Two wheeler Industry (motor cycle)

Table of Contents

Auto Mobile Industry................................................................. .Error! Bookmark not defined. 1)Introduction of Two wheeler Industry.5 2) Industry comparison.5 3) Growth in Two wheeler industry....7 4) Future projection of Autos Mobile Industry....7 5) Product segmentation...8 6) Why so much growth?.................................................................................................................9 7) Trends ...10 8) Pest Analysis of the Industry.11 9) porter's 5force analysis.13 10) Opportunities and threats...15 11) KSF.15 12) Demand Drivers.15 13) Reasoning for related diversification.16
14) Conclusion: ......................................................................... Error! Bookmark not defined.7 15) References: .......................................................................................................................... 18

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Two wheeler Industry (motor cycle)

Auto mobile Industry

2 wheeler

3 wheeler

Passenger vehicle

Commercial Vehicle

L.C.V

L.C.V

H.C.V

Motorcycle

Scooters

Scooterettes

Moped

We are focusing on motor cycle industry from two wheeler industry.Firsty TI manufacture 70cc & 125cc than can more introduce

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2)INTRODUCTION TO TWO-WHEELER INDUSTRY: Automobile Industry is one of the largest industries in global market. Two-wheeler segment is one of the most important components of the automobile sector which has been in existence in the country since 1955. India is the second largest two-wheeler market in the world, it stands next to Japan and china in terms of number of two-wheelers produced and sold. In India there are 7 scooters manufacturers, 9 motorcycle manufacturers and 3 mopeds manufacturers. In earlier days Two-wheeler industry had three segments one is bike and other two being Scooters and mopeds, but in present we can see mostly bikes since there is not that much of scooters and mopeds are produced nowadays, due to new technologies and innovation. Recently the biggest seller of scooters that is Bajaj Auto has stopped producing or selling scooters since there is no demand in the market for the scooters. So we are mainly going to look at the bikes in twowheelers industry. Bikes are also divided in to two groups automatic gear bikes and gear twowheelers, again gear bikes are classified in to two-stroke engine and four stroke engine. 3) INDUSTRY COMPARISON: According to SIAM (Society of Indian Automobile Manufacturers), the domestic market share in 2008-09 for two-wheelers industry is 76.49% which is highest when compared to the category wise market share with passenger vehicles, commercial vehicles and three wheelers which has market share of 15.96, 3.95 and 3.6 respectively as shown in Table no.1. TABLE: 1 Passenger Vehicles Commercial Vehicles Three wheelers Two wheelers CHART: 1 DOMESTIC MARKET SHARE FOR 2008-09 15.96% 3.95% 3.6% 76.49%

Passenger Vehicles Commercial Vehicles Three wheelers Two wheelers

Aggressive marketing by the auto finance company have also played enormous and significant role in boosting automobile demand, because it highly influenced the middle income
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group people to go for the two wheeler. Sometimes even low income group people afford to buy two-wheelers because of easy installment options. Even in Automobiles Export trends two-wheeler Industry captures the first position in terms of number of vehicles sold in a year when compared to that of passenger vehicles, commercial vehicles and three wheelers. From seeing Table no.2 we can clearly see that twowheeler has played major role in all the three years and also market share of key players have given in chart no.2 which shows her0-honda covering major portion compared to all others. Automobile Export trends Table: 2 YEAR Passenger vehicles Commercial vehicles Three-wheelers Two-wheelers 2006-07 198452 49537 143896 619644 2007-08 218401 58994 141225 819793 2008-09 335739 42673 148074 1004174

CHART: 2 MARKET SHARE OF MAJOR PLAYERS IN TWO-WHEELER INDUSTRY:

14%

18%

Tvs motors Bajaj auto ltd

41%

27%

Hero honda Others

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4) Growth in Two wheeler industry:

