Two Wheller in India

8/8/2019 Two Wheller in India

1/27

Two Wheelers in India

India, is the second largest producer of

two wheelers in the world. In the last few years,the Indian two-wheeler industry has seen

spectacular growth. The country stands next to

China and Japan in terms of production and

sales respectively.

Majority of Indians, especially the youngsters

prefer motorbikes rather than cars. Capturing alarge share in the two-wheeler industry, bikes

and scooters cover a major segment. Bikes are

considered to be the favorite among the youth

generation, as they help in easy commutation.

Large variety of two wheelers are available inthe market, known for their latest technology

and enhanced mileage. Indian bikes, scooters

and mopeds represent style and class for both

men and women in India.

Benefits of two wheelers

Two-wheelers are the most popular and highly

sought out medium of transport in India. The

trend of owning two-wheelers is due to its-


2/27

Economical price

Safety

Fuel-efficient

Comfort level

However, few Indian bike enthusiasts prefer

high performance imported bikes. Some of the

most popular high-speed bikes are Suzuki

Hayabusa, Kawasaki Ninja, Suzuki Zeus, HeroHonda Karizma, Bajaj Pulsar and Honda

Unicorn. These super bikes are specially

designed for those who have a zeal for speedy

drive.

Browse through the pages and catch all the

details of high-performance two wheelers inIndia. Know more about latest launches and

happenings in two wheelers industry.


3/27

Indian Two-Wheeler Industry

ICRA Sectoral Analysis - Jan 2005

INTRODUCTION

The Indian automotive industry consists of five

segments: commercial vehicles; multi-utilityvehicles & passenger cars; two-wheelers; three-

wheelers; and tractors. With 5,822,963 units sold

in the domestic market and 453,591 unitsexported during the first nine months of FY2005

(9MFY2005), the industry (excluding tractors)marked a growth of 17% over the correspondingprevious. The two-wheeler sales have witnessed a

spectacular growth trend since the mid nineties.

Two-wheelers: Market Size & Growth

In terms of volume, 4,613,436 units of two-

wheelers were sold in the country in 9MFY2005with 256,765 units exported. The total two-

wheeler sales of the Indian industry accounted foraround 77.5% of the total vehicles sold in the

period mentioned.

Figure 1

Segmental Growth of theIndian Two Wheeler

Industry (FY1995-2004)


4/27

After facing its worst recession during the early

1990s, the industry bounced back with a 25%

increase in volume sales in FY1995. However, themomentum could not be sustained and sales

growth dipped to 20% in FY1996 and further downto 12% in FY1997. The economic slowdown in

FY1998 took a heavy toll of two-wheeler sales,with the year-on-year sales (volume) growth ratedeclining to 3% that year. However, sales picked

up thereafter mainly on the strength of an increasein the disposable income of middle-income salariedpeople (following the implementation of the Fifth

Pay Commission's recommendations), higheraccess to relatively inexpensive financing, and

increasing availability of fuel efficient two-wheelermodels. Nevertheless, this phenomenon proved

short-lived and the two-wheeler sales declinedmarginally in FY2001. This was followed by arevival in sales growth for the industry in FY2002.

Although, the overall two-wheeler sales increasedin FY2002, the scooter and moped segments faced


5/27

de-growth. FY2003 also witnessed a healthygrowth in overall two-wheeler sales led by higher

growth in motorcycles even as the sales of

scooters and mopeds continued to decline. Healthygrowth in two-wheeler sales during FY2004 was ledby growth in motorcycles even as the scooterssegment posted healthy growth while the mopeds

continued to decline. Figure 1 presents thevariations across various product sub-segments of

the two-wheeler industry between FY1995 and

FY2004.

