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index
1. 1
Objectives
To focus on competing in a marketplace this already exists.
To focus on beating the competition.
To focus on the value analysis
To focus on exploiting existing demand.
To focus on execution (better marketing, lower cost base etc).
3. 3
1.1 About The Industry
The Automotive industry in India is one of the largest in the world and one of the fastest
growing globally. India manufactures over 18 million vehicles (including 2 wheeled and
4 wheeled) and exports more than 2.3 million every year. It is the world's second largest
manufacturer of motorcycles; there are eight key players in the Indian markets that
produced 13.8 million units in 2010-11. At present the dominant products of the
automobile industry are Two Wheelers with a market share of over 75% and passenger
cars with a market share of about 16%. Commercial vehicles and three wheelers share
about 9% of the market between them. The industry has attained a turnover of more than
USD 35 billion and provides direct and indirect employment to over 13 million people.
The Indian two-wheeler industry has come a long way since its humble beginning in
1948 when Bajaj Auto started importing and selling Vespa Scooters in India. Since then,
the customer preferences have changed in favour of motorcycles and gearless scooters
that score higher on technology, fuel economy and aesthetic appeal, at the expense of
metal-bodied geared scooters and mopeds. These changes in customer preferences have
had an impact on the fortunes of the players. The erstwhile leaders have either perished or
have significantly lost market share, whereas new leaders have emerged. With an
expanding market and entry of new players over the last few years, the Indian two
wheeler industry is now approaching a stage of maturity. Previously, there were only a
handful of two-wheeler models available in the country. Currently, India is the second
largest producer of two-wheelers in the world. It stands next only to China and Japan in
terms of the number of two wheelers produced and the sales of two-wheelers
respectively. There are many two-wheeler manufacturers in India. The major players in
the 2-wheeler industry are Hero Honda, Bajaj Auto Ltd (Bajaj Auto), TVS Motor
Company Ltd (TVS) and Honda Motorcycle & Scooter India, Private Limited (HMSI)
accounting for over 93% of the sale in the domestic two wheeler market. It is noteworthy
that motorbikes segment’s share is just below 80%of the total 2W market in India which
is dominated by Hero Honda with a market share of 59%. Scooter segment’s market
share is about 18% which is led by Honda Motorcycle & Scooter India, Private Limited
(HMSI) with a market share of 43%.Three-fourth of the total exports in the two wheeler
automobile industry are made in the motorcycle segment. Exports are made mainly to
South East Asian and SAARC nations. The level of technology change in the Motor
vehicle Industry has been high but, the rate of change in technology has been medium.
Investment in the technology by the producers has been high. However, further
investment in new technologies will help the players to be more competitive. Currently,
India’s increasing per capita disposable income which is expected to rise by 106% by
2015 and growth in exports is playing a major role in the rise and competitiveness of the
industry. Consumers are very important for the survival of the Motor Vehicle
manufacturing industry. In 2008-09, customer sentiment dropped, which burned on the
augmentation in demand of cars. The key to success in the industry is to improve labour
productivity, labour flexibility, and capital efficiency. Having quality manpower,
infrastructure improvements, and raw material availability also play a major role. Access
to latest and most efficient technology and techniques will bring competitive advantage to
the major players. Utilising manufacturing plants to optimum level and understanding
4. 4
implications from the government policies are the essentials in the Automotive Industry
of India. This report gives insight of the industry encompassing its evolution in India,
demand drivers, influence of supply side factors, commentary on industry players and
competition and the trends in domestic sales and exports. The report also shows the
oligopolistic nature of the Indian two wheeler industry and the propensity of the major
players to increase their share. In this paper we assess the degree of imperfection in the
two-wheeler industry by using Hirschman-Herfindahl Index (HHI). In a rapidly growing
two wheeler industry, especially in developing economies like India, it is extremely
important to analyse the state of competition to check whether a few firms may increase
their dominance and also the implications of after sale services provided by the two
wheeler firms to consumers. An important point also remains to look that why even after
being the world’s largest two wheeler industry, the Chinese two wheeler firms haven’t
been able to enter the Indian markets successfully? What challenges a new entrant has to
face in the industry?
1.2 INDIAN TWO WHEELER INDUSTRY: AT PRESENT 2000-2010
The Indian two wheeler industry has shown rapid rate of growth in last one decade. Its
share in automobile industry has increased from 15% in 2001 to 17% in 2010 (Table 2).
