भारतीय स्कूटर /मोटर साइकिल उद्योग की अप्रत्याशित सफलता : Indian Two Wheeler Industry : A Great Success Story

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Indian Two Wheeler Industry

The two wheeler industry has been in the country since 1955. It generally consists of three segments Mopeds, Motorcycles and Scooters. Two wheelers have played a pivotal role in the rising growth of the Indian automobile industry. Over the years the domestics sales of two wheelers have grown by huge margins.

The two wheeler market has witnessed a sea change over the years. In the past Indians preferred scooters and mopeds but with the rising income levels and standard of living there is a remarkable rise in the demand for motorcycles which along with serving the purpose of a vehicle has become a style statement for the youth of the country.

The Indian two-wheeler (2W) industry has shown a strong volume growth over the last two-years, having grown by 25% in 2009-10 and 27% in 2010-111 to reach 13.3 million units. This strong double-digit growth has been driven by multiple factors. One reason, of course, is statistical as this period of high double-digit growth has showed up after a rather sedate previous two years, when the 2W industry volumes had shrunk by 5% in 2007-08 and had grown by a mere 5% in 2008-09. In addition to the contribution of pent-up demand, the 2W industry growth over the last two years has been supported strongly by various underlying factors including India’s rising per capita GDP, increasing rural demand, growing urbanization, swelling replacement demand, increasing proportion of cash sales and the less measurable metric of improved consumer sentiment.

Major Two Wheeler Manufacturers in India are :

Hero Motocorp: Hero Motocorp., formerly Hero Honda, is an Indian motorcycle and scooter manufacturer based in New Delhi, India. Hero Honda started in 1984 as a joint venture between Hero Cycles of India and Honda of Japan. The company is the largest two wheeler manufacturer in India. The 2006 Forbes 200 Most Respected companies list has Hero Honda Motors ranked at #108.

In 2010, when Honda decided to move out of the joint venture, Hero Group bought the shares held by Honda. Subsequently, in August 2011 the company was renamed Hero MotoCorp with a new corporate identity. On June 4, 2012, Hero Motocorp approved a proposal to merge the investment arm of its parent Hero Investment Pvt. Ltd. into the automaker. The decision comes after 18 months of its split from Honda Motors.

In 2001, the company achieved the coveted position of being the largest two- wheeler manufacturing company in India and also, the ‘World No.1’ two-wheeler company in terms of unit volume sales in a calendar year. Hero MotoCorp Ltd. continues to maintain this position till date.

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Hero MotoCorp two wheelers are manufactured across three globally benchmarked manufacturing facilities. Two of these are based at Gurgaon and Dharuhera which are located in the state of Haryana in northern India. The third and the latest manufacturing plant is based at Haridwar, in the hill state of Uttrakhand.

Splendors, Passion, Karzima, CBZ, are one of the well known models in India.

Bajaj Auto: Bajaj Auto is the largest exporter of two and three wheelers in India. In collaboration with Kawasaki Heavy Industries of Japan Bajaj Auto Ltd manufactures a wide range of two wheelers which are the best in the industry.

Bajaj Auto is the world’s third-largest manufacturer of motorcycles and the second- largest in India.

The Forbes Global 2000 list for the year 2005 ranked Bajaj Auto at 1,946. It features at 1639 in Forbes 2011 list.

The company has changed its image from a scooter manufacturer to a two-wheeler manufacturer. Its product range encompasses, scooters and motorcycles. Its growth has come in the last four years after successful introduction of models in the motorcycle segment.

This company has introduced certain models like Pulsar, Discover DTSi and Kawasaki Bajaj Eliminator which has given other two wheeler manufacturing companies a run for their money.