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 syst

especially in the semi-urban and rural a Increased availability of cheap consumer f

in the past 3-4 years; Increasing availability of fuel-efficient an

maintenance models;

Increasing urbanisation, which creates a personal transportation;

Changes in the demographic profile Difference between two-wheeler and pas

car prices, which makes two-wheelers


6/27

entrylevel vehicle; Steady increase in per capita income ov

past five years; and

Increasing number of models with diffefeatures to satisfy diverse consumer n

While the demand drivers listed here operate at

the broad level, segmental demand is influencedby segment-specific factors.

MARKET CHARACTERISTICS

Demand

Segmental Classification and Characteristics

The three main product segments in the two-

wheeler category are scooters, motorcycles andmopeds. However, in response to evolvingdemographics and various other factors, other

subsegments emerged, viz. scooterettes, gearlessscooters, and 4-stroke scooters. While the first two

emerged as a response to demographic changes,the introduction of 4-stroke scooters has followed

the imposition of stringent pollution control normsin the early 2000. Besides, these prominent sub-segments, product groups within these sub-segments have gained importance in the recent

years. Examples include 125cc motorcycles, 100-


7/27

125 cc gearless scooters, etc. The characteristicsof each of the three broad segments are discussed

in Table 1.

Table 1Two-Wheelers: Comparative

Characteristics

ScooterMotorc

ycleMoped

Price*(Rs. asin January

2005)

>

22,000

>

30,000

>

12,000

Stroke2-stroke,4-stroke

Mainly4-stroke

2-stroke

Engine

Capacity (cc)90-150

100,

125, >125

50, 60

Ignition Kick/Electronic

Kick/Electronic

Kick/Electroni

c

Engine Power(bhp)

6.5-97-8 andabove

2-3

Weight (kg) 90-100 > 100 60-70

Fuel Efficiency

(kms per litre)

50-75 50-80+ 70-80

Load Carrying High Highest Low

*Ex-showroom MumbaiCompiled by INGRES


8/27

Segmental Market Share

The Indian two-wheeler industry has undergone a

significant change over the past 10 years with thepreference changing from scooters and mopeds tomotorcycles. The scooters segment was the largesttill FY1998, accounting for around 42% of the two-

wheeler sales (motorcycles and mopeds accountedfor 37% and 21 % of the market respectively, that

year). However, the motorcycles segment that had

witnessed high growth (since FY1994) becamelarger than the scooter segment in terms of

market share for the first time in FY1999. BetweenFY1996 and 9MFY2005, the motorcycles segmentmore than doubled its share of the two-wheeler

industry to 79% even as the market shares ofscooters and mopeds stood lower at 16% and 5%,

respectively.

Figure 2

Trends in Segmental Share inIndustry Sales (FY1996-

9MFY2005)


9/27

While scooter sales declined sharply by 28% in

FY2001, motorcycle sales reported a healthy

growth of 20%, indicating a clear shift in consumerpreference. This shift, which continues, has been

prompted by two major factors: change in thecountry's demographic profile, and technological

advancements.

Over the past 10-15 years the demographic profile

of the typical two-wheeler customer has changed.The customer is likely to be salaried and in the first

job. With a younger audience, the attributes thatare sought of a two-wheeler have also changed.Following the opening up of the economy and the

increasing exposure levels of this new targetaudience, power and styling are now as important

as comfort and utility.

The marketing pitch of scooters has typically

emphasised reliability, price, comfort and utilityacross various applications. Motorcycles, on the


10/27

other hand, have been traditionally positioned asvehicles of power and style, which are rugged and

more durable. These features have now been

complemented by the availability of new designsand technological innovations. Moreover, highermileage offered by the executive and entry-levelmodels has also attracted interest of two-wheeler

customer. Given this market positioning ofscooters and motorcycles, it is not surprising that

the new set of customers has preferred

motorcycles to scooters. With better groundclearance, larger wheels and better suspension

offered by motorcycles, they are well positioned tocapture the rising demand in rural areas wherethese characteristics matter most.