Annual sales by industry have increased from Rs. 7486 crore in 2001 to Rs. 30096.82
crore in 2010 (Table 2). A snapshot of the 2W manufacturers operating in India across
time shows that while the core that existed 10 years back continues to remain the same,
there have been several casualties along the way but at the same time there have been
several new entrants.This is also the period which witnessed the end of Hero Honda’s 27
years old JV with Honda in 2010.Rising income levels, reducing excise duties, higher
loan tenure and loan-to-value offered by the financing companies have all fuelled the
growth of two-wheeler demand. Besides, mounting traffic chaos and limited parking
space has also increased the demand for two-wheelers from households that can afford or
actually do own a car. Furthermore, with increasing women working population,
changing social philosophy and broad-mindedness,
the penetration of two-wheelers in target population has increased significantly during
last one decade especially in urban areas. However ruralareas and smaller towns still
remains considerably underpenetrated market. In recent years, 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 2010-11 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.
6. 6
1. Honda
The wholly owned subsidiary of Honda Motor Company, Japan, Honda Motorcycle &
Scooter India has amassed impressive numbers and credibility over the past decade with
some very succesful models like the Activa scooter and the Honda Shine 125cc
motorcycle. HMSI is currently the third largest two-wheeler company in India and is
steadily climbing up the ranks. And now with its third plant getting operational, the long
wait for its products also seems to be dropping effectively.
1.1 Products
Twister
The Honda CB Twister is a motorcycle manufactured and marketed in India by the
Honda subsidiary Honda Motor and Scooter India (HMSI). It was introduced in
December 2009.
7. 7
It was given "the most awarded motorcycle of the year" in 2011.
It is available in the Philippines as the Honda CB110, and in India as the CB Twister.
CBR
The Honda CBR models are a series of Honda sport bikes several of which (400RR,
600RR, 900RR, 929RR, 954RR and 1000RR) are marketed as race replicas, having the
suffix RR after the engine size designation. With the exception of the single cylinder
CBR125 and CBR150, all CBR motorbikes have inline engines (as compared to the V-
twins in the VT, VTR and VF/VFR series). Less sporting models with inline engines
make up the CB Series.
Honda Shine
The Honda Shine is a motorcycle developed by Honda Motorcycle & Scooter
India (HMSI). It was introduced in India in 2006. It is a 125 cc motorcycle.Honda
8. 8
claimed the Shine accelerated from 0 to 60 km/h (0 to 37 mph) in 5.30 seconds
and had a top speed of 95–100 km/h (59–62 mph).[
1.2 Product Offering
Exchange Offer
Free gifts
1.3 USP
Extremely powerful engine and sporty design used in motorsports
1.4 Marketing Strategy
The markets are different in terms of the way we reach out to them. As we are expecting
Dream Yuga to generate good volumes from Tier II and Tier III towns, we need to work
on both front end and back end. So we are working on what we call the 3C strategy at
Honda. The first C is communication; we have to communicate in such a way that we
are understood by customers belonging to Tier II and Tier III towns. We want to translate
our global slogan ‘Power of Dreams’ into a language that is followed by the masses in
India - ‘Sach kar denge sapne’ is being used in local languages as per the region. The
second C is Connect; we have seen that that the Indian buyer has a very good balance of
emotional and rational connect. He evaluates the product on looks and price, as well as
emotional connect through messages and communication of the brand. That’s why we
have roped in Akshay Kumar. We feel that he has very wide acceptability amongst the
masses. We are also increasing our own network - from 1500 touchpoints last year, we
want to take it to 2000 by the end of this fiscal year. The product is a mass segment
product and it should be available closer to the masses. We are also increasing the reach
of our regional offices; every
9. 9
2. Bajaj
India's second largest motorcycle company, Bajaj Auto has been at the helm of the
performance brigade in the country with its Pulsar and Avenger range of motorcycles.
Churning out non-stop upgrades and upping the bar in the premium motorcycle category,
Bajaj Auto has definitely struck a chord in the hearts of million bikers in the country
while at the same time bringing up the commuters up to pace with higher capacity
commuter products like the Boxer 150 and the Discover range.