Two wheeler production units in India constitute of Japanese OEMS (Original Equipment Manufacturers) which include Hero Honda Motors, Honda Motorcycle & scooter India (P) Ltd., Yamaha Motor India (P) Ltd. & Suzuki Motorcycle India (P) Ltd. and Indian OEMs consisting of Bajaj Auto L t d . , TVS Motor Company Ltd., LML Ltd., Kinetic Engineering Ltd., Majestic Auto Ltd., Kinetic Motor Company Ltd. and Royal Enfield of Eicher Ltd. Out of the aforementioned, Hero Honda accounts for 39.55%, Bajaj Auto about 26.87%, TVS Motors 17.98%, Honda Motors 7.94%, Yamaha Motors 3.27%, LML 1.41% and the remaining 2.98% of the total 2 wheelers production in the country. The exports of two wheelers made a significant growth from a level of 180,000 in 2002-03 to reach 513,000 nos. in 2005-06. The latest estimates put up production of 2 wheelers to 13.6 million by 2009.

5) Future projection of Autos Mobile Industry

With the domestic auto industry now moving in step with the WTO covenants, the stage is set for it to make rapid strides domestically and internationally to attain its rightful place in the world trade. A global recession for last two years notwithstanding, the industry has shown appreciable resilience and adjusted to the challenges of the environment. Based on the general growth projections indicated by the Planning Commission of India for the next five-year period,
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automobile industry is expected to register growth pattern as given below. This growth estimate implies certain assumptions relating to segment-wise growth rates based on a study conducted by the National Council of Applied Economic Research (NCAER).

6) WHY SO MUCH GROWTH??? In India major key players in two wheeler industry are Hero Honda Motors Ltd (HHML), Bajaj Auto, Yamaha and TVs motor company Ltd. In 2008-09 Hero Honda is positioned at number one in terms of maximum number of vehicles sold in a year. Since bikes are available with gears and without gears, two strokes and four stroke and also bikes are available in different kind of cc (which implies speed of the bike in technical terms) which varies from 100cc to 350cc. Because there is lot of difference given to people it attracts more segments of people, it attracts both the gender since bikes are available with gears and without gears and it attracts age group from 12 to 56. But in India as per driving rules license is given to the people only when they attain the age of 18. But nowadays even people aged before 12 are used to drive bike and also above the age of 56. Since lot of technologies has developed in two-wheelers like push start,
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maximum mileage bike, alloy wheels, disc break etc it makes most of the people to go for the two-wheeler and also it attracts low middle income group people to high income group people since bikes are available from low-end to very high-end in terms of technology and money. Apart from this the factor which influence the growth of two-wheeler industries are as follows: y y y y y y Lower interest rates Easing liquidity situation Modernization of young generation A well-equipped middle- class transport Fuel-Efficient Comfort level.

PRODUCT SEGMENTATION INDUSTRY: HERO HONDA:

OF

MAJOR

PLAYERS

IN

TWO-WHEELER

Up to 100cc CD Dawn, CD Deluxe, Splendor plus, Splendor NXG, Passion plus. 100 to 135cc Glamour, Super Splendor. More than 150cc - Achiever, CBZ- extreme, Hunk and Karizma.

BAJAJ: Up to 100cc Platina, 100 to 135cc XCD- 125 DTS Si, Discover 135, Kristal DTSi. More than 150cc- Pulsar- 150, 180, 200, 220 DTSi, Avenger DTSi. TVS MOTORS: Up to 100cc Scooty pep+, Star City 100 to 135cc Flame, Victor GLX More than 150cc- Apache RTR. .