TVS Motor Company: TVS Motor Company is the third largest two wheeler manufacturer in India and among the top ten in the world. In its wide range of products TVS offers a two wheelers for everyone right from mopeds to racing bikes. It has a range of products for women as well like the TVS Wego, Scooty Streak, Scooty Pep+, Scooty Teenz and among its most famous road dominators are: TVS Apache RTR 180 and TVS Flame DS 125. TVS Motor will have profitable operations overseas especially in Asian markets, capitalizing on the expertise developed in the areas of manufacturing, technology and marketing. The thrust will be to achieve a significant share for international business in the total turnover.

Suzuki Bikes and Scooters: Suzuki Motorcycle India Pvt. Ltd. is a subsidiary of Suzuki Motor Corporation, Japan where in we are having the same manufacturing philosophy of value packed products right from the inception. SMIPL will be manufacturing two wheelers best suited for the valuable Indian customers covering all segments. Suzuki motors first entered India in collaboration with TVS Motors. Suzuki motors ruled the two wheeler market for quite a long time until competitors started flooding in. Some of the most famous and stylish two wheelers by Suzuki are Suzuki Samurai, Suzuki Shogun and Suzuki Max 100.

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including one dedicated for export engines. The engine and vehicle assembly lines are synchronized and incorporate concepts of Unit Assurance i.e. Complete Product Assurance, Parts Assurance through 100% kit supply on lines and synchronization of parts storage, supply and production. The innovative production processes along with high tech final assurance processes are aimed to achieve Zero Claims at our dealers and thus, a highly satisfied customer base.

Presently, its product portfolio includes VMAX (1,679cc), YZF-R1 (998cc), FZ1(998cc), YZF-R15 version 2.0 (150cc), Fazer (153cc), FZ-S (153cc), FZ16 (153cc), SZ-R(153cc), SZ & SZ-X (153cc), SS125 (123cc), YBR 125 (123cc), YBR 110 (106cc), Crux (106cc) and Ray(113cc).

Mahindra Two Wheeler: Mahindra is new born baby in Indian Two Wheeler Industry. Mahindra Two Wheelers’ acquisition of the business assets of the Kinetic Motor Company in 2008 and given Mahindra smooth entry into the two wheeler market. Mahindra Group excellence and expertise in auto components, manufacturing, distribution, marketing, and customer service enabled Mahindra to launch a collection of Power Scooters in 2009. Today, Mahindra offer four brands that are trendy, vibrant, and environmentally friendly.

Mahindra has partnership with some of the world’s leading specialists in two wheelers to give you the best in quality as well as innovation. Italy-based Engines Engineering, a highly specialized boutique design studio that serves some of the leading European and Japanese two wheeler companies, serves as our research and design center. Mahindra also has a partnership with Taiwan’s Sanyang Industry Company (SYM), a leading manufacturer of scooters, motorcycles and ATVs, to develop our scooter portfolio

With the current range of Power Scooters, Mahindra strive to offer products that redefine the market and consumer expectations with breakthrough technology.

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Production Pattern : Domestic

Domestic Production Growth Rate

Consumption Pattern-Domestic

Domestic Sales Growth Rate

India is the second largest domestic market in the world and growing at good pace. The Indian Two-Wheeler industry recorded sales volumes of 13.4 million units in 11- 12 with a growth of 14% over the pervious year. Indian two wheeler Industry is likely to register good growth in next few years.

As per the recent study currently India has 34-35 million middle class households and in next 5 year middle class population will touch 270-280 million and 700 million people by 2025. In India two wheelers mostly preferred by middle class and with increasing of population future of two wheeler industry in India good.

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Future Forecast of Domestic Demand: 2013 – 17

Domestic Demand Growth Rate

It is expected that two wheelers demand will reach at 24.39 million units by 2017. The Average growth between 2012 to 2017 would round 12%.

Top 5 Exporting Countries (Values in USD Thousand)

Current Export Scenario

Rest of the World ,

16%

Japan, 3%

Thailand, 5%

China, 53%

Italy, 7%

India, 13%

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India is the second largest two wheeler industry in the world and its share for the export is 13%. Where as China stood is top exporting country and 53% share captured by China only.

