1. Industry Analysis of Two wheeler
Market
By
Adnan Kitabi
Anil Nandyala
Avishek Mehra
Gaurav Agarwal
Ranabir Pal

2. Agenda
• Industry Overview
• Market Players
• SWOT
• Industry Life Cycle and PLC
• Porter’s 5 forces

3. Industry Overview

4. Automobile Industry in India
• Market share
– 2 wheeler 76%
– Passenger vehicle 16.25%
– Commercial vehicle 4.35%
– 3 wheeler 4.4%

5. Overview
• Consolidated Industry
• Market size is 10,000-11,000 crores
• 80% of market share between
– Hero Motocorp- 41%
– Bajaj Motors- 25%
– TVS - 14%

6. Segmental Analysis
• Industry Segments
– Motorcycles- 78%
– Mopeds- 17%
– Scooters- 5%

7. Segmental Analysis
• Motorcycles
– Hero Motocorp- 56%
– Bajaj Motors- 25%
– TVS- 6%
• Scooters
– TVS- 19%
– Hero Motocorp- 16%
• Mopeds
– TVS- 49%
– Bajaj Motors- 32%

8. Segmental Analysis
2010-11
• Segment Growth
– Motorcycles- 24%
– Scooters- 42%
– Mopeds- 23%
2011-12
• Segment Growth
– Motorcycles- 14%
– Scooters- 26%
– Mopeds- 12%

9. Industry Happenings
• Hero Honda dissolved their joint venture in
2010
• Honda is the clear market leader in the fastest
growing scooter segment with over 50% of
market share in the segment
• Honda sells close to 100,000 units per month

10. Industry Happenings
• 125cc motorbikes has become a distinct
category
• Intense competition in the premium segment
of motorcycles
• By 2015-16 industry is expected to reach
maturity stage (ICRA)

11. Investment Required
• Investment required for a new entrant is
unknown as all the players are present for
more then 2decades and investment required
at that time cannot be compare to what is
needed today

12. Investment Required
• Hero invested 400 crores for an additional
plant capacity of 750,000 units
• Hero invested another 1100 crores for another
plant for a capacity of 1.2 million
• Hero invested another 500crores to expand its
existing capacity to increase capacity of
another 1 million

13. Capacity Utilization
• Hero Motocorp- 98%
• Bajaj Motors- 75%
• TVS- 86%

14. Expansion Plans
• Hero Motocorp
– 750,000 capacity plant in Rajasthan
– 1.2 million capacity which will increase to 1.8
million in next phase in Gujarat
– 1 million in expanding existing plants
• Bajaj Motors
– 1.26 million in expanding existing plants
• TVS
– No such plans

15. Market Size
• The current market size is 15.4 million units as
on 2011-12
• This is expected to reach 22 million units by
2015-16 (ICRA)

16. Future Capacity Utilization
• Hero Motocorp- 91%
• Bajaj Motors- 86%
• TVS- 100% (will lose 0.58million of sales)

17. Cost of Material
• Hero Motocorp- 68%
• Bajaj Motors- 71%
• TVS- 72%

18. Net Profit
• Hero Motocorp- 9%
• Bajaj Motors- 15%
• TVS- 3%

19. Average Collection Period
• Hero Motocorp- 3 Days
• Bajaj Motors- 12 Days
• TVS- 13 Days

20. Average Age of Inventory
• Hero Motocorp- 13 Days
• Bajaj Motors- 17 Days
• TVS- 40 Days

21. Average Payment Period
• Hero Motocorp- 45 Days
• Bajaj Motors- 51 Days
• TVS- 49 Days

22. Cash Conversion Cycle
• Hero Motocorp- -30 Days
• Bajaj Motors- -22 Days
• TVS- 3 Days

23. Asset Turnover Ratio
• Hero Motocorp- 58%
• Bajaj- 50%
• TVS- 60%

24. CSF
To survive and prosper in an industry a firm
must meet 2 criteria
1. What do our customers want?
2. What does a firm need to do to survive
competition?

