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COVER PAGE

   
Title : Two-wheeler Industry
 
 
Subject : Strategic Management

   
Level : Mba-II

   
Batch : 9-Oct

   
Program : GPBL

   
Subject tutor : Mr. L. Surender

   
Name of Student : Arun Prakaash V.G

   
Register no. : GPBL-B/009-003

   
Date of submission : March31 2010

   
Word count : 2114

   
Word Limit : 2000

     

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TABLE OF CONTENT

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Pg:
Topic No:
   
COVER PAGE 1
   
TABLE OF CONTENT 2
   
INTRODUCTION TO TWO-WHEELER INDUSTRY 3
   
INDUSTRY COMPARISON 3
   
TABLE: 1 - Domestic market share 3
   
CHART: 1 - Domestic market share 3
   
Table: 2 - Automobile Export trends 4
   
CHART:2 MARKET SHARE OF MAJOR PLAYERS IN TWO-WHEELER INDUSTRY: 4
   
WHY SO MUCH GROWTH??? 4
   
PRODUCT SEGMENTATION OF MAJOR PLAYERS IN TWO-WHEELER
IINDUSTRY: 5
   
PEST ANALYSIS OF TWO-WHEELER INDUSTRY: 6,7
   
PORTER’S 5 FORCES ANALYSIS 7,8
   
CONCLUSION 9
   
REFERENCES 10
   

INTRODUCTION TO TWO-WHEELER INDUSTRY:

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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 day’s 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 two-wheelers industry. Bikes are also divided in to two groups automatic gear
bikes and gear two-wheelers, again gear bikes are classified in to two-stroke engine
and four stroke engine.

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 DOMESTIC MARKET SHARE FOR 2008-09

Passenger Vehicles 15.96%


Commercial Vehicles 3.95%
Three wheelers 3.6%
Two wheelers 76.49%
CHART: 1

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

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middle income 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 two-wheeler 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 2006-07 2007-08 2008-09
Passenger vehicles 198452 218401 335739
Commercial vehicles 49537 58994 42673
Three-wheelers 143896 141225 148074
Two-wheelers 619644 819793 1004174

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

14% 18%

Tvs motors
Bajaj auto ltd
Hero honda
27% Others
41%

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

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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,
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:

 Lower interest rates


 Easing liquidity situation
 Modernization of young generation
 A well-equipped middle- class transport
 Fuel-Efficient
 Comfort level.

PRODUCT SEGMENTATION OF MAJOR PLAYERS IN TWO-WHEELER


INDUSTRY:

HERO HONDA: 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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PEST ANALYSIS ON TWO-WHEELER INDUSTRY:

Political, economic, social and technology are those factors which affects the
external environment.

Political Aspects – Tax policies, trade regulation, political influence and some of the
rules and regulation of government policies which is considered in political analysis.

The corrections in Excise duty on electric vehicles which will enable the
manufacturers take CENVAT credit and exemption of customs duty on Electric Vehicles
parts and also weighted deduction for in-house R&D to 200% from 150% and
outsourced R&D from 125% to 175%. This would encourage industry that much
because this price hike isn’t expected to impact sales in a significant way as a majority
of two-wheeler buyers were prepared, and to certain extend braced up and ready to
shell out extra money for their favorite set of wheels.

Economic Aspects – Economic factor are those which is influenced by economic


growth, interest rate, exchange rate and inflation rate.

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. 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 Aspects – 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.

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Technical Aspects - 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 their performance.
Since sufficient bike accessories are available in many place two-wheeler riders has a
privilege to change the broken parts very easily.

PORTER’S 5 FORCES ANALYSIS

Porter’s five forces Model of Competition are as follows:

 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.

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 two-wheelers is steel, aluminum and
rubber, because there are many industries in India for manufacturing those
standardized product the production is going smooth. Sales of two-wheelers 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.

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Potential 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 and loyalty”. Because of low cost production, this industry enjoys good
growth rate and profitability.

Substitute Product: 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: 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: Buyer has added advantage than seller because there are
five to six big popular brands of two-wheelers 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 group’s 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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CONCLUSION:

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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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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