Top 5 Importing Countries (Values in USD Thousand)

Current Import Scenario

Colombia, 18%

Rest of world, 24%

Nigeria, 14%

Philippines, 7%

Bangladesh, 8%

Sri Lanka, 14%

Colombia is top importing country with 18% share in world market where Nigeria stood at second in term top importing countries. For India good things is that our neighboring countries like Sri Lanka and Bangladesh are good importers of two wheelers.

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Tariff Barrier and India’s Position in Selected Markets

In above table I have identified top 20 countries’ basic custom import duty and where India stands in importing countries. Countries like Tanzania, Peru, Ghana, Chilie, etc are few countries where import duty is low and India’s share is quite good.

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Trade Intensity Index shows whether our trade with these countries is increasing. Countries like Nigeria, Sril Lanka, Bangladesh have good TII with India. I have also calculated growth rate/ CAGR of top 15 countries. It will help to prioritize my country further.

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Cultural Insight of Top 15 Markets

Cultural analysis is important for international managers because they need to be able to predict what behavior is typical of the cultural group they are working with. Research into cultures is needed to establish a scientific to give managers valid tools for conducting an analysis. Most cultural analysis models are based on comparative models. These models measure one culture against another.

Following Hofstede tools are used under:

Power Distance (PD): Power Distance is defined as the extent to which the less powerful members of institutions and organisations within a country expect and accept that power is distributed unequally.

Individualism (IDV): Individualism is the fundamental issue addressed by this dimension is the degree of interdependence a society maintains among its members. It has to do with whether people´s self-image is defined in terms of “I” or “We”. In Individualist societies people are supposed to look after themselves and their direct family only. In Collectivist societies people belong to ‘in groups’ that take care of them in exchange for loyalty.

Masculinity / Femininity (MAS): A high score (masculine) on this dimension indicates that the society will be driven by competition, achievement and success, with success being defined by the winner / best in field – a value system that starts in school and continues throughout organisational behaviour. A low score (feminine) on the dimension means that the dominant values in society are caring for others and quality of life. A feminine society is one where quality of life is the sign of success and standing out from the crowd is not admirable. The fundamental issue here is what motivates people, wanting to be the best (masculine) or liking what you do (feminine).

Uncertainty Avoidance (UAI): The dimension Uncertainty Avoidance has to do with the way that a society deals with the fact that the future can never be known: should we try to control the future or just let it happen? This ambiguity brings with it anxiety and different cultures have learnt to deal with this anxiety in different ways. The extent to which the members of a culture feel threatened by ambiguous or unknown situations and have created beliefs and institutions that try to avoid these is reflected in the UAI score.

Long Term Orientation (LTO): The long term orientation dimension is closely related to the teachings of Confucius and can be interpreted as dealing with society’s search for virtue, the extent to which a society shows a pragmatic future-oriented perspective rather than a conventional historical short-term point of view.

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As per the above analysis i.e. Shift Share Method, Trade Intensity Index, Economy Ranking, Cultural Behaviour of different countries helps me to indentified top 5 priority markets.

Economy Ranking/Status of Top 15 Markets

Economy Ranking

I have also indentified ease of doing business ranking as per the selected markets. This will help me in future to setup my business so that I can serve my final customer near to the market.

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Overview of ICRA Study on Two Wheeler exports:

Overseas markets capturing the interest of most 2W OEMs in India

Exports offer strong growth opportunity to Indian companies, given India’s low-cost manufacturing capabilities and reliable quality10. 2W exports from India reported a CAGR of 25% over the period 2005-06 to 2010-11 to reach 1.5 million units in 2010- 11. BAL is the largest 2W exporter from India, followed by TVS, with both companies exporting to a large number of countries. Together, BAL and TVS accounted for 79% of all 2W exports from India in 2010-11 and the managements of both companies consider exports a key component of their overall growth plans.