25. CSF
What do customers want?
How does the firm survives the
competition?
Analysis of Demand
•Who are our customers?
•What do they want?
Analysis of competition
•What drives competition?
•What are the main dimensions of
competition?
•How intense is competition?
•How can we obtain a superior
competitive position?
Prerequisites for success

26. CSF
• To keep customer satisfied and loyal
• Clientele
• Product Design
• Market Segmentation
• Differentiation
• Servicing
• Low cost factor

27. Recent Events
• Mahindra recently entered scooter segment
• Hero and Honda split
– Both continue to operate in the market seperately

28. Future Outlook
• By 2013 India will become largest 2 wheeler
market in India
• India will over take China
• India+ China+ Indonesia=60% of global 2
wheeler market
• Among these 3, only India post positive
growth for FY 2012-13
• Replacement demand will be key contributor

29. Future Outlook
• Motorcycles:
– The growth rate of entry price segment is
expected to be lower then the industry (below
40,000)
– Competition is likely to intensify in executive
segment (price 40,000-50,000)
– Premium class segment is expected to grow at the
fastest rate (above 50,000)

30. Future Outlook
• Scooter:
– Expected to increase the market share steadily
– Expected to double in size by 2014-15
– Segment to reach profitability due to expansion

31. Market Players

32. HERO MOTOCORP
• Hero MotoCorp Ltd. (Formerly Hero Honda Motors
Ltd.) is the world's largest manufacturer of two -
wheelers, based in India.
• In 2001, the company achieved the coveted position
of being the largest two-wheeler manufacturing
company in India.

33. MANUFACTURING
• 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.

34. MILESTONES
• 1983 – Joint Collaboration Agreement with Honda
Motor Co. Ltd. Japan signed
Shareholders Agreement signed.
• 1985 - First motorcycle "CD 100" rolled out.
• 1987 - 100,000th motorcycle produced.
• 1992 - New motorcycle model - "CD 100 SS"
introduced 500,000th motorcycle produced.
• 1994 - New motorcycle model - "Splendor"
introduced. 1,000,000th motorcycle produced.

35. MILESTONES
• 1998 - 2,000,000th motorcycle produced.
• 1999 - New motorcycle model - "CBZ" introduced.
• 2000 - 4,000,000th motorcycle produced.
• 2003 - Becomes the first Indian Company to cross the
cumulative 7 million sales mark.
• 2005 - Hero Honda is the World No. 1 for the 4th
year in a row.
• 2011 - New licensing arrangement signed between
Hero and Honda (Hero Honda is renamed as Hero)

36. CSR
• Raman Munjal Vidya Mandir
• Raman Munjal Memorial Hospital
• Raman Munjal sports Complex
• Vocational Training Complex
• Adult Literacy Mission
• Marriages of unprivileged girls
• Rural Health Care
• Safe side program

37. LISTING INFORMATION
The Company is listed in both:-
• National Stock exchange
• Bombay stock exchange

38. PRODUCTS
HERO TWO WHEELERS
• Passion X Pro
• IGNITOR
• MAESTRO
• IMPULSE
• HF-DAWN
• HF-DELUXE
• PLEASURE
• SPLENDOR +

39. PRODUCTS
• Splendor NXG
• Passion PRO
• Super Splendor
• Glamour
• Splendor PRO
• Achiever
• Xtreme
• HUNK
• Karizma
• Karizma ZMR

40. Advantages Of Corporate sales at
HERO
• Single window processing for delivery at multiple
locations
• No running around for documentation
• Attractive finance options
• Hero MotoCorp Passport - Unique CRM Program
• Bulk Incentive Schemes

41. SPORTS PRODUCTS
HERO also make sports products like BAT.
• Kashmir Willow
• English Willow

42. Hero Motocorp
• Past strategy:
– Focus on economy segment with splendor and
passion being the flagship product
– Minimal presence in the premium segment
• Impact
– Largest selling 2 wheeler in the world
– Started losing due to market evolution