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7) Trends:
The motorcycle industry has seen several notable trends emerge in recent years. Since 2003 the numbers of households that own motorcycles, the number of women who ride motorcycles and the number of younger motorcycle riders on the road have all increased, according to the Motorcycle Industry Council. As motorcycles become an increasingly common sight on Insian streets and driveways and motorcycle riding becomes more accepted by non-riders, the profile of the average motorcycle owner is changing. 8) PEST ANALYSIS ON TWO-WHEELER INDUSTRY: Political, economic, social and technology are those factors which affects the external environment

Political Factors:
Tax policies, trade regulation, political influence and some of the rules and regulation of government policies which is considered in political analysis. y y y y Government policies such as reduction in excise duty from 24% to 16% and allowing for 100% FDI Allowing automatic approval for foreign equity investment up to 100 per cent, with no minimum investment criteria. Establish an international hub for manufacturing small, affordable passenger cars as well as tractors and two wheelers. y Ensure a balanced transition to open trade at minimal risk to the Indian economy and local industry. y y y Assist development of vehicles propelled by alternate energy sources. Laying emphasis on R&D activities carried out by companies in India by giving a weighted tax deduction of up to 150 per cent for in-house research and R&D activities. y Plan to have a terminal life policy for CV along with incentives for replacement for such vehicles. y Promoting multi-modal transportation and the implementation of mass rapid transport systems.
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Economic Factors:
Economic factor are those which is influenced by economic growth, interest rate, exchange rate and inflation rate. Abundant and low cost labor coupled with local availability of raw material like steel, aluminum and natural rubber has placed India amongst the low cost producing centers of two-wheelers. Consequently, CARE Research anticipants buoyant growth in two-wheelers exports as well. Abundance of low labour and raw material gives India an upper hand in the export. Since many auto finance company laid easy installment rules with less interest rate it makes more segment people to go for it.

Social Factors:
Social aspects of two-wheelers industry are Popularity, Subculture, Mobility and safety. In numerous cultures, motorcycles are the primary means of motorized transport. India is the second largest motorcycle markets in the world next to China. Socially many motor cycle organization raise money for charities through organized ride and events. Many people ride motorcycle for various reasons, those reasons are increasingly practical, with riders opting for a powered two-wheeler as a cost-efficient alternative to infrequent and expensive public transport system, or as a means of avoiding or reducing the effect of urban congestion. Motor-cycle gives a great advantage to the specified designation where other buses cannot enter. Since there is a rule in some of the main states and cities in India to wear helmet while riding two-wheelers to make them safe from accidents makes two-wheeler riders to have a safe journey.

Technological Factors:
Technical Aspects in Two-wheeler industry includes construction, fuel economy, electric motorcycles, dynamics and accessories. Two-wheeler construction is the engineering, manufacturing, and assembly of components and systems for two-wheelers which results in performance, cost and aesthetics desired by the designers. Construction of two-wheeler includes steel, aluminum frame, telescopic forks and disc brakes. Motorcycle is the best fuel economy mode of transport, Nowadays two-wheelers is designed to give more than 80km mileage per liter with low maintenance cost. Invention of Electric motorcycle gives an added advantage since the two-wheeler users can avoid using petrol. Different types of two-wheelers have different dynamics and these plays a vital role in
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their performance. Since sufficient bike accessories are available in many place two-wheeler riders has a privilege to change the broken parts very easily.

9) PORTERS 5 FORCES ANALYSIS

Porters five forces Model of Competition are as follows: y y y y y Rivalry among competing sellers Potential new entrants Substitute products Competitive pressures from supplier - seller relations: Bargaining power Competitive pressures from seller buyer relations: Bargaining power.

Intensity of Rivalry: The key players in two-wheeler industries are Hero Honda motor ltd. (HHML), Bajaj Auto ltd and TVS motor Company ltd. The other players are Kinetic, Lml, Yamaha, Majestic auto ltd, Royal Enfield ltd and Honda motorcycle & scooter India. Two-wheelers domestic market growth rate for 2008-09 is 76.49% which is very high when compared to that of three wheelers, Passenger and commercial vehicles. The standardized product used in manufacturing of twowheelers is steel, aluminum and rubber, because there are many industries in India for manufacturing those standardized product the production is going smooth. Sales of twowheelers are very high when compared to that of three wheelers, Passenger and commercial vehicles. Indian Auto policy 2002 gives added advantage to two-wheeler manufacturers to enter even other countries outside India. Since big manufacturer plant with high technology and good R&D team needed many of them dose not enter in two two-wheeler Industries. Only the companies which are in automobile line will expand their product line like Mahindra.