2.1 Product Offer
Pulsar
Bajaj Pulsar is a motorcycle brand owned by Bajaj Auto in India. The two wheeler was
developed by the product engineering division of Bajaj Auto in association with Tokyo
R&D,[1]
and later with motorcycle designer Glynn Kerr. Currently there are five variants
available, with engine capacities of 135 cc, 150 cc, 180 cc, 200 cc, and 220 cc. previously
it was also offered with 200 cc DTS-i oil cooled engine, which now has been
discontinued. Instead a new version Pulsar 200NS was launched in 2012.[
10. 10
Platina
Bajaj Platina is a 100 cc motorcycle manufactured by Bajaj Auto. The Platina was
launched in April 2006 at an ex-showroom price of Rs 35,000 and crossed sales of
500,000 units within eight months of its launch. A 125 DTS-Si variant with the same
engine as the XCD was introduced in September 2008 with sales of more than 30,000
units per month but subsequently discontinued
Discover
The Bajaj Discover is a motorcycle brand by Bajaj Auto. Currently there are four
variants of Discover- Discover 100 DTS-Si,Discover 125 DTS-i,Discover 125ST and
Discover 150 DTS-i.The bike initially launched in the year 2004 has been a success in the
Indian two Wheeler segment since then.
11. 11
2.2 Product offering
Cash Back
Exchange Offer
Free accessories
2.3 USP
Product USP
Pulsar Powerful engine and good pickup
Platina Durable stylish and good performance
Discover Good mileage
2.4 Market Strategy
The focus of BAL off late has been on providing the best of the class models at
competitive prices. Most of the Bajaj models come loaded with the latest features within
the price band acceptably the market. BAL has been the pioneer in stretching competition
into providing latest features in the price segment by updating the low price bike with the
latest features like disk-brakes, anti-skid technology and dual suspension, etc.
12. 12
3. Hero
Hero Motocorp Ltd., 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 4 June 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.
3.1 Product offer
Karizma ZMR
13. 13
Hero Honda bike at last has released the long awaited Tourer - ZMR Karizma Fi in the
Indian market. Karizma ZMR will be sold alongside the old model Karizma. They don't
want to end the competition for Apache 180 & Pulsar 220 as Karizma R is priced around
Rs. 80,000.
The position remains the same as the old Karizma still considered the best touring bike in
India, with smooth, refined and relaxed Honda engine at the top. The most important and
much needed change is is the addition of the programmed fuel injection (PGM-FI) into
the engine. In addition, Hero Honda also replaced the rear disc brake, gas charged rear
shock absorber, a little more power and torque. Hero Honda also began giving teaser
advertising on leading TV channels in which they show some insights into the front panel
of the New ZMR's, headlight and taillight. And now they have launched full commercial
with Hrithik Roshan in Karizma ZMR ads. ZMR looks quite stunning in white shades in
the commercial with ZMR Label in the red hue.
Hero Impulse
Hero MotoCorp had showcased their new Impulse at the brand identity change
ceremony few months ago in London. They chose to remain silent about the bike until
now. Hero today launched the 150cc.
14. 14
Hero Splender
The Hero Splendor is a motorcycle manufactured in India by Hero. It has an electronic ignition
and a tubular double cradle type frame with a 97.2 cc engine. As of 2009, Splendor models were
selling at a rate of one million per year.
3.3 USP
India’s first transroad-On road, Off Road Bike
3.4 Marketing Strategy
Hero MotoCorp's key strategies are to build a robust product portfolio across categories,
explore growth opportunities globally, continuously improve its operational efficiency,
aggressively expand its reach to customers, continue to invest in brand building activities
and ensure customer and shareholder delight
16. 16
The global market for motorcycles, including electrically-powered machines, is forecast
to expand 7.2 percent annually to 134.5 million units in 2016, when industry revenues
will reach $90 billion. The Asia/Pacific region, which predominantly utilizes small and
inexpensive motorcycles, will continue to dominate worldwide demand, representing 84
percent of all units sold in 2016.
World sales of motorcycles will be stimulated by rising standards of living in developing
nations. China will remain by far the largest national market, with India and Indonesia
also important based on large populations with the means to purchase inexpensive
motorcycles. There is a strong correlation between average income levels and motorcycle
demand up to a certain point. In emerging economies strong growth in motorcycle sales
is triggered once certain per capita income thresholds have been reached.