43. Hero Motocorp
• Current Strategy
– Fully utilize the domination in the economy
segment
– Have bigger presence in the premium segment

44. Hero Motocorp
• It is enjoying 3% advantage in terms of cost of
goods sold over Bajaj
• Still their bottom line is 6% thinner then Bajaj
• Their operating and non operating cost is 9%
dearer then Bajaj
• This is because of high non cash expenses
which is likely to go up with 2 new plants
• Their utilization of capacity is the most
optimum among the three

45. Hero Motocorp
• They have a robust collection mechanism which
ensures their collection period is by far the best
in the industry
• Their production speed is the fastest among the 3
players
• They are also making their supplier happy by
having the best payment period
• Due to the first 2 points their cash conversion
cycle is the best despite getting less bargain from
suppliers

46. Hero Motocorp
• They are able to roll money 3 times before
paying to the supplier
• They are able to generate 58 paisa out of
every rupee invested

47. BAJAJ GROUP
BAJAJ GROUP
BAJAJ SONS
BAJAJ
MOTORS
Ludhiana
Motor
Agency
Esvee
Precision
Component
limited
Saroop
Sons
industries
limited
Veer
Industrial
corporation

48. BAJAJ MOTORS
• Bajaj Motors Limited was incorporated in 1986 and
started it’s commercial production
in 1989.
• BAJAJ MOTORS was started as a machining unit with
backward integration in
Forgings of Auto Components
• They are into manufacturing of auto components
mainly precision engine & transmission components
for Two Wheelers, Four Wheelers, Tractors and other
Heavy goods.

49. BAJAJ MOTORS
• Located on the Delhi-Jaipur Highway on 39-40
milestone, Bajaj Motors Limited is ISO
9001:2000certified & recommended for TS-16949,
ISO-14001 certifications from TUV GmBH, Germany.
Since its inception in 1986, BAJAJ MOTORS has its
specialization in Machining for Auto components
specifically Precision Engine Components.

50. MILESTONES
• 1989 - Start of Bajaj Motors Ltd
• 1995 - Establishment of Current Location Bajaj
Motors Ltd.
• 1998 - Introduction of Flexible Manufacturing
Concept.
• 2000 - Establishment of Microtek Forgings as
Backward Integration.
• 2004 - Started Export Activities
• 2005 - Iintegrated Management System Certification
of BML, from TUV, Germany.

51. MILESTONES
• 2006 - Establishment of Ferrous Casting, as backward
Integration.
• 2007 - IMS Certification for Microtek Forging
Established Aluminium Forging. Plant at Pantnagar.
• 2010- Plant at Haridwar for HHML .
• 2011 - New Dedicated Export Line for Machining in
IMT Manesar,Gurgaon.
• 2012 - New Forgong Plant at Bawal Industrial area,
Gurgaon.

52. Facilities
The facilities can be divided in 3 categories:-
• Machining
• Forging
• Casting

53. Products
• Bajaj Platina (all variant)
• Bajaj Discover
• Bajaj XCD
• Bajaj Pulsar (all variant)
• Bajaj Avenger

54. Bajaj Motors
• Past strategy:
– Full reliance on scooter segment
• Impact:
– Was numero uno when scooter was a dominant
segment
– Lost out after the entry of motorcycles in the
market

55. Bajaj Motors
• Current Strategy
– Target the youth with sporty bikes

56. Bajaj Motors
• Need to reduce the cost of goods sold which is
now as high as 71%
• Strategy of backward integration can be
deployed
• Need to re enter the fastest growing scooter
segment
• Need to capture more market share if they
want to make more optimum use of their
capacity

57. Bajaj Motors
• Their collection period is 4 times more lag
then Hero but still better then TVS
• The production speed is just above 30%
slower then Hero
• They are getting the best terms with their
suppliers
• Like Hero they are also enjoying negative cash
conversion cycle but a week worse then Hero
due to the first 2 points

58. Bajaj Motors
• They are able to roll the money around 1.5
times before paying it to the suppliers
• They are generating 50 paisa out of every
rupee invested worst among the 3

59. TVS
TVS Motor Company is the third largest two-wheeler
manufacturer in India and one among the top ten in
the world, with annual turnover of more than USD 1
billion in 2008-2009, and is the flagship company of the
USD 4 billion TVS Group.