However, export volumes of the largest 2W manufacturer in the world Hero Honda, have remained rather flat, being around 0.1 million units and accounting for just 2% of its total 2W sales volumes in 2010-11 (Refer Table 16). Nevertheless, following the cessation of its JV agreement with Honda Motor Company (Japan) recently, Hero Honda is expected to get aggressive on the exports front, something it could not do earlier due to the JV’s constraints which restricted the markets to which it could export. Currently, HHML’s export markets are limited to Bangladesh, Sri Lanka, Nepal and Columbia but the company is likely to expand its geographical footprint over the medium term. Yamaha too has announced plans to intensify its focus on exports and is even looking to set-up a third plant (in addition to the Surajpur and Faridabad plants) where it would manufacture mass market bikes (like Crux and YBR) with Africa and South America as the key target markets.

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Since the developed markets like the United States and Europe have altogether different product and technology requirements as compared to emerging markets, they get naturally excluded as target markets for the Indian players. Accordingly, a large majority of 2W exports from India are to developing markets like South Asia, Africa and Latin America. While the developing markets are quite large in terms of volume potential, their appeal from a profitability perspective is somewhat mixed. Bajaj Auto’s margins in certain markets like Africa12 are either similar or lower than that in the domestic market; although in various other overseas markets, it does earn 3-4% higher margins. At the same time, competition from global players in other developing markets is also quite formidable. For instance:

The African market is replete with Chinese bikes which provide strong price- based competition to other players

The South-East Asian market also has high competitive intensity where the Japanese majors like Honda, Yamaha, Suzuki and Kawasaki command the bulk of the volume share

The Chinese market, the largest 2W market, has its own set of challenges including lack of respect for intellectual property and low price points

Over the years, Bajaj Auto and TVS have expanded their overseas presence in a large number of countries and have even established assembly units in China (Bajaj Auto) and Indonesia (Bajaj Auto and TVS) to have direct local presence. However, for sustaining exports growth going forward, the domestic players will need to continuously identify new potential markets, develop products suited to local needs, invest in building brands for increasing market share and appropriately cope up with the challenge of establishing a distribution network.

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Conclusion:

This project helped me to indentify unexplored and explored markets which are directly applicable to strengthen my exports. By using various tools, it became easy for me to proceed for further analysis on top 20 countries.

Following are the various tools have been used during the project:

1.Revealed Comparative Advantage (RCA): At very beginning RCA is calculated to know whether the selected product is enjoying the global market or not.

2.Shift Share Method: Shift share Method is also applied to identified top 20 importing markets, where export probability is very high for my product. Through this method I have shortlisted top 20 markets .

3.Trade Intensity Index (TII): In this step, I calculated TII with top 15 countries. This index helped me to show India’s trade intimacy with other selected countries.

4.Analysis of Cultural Index: Deep Analysis of Cultural Index is also important to understand customers need and wants. I recorded the 5 dimensions which were introduced by Great Hofstede i.e. Power Distance, Individualism, Masculinity/Femininity, Uncertainty Avoidance and Long Term Orientation. Hofstede model helps us to know more about the countries’ culture, habits, preferences, etc.

5.Check ease of doing business in selected Countries: I also checked and collated the data on ease of doing business in selected countries from World Bank Report. This is my secondary step and this is called international marketing when you want to setup your manufacturing facilities near to the buyer. This type of anlaysis would help you to check whether the country is suitable for you to do business or not, any wrong decision will make you suffer a lot. Be very sure and deep analysis is required while taking this step and start manufacturing in new country.

This project will help me in future to identify accurate markets for various products. With the proper usage and understanding of the above mentioned tools, right decision can be taken. In this competitive environment, we have more than 190 countries across the globe where you can sell your product through proper market identification.

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Bibliography

Internet Sources

ICRA Report

Hofstede tools

World Bank

Trade Map

Trade Map-Market Analysis

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