Threat of New Entrants: Capital investment is very huge in two-wheeler industries since large plant and large machineries needed with skilled labours and good R&D team needed for producing two-wheelers. Since high technology and raw material resources are abundant to produce the production cost is less in producing two-wheelers. Since each company in industry change the model on going basis to show differentiation among their competitors because of this there is more learning and experience in this field. Each company in industry not only makes differentiation in their product strategy but also makes differentiation in the promotional strategy to create brand preference

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and loyalty. Because of low cost production, this industry enjoys good growth rate and profitability. Threat of Substitute: Substitute products for two-wheeler industries are bus transportation, Auto transportation and even low-end cars, but people using two-wheelers can only use the service of buses and auto as a substitute product. Sometimes low-end car is a substitute product for the people using high-end motor cycles. Because nowadays there is lot of segment in buses in urban areas and the private companies also influenced very much, buses are available from normal buses to hi-tech ac buses which is threat to two-wheeler industry. Since only two people can travel in a bike most of them uses auto when they go out with their family and if they are affordable to buy car will use car instead of auto. Since bus service has increased when compared to five years back people who are aged above 45 years uses buses because of their health condition. These are the substitute product available to two-wheelers. Supplier Seller Relations: (Bargaining power of suppliers) Since their selling units are very high in two-wheeler industry and because of many competitors supplier are very high. Since they change their models on going basis they create good relationship between their suppliers. Some of the components in two-wheeler industry are very common for all the two-wheeler industries like steel, aluminum, tyres and tubes, these material are available in abundant. This makes them to drive a smooth production of their finished products.

Seller Buyer Relations: (Bargaining power of buyers) Buyer has added advantage than seller because there are five to six big popular brands of twowheelers are available in India, so that they can switch brand from one another. Since full information is available to the buyers about their product details and their prices buyers are fully aware of seller costs and products. Buyers are very conscious in spending their money to purchase two-wheeler, because it attracts most of the middle-income groups seller cannot price their product very high. Nowadays people go to unique brand because of the good service they provide after purchase. Because service centers and spare parts shop available to their customer very near to their place buyer sometimes do not mind spending little money extra. These factors create good relationship between them.

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10) KSF
 Product design and quality In motor cycle industry survival innovative product design and quality is compulsory to attract the customers like youth Technological up-gradation The industry players need to replace their old machinery with latest updated machinery that does reduce production time and cost of the products.  Research & development The industry players more focus on the research and development to create innovation in products. By the innovative products they can compete domestic market as well as the international market.  Cost competitiveness Industry players and new comers use new technology and install plants to reduce the production cost by this they can penetrate in the market and gain more market shares. Companies offer motor cycles at low price because Nano car already attack to the motor cycle industry.  Customer satisfaction & loyalty Companies offer low price and high quality motor cycles with design through this can succeed in the industry and can make customers loyal with their brands.  Distribution network Companies in motor cycle industry must have strong retail and distribution network for presence of motor cycle in all over the country.

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 Financial capital The financial capital is necessary to sustain and compete in the industry because huge investment is required otherwise no one sustain and enter in this industry.  Market shares: The companies in cycle industry offer low cost and high quality products to customers focus on rural and urban areas to gain market shares.  Brand Image: Indian people are brand conscious as given information in the case that people purchase cycle which are recommended by other person(cyclist, friends).

11) Opportunities and threats from Pest and Porter:

OPPORTUNITIES  Double-digit growth in two-wheeler market.  Untapped market above 180 cc in motorcycles.  More maturity and movement towards higher-end motorcycles.  The growing gearless trendy scooters and scooterette market.  Growing world demand for entry-level motorcycles especially in emerging markets. THREATS  The competition catches-up any new innovation in no time.  Threat of cheap imported motorcycles from China.