Scooters are perceived to be family vehicles, which

offer more functional value such as broader seat,bigger storage space and easier ride. However,with the second-hand car market developing, a

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

Nevertheless, the past few years have witnessed ashift in preference towards gearless scooters (that

are popular among women) within the scooterssegment. Motorcycles, offer higher fuel efficiency,greater acceleration and more environment-friendliness. Given the declining difference in prices

of scooters and motorcycles in the past few years,


11/27

the preference has shifted towards motorcycles.Besides a change in demographic profile,

technology and reduction in the price difference

between motorcycles and scooters, another factorthat has weighed in favour of motorcycles is thehigh re-sale value they offer. Thus, the customer iswilling to pay an up-front premium while

purchasing a motorcycle in exchange for lowermaintenance and a relatively higher resale value.

Supply

Manufacturers

As the following graph indicates, the Indian two-

wheeler industry is highly concentrated, with threeplayers-Hero Honda Motors Ltd (HHML), Bajaj Auto

Ltd (Bajaj Auto) and TVS Motor Company Ltd(TVS) - accounting for over 80% of the industrysales as in 9MFY2005. The other key players in the

two-wheeler industry are Kinetic Motor CompanyLtd (KMCL), Kinetic Engineering Ltd (KEL), LML Ltd

(LML), Yamaha Motors India Ltd (Yamaha),Majestic Auto Ltd (Majestic Auto), Royal Enfield Ltd

(REL) and Honda Motorcycle & Scooter India (P)Ltd (HMSI).

Figure 3Shares of Two-Wheeler

Manufacturers in Industry Sales


12/27

(FY2000-9MFY2005)

Although the three players have dominated themarket for a relative long period of time, theirindividual market shares have undergone a majorchange. Bajaj Auto was the undisputed market

leader till FY2000, accounting for 32% of the two-wheeler industry volumes in the country that year.

Bajaj Auto dominance arose from its complete hold

over the scooter market. However, as the demandstarted shifting towards motorcycles, the company

witnessed a gradual erosion of its market share.HHML, which had concentrated on the motorcyclesegment, was the main beneficiary, and almost

doubled its market share from 20% in FY2000 to40% in 9MFY2005 to emerge as the market leader.

TVS, on the other hand, witnessed an overalldecline in market share from 22% in FY2000 to18% in 9MFY2005. The share of TVS in industry

sales fluctuated on a year on year basis till FY2003as it changed its product mix but has declined


13/27

since then.

Technology

Hitherto, technology transfer to the Indian two-wheeler industry took place mainly through:licensing and technical collaboration (as in the case

of Bajaj Auto and LML); and joint ventures(HHML).

A third form - that is, the 100% owned subsidiaryroute - found favour in the early 2000s. A case in

point is HMSI, a 100% subsidiary of Honda, Japan.Table 2 details the alliances of some major two-wheeler manufacturers in India.

Besides the below mentioned technology alliances,

Suzuki Motor Corporation has also followed thestrategy of joint ventures (SMC reportedly acquiredequity stake in Integra Overseas Limited for

manufacturing and marketing Suzuki motorcyclesin India).

Table 2Technological tie-ups of Select Players

Nature of

AllianceCompany

Produ

ct

BajajAuto

Technological tie-up

Kawasaki HeavyIndustries Ltd,

Motorcycles


14/27

Japan

Technological tie-up

Tokya R&D CoLtd, Japan

Two-wheele

rsTechnological tie-up

Kubota Corp,Japan

DieselEngines

HHML Joint

Venture

Honda Motor Co,

Japan

Motorc

ycles

KEL Technologic

al tie-up

Hyosung Motors &

Machinery Inc

Motorc

yclesKEL Tie up for

manufacturing

anddistribution

Italjet, Italy Scooter

s

LML Technologic

al tie-up

Daelim Motor Co

Ltd

Motorc

yclesHero

Motors

Technologic

al tie-up

Aprilia of Italy Scooter

s

Compiled by INGRES

With the two-wheeler market, especially the

motorcycle market, becoming extremelycompetitive and the life cycle of products gettingshorter, the ability to offer new models to meet

fast changing customer preferences has becomeimperative. In this context, the ability to deliver