60. Milestones
• 1980 – Company launched the first two seater.
• 1984 – Company launched 100cc bike and took
first mover advantage.
• 1994 – Company launched scooty for women.
• 1996-97 – They introduced green concept by
introducing 110 cc Shogun
• 2000 – Introduced 150 cc, 4 stroke motorcycle
• 2002 – They won total quality management
award

61. Continued
• 2005-06 – It launched its first Indonesian Plant.
• 2007 – It introduced 7 new products.
• 2009-10 – It introduced Jive- auto-clutch bike.

62. International Performance
TVS Motor Company has been awarded 'Star Performer
- Silver Shield' in two/three wheelers category, by EEPC
India, for excellent export performance for year 2007-
08.

63. Products
Motorcycles
• Apache RTR 180
• Flame DS 125
• Flame
• TVS Jive
• Star City
• Sports

64. Continued
Variomatic Scooters
• TVS Wego
• Scooty Streak
• Scooty Pep+
• Scooty Teenz

65. Continued
Mopeds
• TVS XL Super
• TVS XL Heavy Duty.

66. Service
• Extended Warranty
• Xpress Service
• Online Service booking

67. TVS
• Past strategy
– Focus on rural/semi urban population
• Impact
– Did poorly in urban areas
– Started losing due to
• Population Migration
• Increase in purchasing power

68. TVS
• Current strategy
– Maintain dominance in rural/ semi urban
population
– Focus on economy segment in urban population
– Presence in premium segment

69. TVS
• Need to expand its capacity so as to not to
lose market share
• Can take advantage of its financial
leveragability which is as low as 0.61
• Need to reduce its cost of goods sold as it is
most expensive for them
• They need to get their expansion plan in place

70. TVS
• The robustness of their collection mechanism is
similar to that of Bajaj
• The production process is where they are losing
big time with the other which is more then
double then that of Bajaj and more then triple
then that of Hero
• Their payment terms with suppliers are similar to
the other 2
• Especially due to the production speed it is the
only company with a positive cash conversion
cycle

71. TVS
• Their money is locked in the system for 3 days
• They are generating as high as 60 paisa out of
every rupee invested which is the best in the
industry

72. SWOT Analysis

73. SWOT for HERO
• Strengths
– Largest manufacturer of two wheelers in India
– Many service stations
– Easy availability of replacement part/spare parts
– Products for all the segments

74. SWOT for HERO
• Weakness
– After the demerger of Honda from Hero Honda,
Hero will not be getting the technical expertise of
Honda in motor engineering
– Capacity utilisation is almost 100%
– The word Hero Honda and Honda became
synonymous for normal people
– Hero and Honda have almost similar type of
models

75. SWOT for HERO
• Opportunity
– Increase in the sale of sports bike segment
– Credit financing by different banks is increasing for
the 2 wheeler purchaser
– Increase in disposable income

76. SWOT for HERO
• Threat
– Increase in fuel price
– Inflation
– Economic slowdown

77. SWOT for Bajaj
• Strengths
– In the last few years they are the innovators in
technology (specially for the brand Pulsar)
– Providing technology which can make fuel
efficiency bike
– Leader in 150+ cc segments

78. SWOT for Bajaj
• Weakness
– Not full capacity utilisation
– Not strong in all the categories
– Do not have any presence in the moto-scooter
segment
– Worst asset turnover ration in the industry

79. SWOT for Bajaj
• Opportunity
– Increase in the sale of sports bike segment
– Credit financing by different banks is increasing for
the 2 wheeler purchaser
– Increase in disposable income
– Can re-enter the fastest growing segment

