes:
Performance bikes, ranging from 150cc to 220 cc, and consisting of Bajaj Autos
Pulsar family, Hero MotoCorps Glamour, Achiever, CBZ Extreme, Hunk, Impulse
and Karizma;, Hondas Unicorn, and TVS Apache RTR, besides models from the
stable of Suzuki and Yamaha
Leisure bikes such as Royal Enfields Bullet, Thunderbird and Classic (350cc and
500cc)
Cruiser bikes of Harley Davidson and Triumph
Super bike range consisting of Bajaj Autos Kawasaki Ninja, Hondas CB 1000R,
Suzukis Hayabusa, Yamahas YZF-R1 and bikes introduced by Hyosung, Ducati etc
Bajaj Auto: When Bajaj Auto had launched the Pulsar150 model in 2001, it was with the objective of building a strong brand in a segment where Hero MotoCorp (the
overall market leader) was not as strong as it was in the 100cc commuter segment. The segment itself was quite small then in terms of volumes, but was expected to be
a fast growing one over the next decade. The next decade indeed was a high growth period for the >150cc segment and Bajaj Autos Pulsar was a key brand that helped
expand the segments pie. The company has introduced several line extensions since then two that are >150cc viz., Pulsar 180cc and Pulsar 220cc; and one that is sub
150cc viz., Pulsar 135cc (Pulsar200-NS is also scheduled to be launched in Q1, 2012-13). What had started as a quintessential flanking attack on Hero MotoCorp, and a
successful one too reflected in the >50% market share enjoyed by the Pulsar brand during the better part of the last decade, is now finding itself surrounded by a large
number of competing brands from the stable of Hero MotoCorp, Yamaha, Honda and TVS. Still, the Pulsar family of bikes continues to out-volume the rest by a long
way. From a strategic perspective, the ability of Bajaj Auto to sustain its leadership position in the 150-220cc segment of bikes holds a critical importance for it;
something which can have a virtuous effect on its Discover brand as well. To strengthen its position in the >150cc segment of bikes, in India and internationally, Bajaj
Auto had acquired 14.7% equity stake in the Austria-based KTM Power Sports AG in 2007 and has gradually increased its equity ownership in the company to around
47%. The company also launched the KTM Duke200 in India in January 2007 at a price tag of Rs. 1.17 lakh (ex-showroom, Delhi) and proposes to launch the new Pulsar
200NS in Q1, 2012-13, a model that uses the same platform and engine as the Duke200. Bajaj Auto and KTM plan to take their synergistic product development
partnership further and are understood to be currently developing several new bikes for the domestic and global markets. These initiatives are likely to enable Bajaj
Auto maintain its stronghold in the premium motorcycles space over the medium term.
ICRA LIMITED
Scooters Segment
As the pie grows in size, the number of claimants too on the rise
Table 8: Snapshot of Scooter Brands
OEM
Brand
Pleasure 102cc
Hero MotoCorp
Maestro 109cc
Scooty 88cc
TVS
Wego 110cc
Dio 109cc
Honda
Activa 109cc
Aviator 109cc
Access 124cc
Suzuki
Swish124cc
Piaggio
Vespa 125c
Price (Rs.)
42,000
46,000
42,000-45,000
49,000
44,000
46,000
47,000-52,000
45,000
46,000
67,000
bhp@rpm
6.7@7,000
8.1@7,500
5.0@6,500
8.0@7,500
8.0@7,500
8.0@7,500
8.0@8,000
8.6@7,000
8.6@7,000
9.9@7,500
April 2012
115,846
40,354
27,995
20,073
12,663
9,939
252
802
Market Share
50.8%
17.7%
12.3%
8.8%
5.6%
4.4%
0.1%
0.4%
Like the motorcycles segment, the scooters segment too has experienced a trend in growing segmentation with the category having three differentiated sub-segments
consisting of sub-100cc models, 100cc models and 125cc models, each having its own value proposition and target segment. While the sub-100cc segment scooters are
light weight having fibre-bodies, the 125cc scooters are positioned as power scooters with metal bodies. Amongst these three sub-segments, the 100cc scooters subsegment remains the largest, whose share in the total scooters market increased from 67% in 2010-11 to 70% in 2011-12.