15/27

newer products calls for sound technologicalbacking and this has become one of the critical

differentiating factor among companies in the

domestic market. Thus, the players have increasedtheir focus on research and development withsome having indigenously developed new modelsas well as improved technologies to cater to the

domestic market. Further, with exports being oneof the thrust areas for some Indian two-wheeler

companies, the Indian original equipment

manufacturers (OEMs) have realised the need toupgrade their technical capabilities. These relate to

three main areas: fuel economy, environmentalcompliance, and performance. In India, because ofthe cost-sensitive nature of the market, fuel

efficiency had been an interest area formanufacturers.

It is not only that the OEMs are increasing theirfocus on in-house R&D, they also provide support

to the vendors to upgrade the technology and alsoassist them striking technological alliances.

TRENDS IN THE TWO-WHEELER INDUSTRY

Companies raising capacity to meet thegrowing demand

All the major two-wheeler manufacturers, viz.


16/27

Bajaj Auto, HHML, TYS, HMSI and others, haveincreased their manufacturing capacities in the

recent past. The total capacity of these players

stood at 7.8 million units per annum (FY2003) asagainst total market sales of 3.8 million units inFY2002. Most of the players have either expandedcapacity, or converted their existing capacities for

scooters and mopeds into those for manufacturingmotorcycles. The move has been prompted by the

rapid growth reported by the motorcycles segment

since FY1995.

HHML increased the capacity of its plants from 1.8million units in FY2003 to 2.25 million in FY2004and has been able to achieve 92% capacity

utilisation. In light of the increase in demand formotorcycles, the company plans to set up a new

plant. Since its entry in the Indian market duringFY2002, HMSI has aggressively expanded itscapacity.

Niche markets also witnessing intense

competition

A significant trend witnessed over the past fiveyears is the inclination of consumers towardsproducts with superior features and styling. Betterawareness about international models has raised

expectations of consumers on some key attributes,


17/27

especially quality, styling, and performance. Highcompetitive intensity has prompted players to

launch vehicles with improved attributes at a price

less than the competitive models.

In an effort to satisfy the distinct needs ofconsumers, producers are identifying emerging

consumer preferences and developing new models.For instance, in the motorcycles segment,

motorcycles with engine capacity over 150cc, is a

segment that has witnessed significant newproduct launches and hence, become more

competitive. The indigenously launched Pulsar 150had met with success on its launch and thereafter,a host of models have been launched in this

segment by various players. While Bajaj Autolaunched the Pulsars (150 and 180 cc) with digital

twin spark technology (DTSi) that offers a powerfulengine and fuel efficiency of 125 cc models, modellaunches by other players include LML's

Graptor/Beamer, HMSI's Unicorn besides theHHML's CBZ (improved version launched in 2003-

04) and TVS' Fiero F2. Moreover, in the recentpast, the motorcycle segment has witnessed

launch of vehicles with higher engine capacity(higher than 150cc) and power (higher than15bhp). These include models such as Bajaj AutoEliminator and Royal Enfield's Thunderbird followed

by HHML's Karisma. Besides these, KEL has


18/27

launched premium segment motorcycles GF 170and GF Laser besides launching products from the

portfolio of its technology partner (Hyosung's

Aquila and Comet 250). The products in thissegment cater for style conscious consumers.Quite a few players are developing modelscombining features such as higher engine capacity"

optimum mix of power and performance, andsuperior styling. However, the extent of shift to

these products would depend on the positioning of

such products in terms of price.

In the scooters segment, the market for plastic-bodied variomatic scooters continues to witnessgrowth in the scenario of overall decline in scooter

volumes. Higher volumes and growth areespecially true for certain scooter models, such as

Honda Activa, that brought in new technology(besides variomatic transmission) to furtherdifferentiate themselves. Thus, the need to

differentiate and create a niche has led tocompanies strengthening their research and

development (R&D) capabilities and reducing thedevelopment time for new models.

