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India is the second largest manufacturer of 2-Wheelers in the world. It stands next only to
Japan & China in terms of number of 2-wheelers produced & sold respectively (with total
sales volume of over 4.8 million in 2002-03 & over 5.3 million in 2003-04). Last few years
have not only seen rapid growth in the industry but also structural changes within the
industry. While the total market has grown at a CAGR of 11% (in the 10 years from 1993-94
to 2002-03), the motorcycle market has grown at a CAGR of 23% in the same period with
scooter market at an almost same level & a “negative CAGR” of -3% in the mopeds segment.
Each of the components of 2-W industry (m’cycle, scooters & mopeds) has distinct profile.
Motorcycles
Hero Honda, Bajaj & TVS capture 80% share
Over 3.7 million motorcycle units were
Players in Motorcycle Market
sold in 2002-03. The growth in motorcycle
sales has been largely assisted by
100%
increasing affordability. This comes in two 90%
1,412,279
1,029,591
1,654,703
30%
model starting with prices above Rs
761,700
530,600
407,563
20%
150456
1995-96 230194
1994-95 183671
1996-97 268945
1997-98
1998-99
1999-00
2000-01
2001-02
2002-03
level of Bajaj’s ‘Boxer’ now available at
less than Rs 30,000 per unit. Eventually,
Hero Honda Bajaj TVS Yamaha Other (LML, Kinetic etc)
the price difference between a ‘boxy’
geared scooter and a ‘sleek-cum-trendier’
motorcycle has narrowed.
This has also aided the shift in demand towards m’cycles. Besides, the consistent fall in
interest rates has also benefited the industry immensely (about 40% of motorcycles are now
financed as compared to 25% three years ago.
Secondly, rising double income families and urbanisation have also led the change in
consumer preference. For quantification purpose, the NCAER estimate suggests that the
consuming class as a percentage of total households in India in FY95 was 29 m (17%).
NCAER expects the mix to change considerably with the consuming class expected to touch
91 m households in FY07 (46%). This has also been a driving factor for the industry in the
last few years.
The motorcycle sales is typically divided into 3 segments :
Economy Segment (100cc), < Rs 35,000
Bajaj Boxer With 1.2 million units (19% y-o-y growth) sold in 2002-03,
32% of total motorcycle sales is in Economy. Bajaj Boxer (in
TVS MAX 4 variants – AT, CT, CT DLX & K-Tec) is the market leader.
Hero Honda CD, JOY, SS, CD Dawn Bajaj sells around 50,000 units p.m. (about 50% market-
Yamaha Crux share). These are popular in semi-urban & rural areas. TVS is
in 2nd place. Hero Honda (till now considered not a serious
Kinetic Boss player) has launched Dawn in the segment.
Executive Segment (100-115cc), Rs 35,000 - Rs 45,000
Bajaj Caliber With 2.12 million units (26% y-o-y growth) sold in
2002-03; 57% of motorcycle sales is in this segment.
Hero Honda Splendor, Passion Hero Honda is dominating (over 50% market-share)
TVS Victor this segment since last 5 years. Its product Splendor is
LML Freedom the largest selling motorcycle in the world (75000-
80000 units p.m.) It is being threatened by success of
Yamaha Libero, RX Series Victor (TVS 2nd placed now). Typical consumers of
Kinetic Challenger this segment are in 30-45 yrs age group who prefer
m’cycle with more stability & comfort.
Scooter
The scooter industry is led by Bajaj & has suffered at the expense of growth in motorcycle.
The major reason has been lack of product innovation in the geared scooters (the scooter
market is divided into the geared & un-geared category -combined sales of about 70,000 units
per month, with the latter having escaped the slowdown witnessed by the geared category).
The introduction of new products in the ungeared category by new players like Honda
Scooters (sold 1.55 lac units in 2002-03 capturing 18% marketshare in total scooter market).
Honda Motorcycles & Scooters (HMSI) having already launched Activa & Dio, is expected
800,000
Honda
700,000
31%
600,000
500,000
Units sold
TVS
400,000
47%
300,000
200,000
100,000
- Kinetic
8%
to further boost the product innovation in this segment. Kinetic Motors has pitched Nova
against Activa.
Moped
The moped industry appears to be a sinking ship (only 3.1 lac units sold in 2003-04 after 3.3
lac units of 2002-03; declined 29% in FY’03 ) & therefore has not been dealt in detail.
However it is worthwhile to mention that TVS is a major player in the field capturing over
73% market-share during 2002-03 (67% in the previous year) inspite of its sales having fallen
to 2.45 lac units in 2002-03 (previous year 2.67 lac units).
The growth of 2-wheelers (total population of over 45 million in India) can be partly
explained by the shift in income groups of Indian households (particularly post
liberalization). The NCAER in its latest report on market demographics has clearly indicated
that post-liberalization (ie FY92 to FY96) Indian households have graduated to higher
income groups as can be seen in the table below.
Distribution Of Households In %age
Annual income Income group FY86 FY96
(Rs at FY96 prices) Urban Rural Total Urban Rural Total
<=25,000 Low 42.1 73.6 65.2 27.9 57.2 48.9
25,001 - 50,000 Low Middle 35.8 21.4 25.2 34.9 29.0 30.7
50,001 - 77,000 Middle 15.2 4.0 6.9 20.3 8.6 11.9
77,001 – 106,000 Upper Middle 3.9 0.7 1.5 9.6 3.1 5.0
> 106,000 High 3.1 0.3 1.1 7.3 2.0 3.5
As seen from the above tables, the number of households in the low income group has fallen
since FY86 and has been more pronounced in the post-reform period. On the other hand, the
number of households in the middle, upper middle and high income groups, which form the
consumer base for two wheelers, have increased.