Honda: In the Indian 2W market, one premise that remains valid across 2W segments is that brand strength precedes company primacy. This is evident from the fact
that there is a conspicuous absence of across-the-board market leadership for any one player, or in other words select players enjoy segment-specific leadership.
This is true for the 100cc segment of motorcycles (where Splendor and Passion brands are the clear market leaders), the 150cc segment of motorcycles (where the
Pulsar brand rules the roost) as even the Scooters segment (where Hondas Activa brand far outsells competition). When scooter sales were flagging a decade ago, it
was Hondas Activa brand that had revived the segment and its pioneer coterie of products (Dio, Activa and Aviator) continue to command over 50% market share in
the scooters segment. Honda has regularly refurbished its three scooter offerings over the years, with the latest one being the introduction of the 109cc engine in the
Dio, replacing the earlier 102cc displacement engine. Although over the last couple of years Hondas market share had suffered due to capacity constraints, the
commencement of operations of the companys second plant at Tapukara (Rajasthan), from July 2011 is expected to give it the headroom to scale-up production and
consolidate its market position. We believe competition for Hondas scooters is not strong enough yet, notwithstanding several new product launches by other OEMs
over the last few months (including Heros Maestro, Suzukis Swish and Piaggios Vespa); and the company is expected to retain its top slot in the scooters segment.
Hero MotoCorp: The company had made a debut in the Scooters segment in January 2006 with the launch of the Pleasure model in the ungeared scooters segment,
whose sales volumes have grown from around 92,000 units in 2006-07 to over 400,000 units in 2011-12, a volume CAGR of 35%. The companys market share in the
scooters segment, on the back of its sole brand Pleasure, has also grown from 9.8% to 16.3% during the above period. While the market leaders flagship brand
Activa is positioned as a unisex scooter, Hero MotoCorps Pleasure is targeted at the female population. With the launch of its new product Maestro in March 2012,
targeted at the male population, the company has continued with its strategy (as evident even in other 2W segments) of having specific products for specific market
segments. Overall, we believe Hero MotoCorps scooter volumes to continue to maintain a healthy growth rate over the medium term, in line with the industry,
while maintaining its position as the second largest player in the scooters segment.
ICRA LIMITED
TVS: Based on industry volumes in 2011-12, TVS was the second largest player in the domestic scooters segment with a market share of 19.4%. However, the
companys market share has been sliding sharply since February 2012, being below 15% in each of the last three months. With this, Hero MotoCorps scooter
volumes have overtaken that of TVS with the latter sliding down to the third place in the ranks of the domestic scooters segment. TVS has the widest portfolio of
products in the scooters segment including the 60cc Scooty Teenz, the 88cc Scooty Streak and Scooty Pep+ models and the 110cc Wego model. However, the trend in
demand for sub-100cc scooters has been softening over the last several years, reflected in the reduction in proportion of sub-100cc scooters in the overall scooters
market from 28% in 2006-07 to 15% in 2011-12. To sustain its market share in this growing segment, the company plans to launch two new products in 2012/ 2013
(a) a new 125cc scooter to compete with the likes of Suzuki Access125 and Mahindra Duro125; and (b) a new 100cc hybrid two-wheeler whose test marketing is
proposed to be initiated from June 2012 onwards before its launch in 2013. While the companys product strategy in the scooters segment appears to be targeted at
having models across segments, it will have to be synchronized with the pricing strategy, given that most of the companys offerings currently are priced higher than
competitions.
Suzuki: In terms of value proposition, Suzukis scooter Access125 scores well over competition given that it is a higher powered, higher engine capacity scooter that
also comes along with a penetrative price tag. When other scooters offered by competition were either sub-100cc or 100cc, Suzuki, through the launch of the
Access125 in September 2007, endeavoured to create a new segment of power scooters. Since the first year of its launch, Suzukis market share has increased from
2.3% in 2007-08 to 11.3% in 2011-12, registering a volume CAGR of 86% (on a low base). In February 2012, Suzuki launched a new brand Swish125 that is similar to
the Access125 in terms of platform, features and engine specifications; except that it comes with an improved styling and lower weight (115 kgs Vs 110 kgs) that
should improve fuel efficiency. Since the target segment for both Access125 as well as Swish125 remain the same, we believe the brands are more likely to
cannibalize into each others volumes rather than increase the addressable market for Suzuki.