Increasing focus on exports

For the first nine months of FY2005, two-wheeler

exports increased by 37% over the corresponding


19/27

previous, led mainly by motorcycles even asexports of other two-wheelers were healthy. While

motorcycle exports increased by 40%, scooter and

moped exports increased by 29% and 27%respectively.

Motorcycle exports by Bajaj Auto, HHML and TVS

have reported a tobust growth in FY2005 and areexpected to increase further in the medium term.

Table 3Two-Wheeler Exports from India (in

numbers)

FY2000

FY2001

FY2002

FY2003

FY2004

CAGR(FY20

00-04)

9MFY2005

Scooters

20,188

25,625

28332

30116

53148

27.4 44832

Motorcycles

35,295

41,339

56,880

126122

187287

51.4 188807

Mopeds

27,754

44,174

18,971

23330

24234

-3.3 22739

Total 83,237

111,138

104183

179568

264669

33.5 256378

Source: SIAMAlthough the Indian two-wheeler manufacturers

have forayed on their own in their target exportmarkets, there have been instances of tie-ups with


20/27

the technology partners. Bajaj Auto's tie-up withKawasaki to jointly market Bajaj products in

Philippines is a case in point. Under the tie-up, M/s

Kawasaki Motors Philippines Corporation has beenappointed as exclusive distributors to marketselect Bajaj two-wheelers that include Byk, Caliber115 and Wind 125. These vehicles are being sent

to Philippines in the completely built unit (CBU)form. Other strategy of expanding international

presence considered by few players is that of

setting up assembly lines in select South EastAsian countries either on their own or in

partnership with local players. Besides, plans ofselect overseas technology partners to source fromtheir Indian partners and plans of global majors to

develop their Indian manufacturing unit as asourcing hub may also lead to increase in two-

wheeler exports from India.

Companywise two-wheeler exports since FY2000

are presented in the following Table 4.

Table 4Company-wise two-wheeler exports

(FY2000-9MFY2005)

FY2

000

FY2

001

FY2

002

FY2

003

FY2

004

CAGR

(FY2000-04)

9MFY

2005

Bajaj 149 161 285 533 902 56.8 87225


21/27

Auto 24 12 27 66 10

HHML10061

10324

13023

21165

39254

40.5 43441

HMSI 0 0 1293

10916

31414

n.a 27734

TVS7265

6621

7765

9636

28093

40.2 36666

Yama

ha

151

97

204

46

203

21

455

46

329

0621.3 27539

Other

s

357

90

576

35

327

52

390

53

427

924.6 33773

Total83237

111138

103681

179682

264669

33.525637

8

Source: SIAMVehicle Emission Norms

Emission norms for all categories of petrol anddiesel vehicles at the manufacturing stage were

introduced for the first time in India in 1990 andwere made stricter in 1996. When the 1996 norms

were introduced, it resulted in certain modelsbeing withdrawn from the market. With Stage IIndia 2000 emission norms coming into place, the

cost of developing suitable technology hasremained high.

The emission norms that are currently in force fortwo-wheelers and three-wheelers are more


22/27

stringent than the Euro II norms. The roadmapsuggested for emission norms for two/three-

wheelers by the Expert Committee on Auto Fuel

Policy is as follows:

For two-/three-wheelers the emissionnorms are recommended to be the same inthe entire country:

For new vehicles:

Bharat Stage II norms throughout the countryfrom April 1, 2005

Bharat Stage III norms to be applicable

preferably from April 1, 2008 but not later thanApril 1, 2010.