80. SWOT for Bajaj
• Threat
– Increase in fuel price
– Inflation
– Economic slowdown

81. SWOT for TVS
• Strengths
– Strong in the moped segment
– Gaining popularity in the 100 cc segment
– Capacity utilisation is 100%

82. SWOT for TVS
• Weakness
– Very less product portfolio in the motorcycle
segment
– Least financial leveragability in relation to industry
standard
– No expansion plans

83. SWOT for TVS
• Opportunity
– Increase in the sale of sports bike segment
– Credit financing by different banks is increasing
– Increase in disposable income

84. SWOT for TVS
• Threat
– Increase in fuel price
– Inflation
– Economic slowdown
– Migration of people from moped to motorcycle

85. Industry Life Cycle and PLC

86. PLC of two wheeler industry- India

87. PLC of two wheeler industry- India
• Though various segments have reached
various levels in the Industry PLC but the
industry itself has just entered the maturity
stage.

88. PLC of MotorCycles

89. PLC of MotorCycles
• Motor cycles had a very strong introduction
and growth stage.
• The Indian motorcycle segment has entered
the maturity stage

90. PLC of Scooters

91. PLC of Scooters
• Scooters enjoyed a pretty long stay in the
market
• Decline started after the coming up of motor
cycles scooters had reached the start of
decline stage
• With scooty, honda activa,aviator the scooter
market re-emerged and PLC got a new curve

92. PLC of Mopeds

93. PLC of Mopeds
• Started off strong
• Had a strong growth phase
• Is now in the end of the maturity

94. Porter’s 5 Forces

95. Porter’s 5 Forces

96. Threat of New Entrants
Very Low because
• Entry barriers are very high
• Product falls under the category of high level of
involvement
• The biggest challenge is setting up sales service
center, which is very hard for a new entrant
• Well established players are already existing
• Industry is consolidated
• Economies of scale

97. Threat of Buyer’s Bargaining Power
Very High because
• So many options are available to buyers
• Substitutes are available
• Supply-demand mismatch in the industry
• Supply is greater than the demand

98. Threat of Supplier's Bargaining Power
In automobile industry sellers can have
bargaining power in the following areas
• Metal
• Tires
• Batteries
• Auto components

99. Threat of Supplier's Bargaining Power
• Metal : Prices are determined in international
markets, chances of Bargaining power is less
• Tires: They are 40 listed tire manufactures in
India, Industry is fragmented. Bargaining power
of suppliers is low
• Batteries: Industry is fragmented. Bargaining
power of suppliers is low
• Component Manufacturers: Industry is
fragmented. Bargaining power of suppliers is low

100. Intensity of Competition
Intensity of competition is high
• Aggressive competent players are already
present
• 7 players are present in commuter segment
• Manufacturing capacity already exceeding
demand

101. Threat of Substitutes
• Local trains
• Cars
• Electrical Vehicles
• Public transport

102. Threat of Substitutes
The substitutes in one form or other have the
following attributes
• Relative price of substitutes is cheaper
• Relative quality of substitutes is higher
• Switching costs is lower

103. Threat of Substitutes
Why people are switching to Local trains?
• Safety
• Affordability
• Time saving
• Cost
• Pollution

104. Threat of Substitutes
Why people are switching to Cars?
• Safety
• Comfort
• Status Symbol

105. Threat of Substitutes
Why people are switching to Public Transport?
• Safety
• Affordability
• Time saving
• Cost
• Pollution

106. Threat of Substitutes
Why people are switching to Electrical Vehicles?
• Environmental Friendly
• Maintenance cost

107. Threat of Substitutes
Reasons for Electrical Vehicles not doing well ?
• Electrical vehicles at present not competitive
with respect to present petrol running
vehicles
• No established player is offering Electrical
vehicles

108. What 2 wheeler companies can do ?
Fill the gaps in their product portfolio
– Electrical vehicles for environment friendly
– Launch a new product which takes care of safety
and comfort

109. Thank You