ICRA LIMITED
Q4 FY12
Q3 FY12
5,350.9
30.7%
789.9
237.4
106.2
658.8
157.2
501.6
5,962.5
11.4%
852.9
280.4
177.4
746.9
143.3
603.6
5,983.6
16.9%
895.1
298.7
127.4
723.8
110.8
613.0
14.8%
OPBDIT/OI (%)
9.4%
PAT/OI (%)
Source: Company Data, ICRA Estimates
Operating Income
Growth (%) - YoY
OPBDIT
PAT
OPBDIT/OI (%)
PAT/OI (%)
Q1 FY11
4,264.6
11.9%
570.5
491.7
13.4%
11.5%
14.3%
10.1%
Q2 FY11
4,511.3
11.7%
567.3
505.6
12.6%
11.2%
ICRA LIMITED
15.0%
10.2%
Q3 FY11
5,118.2
34.2%
533.1
429.0
10.4%
8.4%
Q4 FY11
5,350.9
30.7%
789.9
501.6
14.8%
9.4%
Q1 FY12
5,637.6
32.2%
772.1
557.9
13.7%
9.9%
Q2 FY12
5,784.3
28.2%
873.7
603.6
15.1%
10.4%
Q3FY12
5,983.6
16.9%
895.1
613.0
15.0%
10.2%
Q4FY12
5,962.5
11.4%
852.9
603.6
14.3%
10.1%
5.7
Others
8.8
HMCL
BSE Auto
CNX Nifty
12M
-1.5%
6.4%
-12.9%
Hero MotoCorp
BSE Auto
Bloomberg Code
HMCL
Market Capitalization Rs. 36,879 Cr
Valuations
FY13e
FY14e
Price/Earnings
13.4
12.5
EV/ EBITDA
10.1
8.9
Source: Bloomberg Consensus Estimates
May-12
Operating Income
YoY Growth (%)
OPBDIT
Less: Depreciation
Other Income
Exceptional Gain/Loss
PBT
Less: Tax
PAT
Q4 FY11
DIIs
Jan-12
33.4
M ar-12
52.2
FIIs
Nov-11
Rs 2,378.1 Crore
Promoters
Jul-11
PAT FY12
Brands
Sep -11
May-11
Manufacturing Facilities
Jan-11
Mr. B. M. Munjal
M ar-11
Chairman
[ICRA]AAA
[ICRA]A1+
Stable
Nov-10
1984
Long Term
Short Term
Outlook
Jul-10
Year of Incorporation
Sep -10
May-10
Q4 FY11
4,200.0
23.1%
861.5
30.1
101.0
724.6
1,656.9
256.5
1,400.4
Q4 FY12
4,651.4
11.4%
920.6
43.4
139.5
20.3
1,035.1
263.1
772.0
Q3 FY12
5,063.2
20.2%
1,061.4
32.1
90.8
(58.9)
1,061.2
266.0
795.2
20.5%
OPBDIT/OI (%)
33.3%
PAT/OI (%)
Source: Company Data, ICRA Estimates
19.8%
16.6%
21.0%
15.7%
Operating Income
YoY Growth (%)
OPBDIT
Less: Depreciation
Other Income
Exceptional Gain/Loss
PBT
Less: Tax
PAT
Standalone
Operating Income
Growth (%) - YoY
OPBDIT
PAT
OPBDIT/OI (%)
PAT/OI (%)
Q1 FY11
3,890.1
65.4%
776.9
590.2
20.0%
15.2%
Q2 FY11
4,341.8
49.7%
897.2
682.1
20.7%
15.7%
ICRA LIMITED
Q3 FY11
4,177.1
27.2%
849.3
667.1
20.3%
16.0%
Q1 FY12
4,777.3
22.7%
910.8
711.1
19.1%
14.9%
Q2 FY12
5,267.3
19.3%
1057.4
725.8
20.1%
13.8%
Q3FY12
5,063.2
20.2%
1061.4
795.2
21.0%
15.7%
Q4FY12
4,651.4
11.4%
920.6
772.0
19.8%
16.6%
8.4
Others
25.1
BAL
BSE Auto
CNX Nifty
12M
7.1%
6.4%
-12.9%
Bajaj Auto
M ay-12
Standalone
DIIs
Jan-12
16.4
M ar-1 2
50.0
FIIs
No v-11