 Margins getting squeezed from both the directions (Price as well as Cost)

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12) Demand Drivers: 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;  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.

13) Reasoning for related diversification from Bicycle to Motor cycle industry:
 We are doing related diversification from Cycle industry to auto industry. In auto industry we are focusing on two wheeler ( motor cycle). We take the decision by critically analyze the value chain and core competency of TI cycle(tube investment of group).It is feasible for TI cycle of India to enter in the auto industry on the base of the following reasons  TII( tube investment of group) is already manufacturing steel tubes, roller chain, saddle, car door flames, auto motives and industrial chain and has special fitting plant of cycle with the collaboration of Brampton fitting Ltd.U.K.It can get more help through backward integration for making motor cycle because almost same material is used in motor cycle as Rim,Tubes,Handle,cahin except engine.  TII has engineering company can get help from its expertise and can get better technology from Japan by doing collaboration as they have with UK companies.  TI has strong distribution network all over the India (1,500 direct dealers under whom there are over 10,000 indirect outlets across the country. About 600 of these are trained outlets, including 180 exclusive BSA-GO stores and warehouses in more than 12 cities) The company expects that the number of retail outlets to increase to 700 and exclusive stores to 250 by the end of the next financial year. So it will be help full for company to distribute and increase the presence of motor cycle all over the India.
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 The growing preference for two-wheelers has affected the purchase of bicycles in India so thats why company needs to enter in the auto industry (motor cycle).  TI Company also has strong back of morgrappa group which has 29 companies from which 12 are listed. Therefore it will be not difficult to diversify in suitable condition. They have strong financial position, brand loyalty and good brand image in the market.  The core competency of TI is strong distribution network, technology and research department so it is the main requirement to enter in the auto industry. Also through this can introduce new models and reduce cost to attract the customers.  Indian motor cycle market is growing fastly by 76.49% which is high as compare to three wheeler, commercial vehicles and passenger vehicle.  Indian government give tax relief to the manufacture and most of the people to go for the two-wheeler and also it attracts low middle income group people to high income group people since bikes are available from low-end to very high-end in terms of technology and money.  Abundant and low cost labour coupled with local availability of raw material like steel, aluminum and natural rubber has placed India amongst the low cost producing centers of two-wheelers.  India is the second largest motorcycle markets in the world next to China.the market is increasing day by day.  People prefer two-wheeler as a cost-efficient alternative to infrequent and expensive public transport system, or as a means of avoiding or reducing the effect of urban congestion.  TI sponsor to different event and arrange marathon race so company can advertise motor cycle properly to increase customer loyalty and brand image.  If we see porter 5 forces in which 4 forces are high and one power is low but on the other hand pest analysis show favorable condition to enter in the industry. For TI there is no difficulties because TI give parts to Honda and Bajajetc.Just TI needs engine technology it can collaboration with any Japanese companies.

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14) Recommendations; My recommendation to the two-wheeler industry: Nowadays designing of two-wheelers industries seems to be aiming only at youngsters; they have to aim at providing some technology which also convinces people who are aged above 40. Many of them are affected with back pain while riding low or middle cost two-wheeler and also shock-ups life is very minimum. They have to think on these technologies and give some added on facilities to their products. Sometimes there is variation between the mileages too, i.e. they promises us that their product would give 80 Km/per liter but product will result in giving lesser than that even after following their guidelines. Because of the different segments in two-wheeler industry, 100cc segment two-wheelers demand falls down which has traditionally enjoyed the maximum market share. The two-wheeler industry should concentrate on reducing their bike prices because there is not that much difference of price between high-end bikes and low-end cars (e.g.: Nano).

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15) REFERENCES:

www.siamindia.com www.fadawebs.com Thompson, AA (2005) Crafting and Executing Strategy, McGraw Hill, New York, 14th Edition http://www.tvsmotor.in/ http://www.herohonda.com/ http://www.bajajauto.com/

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