For reducing pollution from in-use vehicles

New pollution under control (PUC) chec

system for all categories of vehicles to beplace by April 1, 2005

Inspection & maintenance (I&M) system

categories of vehicles to be put place by1, 2010

Performance checking system of catalconverters and conversion kits installe


23/27

vehicles to be put in place by April 1, 2

Table 5 presents the emission norms for two-

wheelers that were in place in the past, the India2000 emission norms, and the norms that havebeen implemented for April 2005 (Stage II) andproposed for 2008 (Stage III).

Table 5

Exhaust Emission Norms

Vehicle

Pollutants

OldNorm

s

1996

2000

2005

*

2008/10*

*

Tow-wheelers

(gm/Km)

CO 12-304.52.0 1.5 1

HC+Nox

8-12 3.62.0 1.5 1

Three-

wheelers(petrol)

CO 12-306.84.02.2

51.25

HC+Nox

8-12 5.41.5 2 1.25

Three-

wheeler

s(Diesel)

CO 1 1.1

HC+

Nox

0.8

5

1

PM0.10

0.05

CO: Carbon Monoxide; HC:

Hydrocarbon; Nox: Nitrogen Oxide,


24/27

PM: Particulate Matter, * MaximumSulphur parts per million (ppm)

permissible of 150 and ** Maximum

Sulphur ppm permissible of 50Compiled by INGRES

To be able to meet the exhaust norms, the AutoFuel Policy has suggested following technologies:

Table 6

Technologies for meeting the emissionnorms for Spark Ignited Vehicles

2/3 -wheelers

Level ofEmissionNorms

2-StrokeTechnology

4-StrokeTechnology

Euro I/India

2000

Intake,

exhaust,combustion

optimisationCatalyticconverter

4-Stroke

enginetechnology

Euro

II/BharatStage II

Secondary air

injectionCaatalytic

Converter

Hot tube

Secondaryair injection

EuroIII/Bharat

Fuel injectionCatalytic

Fuel injectionCarburetor +


25/27

Stage III converter catalyticconverter

Euro

IV/BharatStage IV

To be

developed

Learn burn Fuel

injection+ catalyticconverter

Source: National Auto Fuel Policy

The adoption of new technologies for compliance

with stricter emission norms may affect the prices

of vehicles. Some two-wheeler manufacturers aretesting electronic fuel injection systems for

motorcycles. To begin with, electronic systems arelikely to be introduced in premium segment

motorcycles.

Fiscal Policy

The Union Budget for 2001-02 had lowered theexcise duty on two-wheelers (with engine capacity

in excess of 75 cc) from 24% to 16%. Themanufacturers responded to this by passing on a

relatively large part of the excise cut to customers.The Union Budget thereafter have left the excise

duty on two-wheelers unchanged. But the UnionBudget 2004-05 provides for a weighted deductionof 150% for investments in R&D. This may

facilitate increasing R&D allocations and allow forimprovement in the technical as well as product


26/27

development skills of the Indian companies.

Indian Auto Policy 2002

The Government of India approved acomprehensive automotive policy in March 2002,the main proposals of which are as under:

Foreign direct investment : Automatic approval

is proposed to be granted to foreign equity

investment up to 100% for manufacture ofautomobiles and components.

Import tariff : Import tariffs are proposed to befixed at a level such that they facilitate the

development of manufacturing capabilities asopposed to mere assembly.

Incentives for R&D : The weighted average taxdeduction under the Income Tax Act, 1961 for

automotive companies is proposed to be increasedfrom current level of 125% (The weighted average

deduction for R&D was increased to 150% in theUnion Budget 2004-05). Further, the policy

proposes to include vehicle manufacturers for arebate on the applicable excise duty for every 1%of the gross turnover of the company expendedduring the year on R&D.


27/27

Environmental aspects : Adequate fiscalincentives are proposed to promote the use of low-

emission auto fuel technology (in line with the Auto

Fuel Policy). The auto policy states theGovernment's intent to align domestic policy withthe international practice of imposing higher roadtax on old vehicles so as to discourage their use.

Two Wheller in India

Documents

Transcript of Two Wheller in India