Promoters
Ju l-1 1
PAT FY12
Brands
Se p -11
Revenues FY12
M ay-11
Manufacturing Facilities
Jan-11
M ar-1 1
Chairman
NA
NA
NA
No v-10
1945
Long Term
Short Term
Outlook
Ju l-1 0
Year of Incorporation
Se p -10
ICRA Ratings
M ay-10
As domestic volume growth slows down, sustenance of exports momentum becomes crucial for sustaining earnings growth
BSE Auto
Bloomberg Code
BJAUT
Market Capitalization Rs. 43,503 Cr
Valuations
FY12e
FY13e
Price/Earnings
12.8
11.4
Price/Sales
9.5
8.8
Source: Bloomberg Consensus Estimates
Standalone
Q4 FY11
1,633.5
34.6%
109.1
42.1
0.3
61.6
19.9
41.7
Operating Income
YoY Growth (%)
OPBDIT
Less: Depreciation
Other Income
Exceptional Gain/Loss
PBT
Less: Tax
PAT
6.7%
OPBDIT/OI (%)
2.6%
PAT/OI (%)
Source: Company Data, ICRA Estimates
Standalone
Operating Income
Growth (%) - YoY
OPBDIT
PAT
OPBDIT/OI (%)
PAT/OI (%)
Q1 FY11
1,393.0
40.4%
103.7
40.4
7.4%
2.9%
Q4 FY12
1,627.2
-0.1%
98.9
31.7
8.3
62.2
5.0
57.2
6.1%
3.5%
Q2 FY11
1,616.2
42.5%
122.8
54.8
7.6%
3.4%
ICRA LIMITED
Q3 FY12
1,762.2
7.4%
122.3
36.4
0.1
75.6
19.0
56.5
6.9%
3.2%
Q3 FY11
1,646.7
50.4%
117.1
55.8
7.1%
3.4%
Q4 FY11
1,633.5
34.6%
109.1
41.7
6.7%
2.6%
Q1 FY12
1,746.0
24.7%
125.4
58.8
7.2%
3.4%
Q2 FY12
1,991.8
22.8%
146.0
76.5
7.3%
3.8%
Q3FY12
1,762.2
7.4%
122.3
56.5
6.9%
3.2%
Q4FY12
1,627.2
-0.1%
98.9
57.2
6.1%
3.5%
16.5
Others
21.6
TVS
BSE Auto
CNX Nifty
12M
-35.8%
6.4%
-12.9%
TVS Motor
May-12
DIIs
Jan-12
2.6
Mar-12
Revenues FY12
59.3
FIIs
Nov-11
Consolidated
Promoters
Jul-11
Brands
Sep-11
May-11
Manufacturing Facilities
Jan-11
Mar-11
Chairman
NA
NA
NA
Nov-10
1982
Long Term
Short Term
Outlook
Jul-10
Year of Incorporation
Sep-10
ICRA Ratings
May-10
Weaker product portfolio hampers revenue growth; company planning several new 2W model launches in 2012-13
BSE Auto
Bloomberg Code
TVSL
Market Capitalization Rs. 1,634 Cr
Valuations
FY12e
FY13e
Price/Earnings
7.1
6.6
Price/Sales
5.2
4.8
Source: Bloomberg Consensus Estimates
Analyst Contacts
Analysts
Contacts
Mumbai
Subrata Ray
subrata@icraindia.com
anupama@icraindia.com
shamsherd@icraindia.com
jitinm@icraindia.com
0124 4545303
0124 4545328
0124 4545368
pavethrap@icraindia.com
044 45964314
Delhi
Anupama Arora
Shamsher Dewan
Jitin Makkar
Chennai
Pavethra Ponniah
ICRA Limited
An Associate of Moody's Investors Service
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ICRA LIMITED