Due to the superior fuel efficiency these machines provide compared to automobiles and
other light vehicles, motorcycle demand gains will also be supported by higher petroleum
costs . Furthermore, a rebound from the 2007-2009 recessions in developed countries like
the US will lead to higher product sales, particularly of medium and heavy motorcycles,
as economic conditions become more favorable and consumers begin to purchase these
expensive recreational items again. As a result, medium and heavy internal combustion
engine (ICE) motorcycles will account for nearly 20 percent of 2016 demand in dollar
terms, even though they will make up less than two percent of global unit sales.
Light motorcycles will remain the single largest ICE product segment in unit
terms because they offer a mix of the best attributes of smaller (lower cost) and larger
displacement models (more power). ICE scooters, mopeds, and motorbikes will comprise
approximately one-third of total product sales in 2016, supported by their low cost and
easy maneuverability in congested urban areas. Sales of electric bicycles (e-bikes) and
electric motorcycles (e-cycles) are expected to grow roughly in line with ICE motorcycle
demand through 2016
19. 19
Segmentation
Company Segmentation
Honda Ultra premium sports bike
Bajaj Young boys looking for fast sporty bikes for Indian
roads
Hero Upper Middle-class people who want a bike that is
stylish and gives a good mileage
Targeting
Company Targeting
Honda Upper middle and upper class men
Bajaj Young boys in the age 18-30 middle class
Hero Young and Adventurous Men from the age bracket of 25-
35
Positioning
Company Positiong
Honda Powerful sports bikes
Bajaj The No.1 Sports bike in India
Hero Positioned as India's first on road and off road bike
21. 21
1. Honda
1.1 Price
Product Price
Twister 55000-60000
CBR 150000-180000
Shine 60000-65000
1.2 Utility
Transportation
Off road
1.3 Interpretation
Twister is satisfying their cost and customer satisfaction is also high. CBR is not
satisfying its cost but customer satisfaction is high.
22. 22
2. Bajaj
2.1 Price
Product Price
Pulsar 62000-93000
Platina 55000
Discover 58000-65000
2.2 Utility
Cops
Off road
2.3 Interpretation
The products of Bajaj are justifying their cost and customer satisfaction is high.
23. 23
3. Hero
3.1 Price
Product Price
Karizma ZMR 96000-110000
Impulse 72000
Splendor 55000-62000
3.2 Utility
Transportation
Cops
3.3 Interpretation
The cost of Karizma ZMR and Impulse are satisfying their cost but customer satisfaction
is low.
satisfying its cost but it is satisfying their customer by its performance.
25. 25
SWOT Analysis
1. Honda
Strength Diversified operation
Leading market position and brand strength
Engineering Capability
Strong distribution network
Weakness Expenses related to post retirement benefits for
employees
Employee Productivity
Opportunities Increasing demand for hybrid electric vehicles
Opportunities in Asian market
Aviation business
Threats Economic slowdown
Competition in the Global Automative Market
26. 26
2. Bajaj
Strength Highly experienced management.
Product design and development capabilities.
Widespread distribution network.
High performance products across all categories.
High export to domestic sales ratio.
Great financial support network (For financing the
automobile)
High economies of scope.
Weakness Hasn't employed the excess cash for long.
Still has no established brand to match Hero
Honda's Splendor in commuter segment.
Not a global player in spite of huge volumes.
Not a globally recognizable brand (unlike the JV
partner Kawasaki)
Opportunities Double-digit growth in two-wheeler market.
Untapped market above 180 cc in motorcycles.
More maturity and movement towards higher-end
motorcycles.
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)
TATA Ace is a serious competition for the three-
wheeler cargo segment
27. 27
3. Hero
Strength First brand from the stable of Hero MotoCorp after
the split
Great positioning combining the adventurous side
and executive class
Excellent branding and advertising
Great technical specifications and features
Weakness Priced on a slightly higher side when compared to
other in the segment
Limited target audience due to Off Road and
adventurous positioning
Opportunities Expansion in Tier 2 cities
More variants of the bike e.g. high performance
versions
Threats New entrants
Competitors
Low cost bikes
28. 28
Recommendation
Bajaj Pulsar and Discover should improve its mileage.
Honda CBR should lower its price.
Hero Karizma should improve its performance and its mileage.
Hero Impulse should add new features and should advertise it.
29. 29
Conclusion
Honda CBR price is high.
Hero Karizma and Impulse performance and customer satisfaction is low.
Bajaj Pulsar and Platina are high in performance.