By Team Starship- IMTG

Strategy for M&M Two

Wheeler Foray

Scenario Analysis2Wheeler: Growth Drivers remain intact

Favorable Demographics

Average age for the 1st

time buyer down to 18

Need for individual mobility

Strong GDP growth

Low penetration

Poor mass transport system

Scenario Analysis…contd2Wheeler: Growth Drivers remain intact

Growing retail & service industry.

Reduced product life cycle 7 to 5 yrs

Increasing replacement demand -35%

Export Opportunities

Scenario Analysis…contdHowever, the market has de-grown

Scenario Analysis..contdWhat has changed? Credit availability

Squeeze and higher down payment

Credit norms Tightening of lending norms. Impact on eligibility for lower income groups

Rising interest rates Increase in the interest rates across the board

reducing available disposable income

M&M’s Strategic intent in the 2W Segment

With the acquisition of Kinetic Motors Company Limited it wants and Italian engine designing firm

“To design and market a range of scooters, Value engineered motorcycle and high end motorcycles for the Indian and Global markets, helping it establish a robust, end to end two wheeler business in every segment of the industry ”

Existing Business StrengthThe following factors were considered

for evaluating present business strengths.

•Strong equity in Rural due to farm equipment business and in urban with success of the ScorpioBrand Equity•Leverage existing distribution network of Mahindra in rural

Distribution Network

•Technological tie ups with design companies and also Kinetic’s existing tie up with SYM.

Technological Competency/Tie Ups

•Kinetic’s existing production facilities can be put to use.

Current Production Facility

Segment AttractivenessThe variant of The GE Mckinsey

Matrix has been used to evaluate Market Segment Attractiveness.

•The executive segment(125cc) is growing at the fastest.Market growth rate•The entry segment(100cc) is still the biggest in terms of volumes sold.Market size•The entry segment is most interest rate elastic, hence high demand variabilityDemand variability•Low Margins in 100 cc make it less profitableIndustry profitability

•Both 100 and 125cc being fiercely competitiveIndustry rivalry•100 and 125 cc Bikes are being exported to other third world countries.Global opportunities

•Empowerment of women and development of rural infrastructure throwing new opportunitiesMacro environmental factors

High

High

Medium

Medium

Low

Low

Executive Bikes

Entry Bikes

Premium Bikes

Gearless

Geared

E-Scooters

Segment AnalysisSe

gmen

t At

tract

iven

ess

Existing Business Strength

Proposed Strategy for M&M

Short term

• Gearless Scooters (New models from SYM)

• Premium (Foreign collaboration)

• Entry- Rural (100cc segment)

Medium Term• Executive Segment (125 cc

+ Ergonomics+ Urban)• E-Scooters- (SEC B2/C)

Long Term

• Global reach e-scooters/ Entry, executive bikes

• Commercialization of Hybrid fuel/engine in 2W

Time-plan for the Strategy7M/FY08

FY09 FY10 FY11 FY12 FY13

Premium BikesGearless ScootersEntry SegmentExecutive segmentE- Scooters

Red cell indicates the year of entry in that particular segment, whereas Grey cell indicates staggered launch in that segment.

Detailed Strategy

Motorcycle Segment Objective

• Establish a market share of 20% (overall) by FY 13(2013-14)

Exploring bikes..

03-04

04-05

05-06

06-07

07-08

08-09

09-10

10-11

11-12

12-13

13-14

0%10%20%30%40%50%60%70%80%90%

100%

100cc125cc150cc

03-04

05-06

07-08

0%

20%

40%

60%

80%

100%

Bajaj Auto Hero Honda Mo-tors

TVS Motors Yamaha MotorsHonda Motor-cycles & Scooters

Projected share of 125cc+ segment to exceed 50% by 2013-14.

•Bajaj more hit with the tight credit situation.•Players like Yamaha, TVS loosing market share over the years.

100 cc

125 cc

150+ cc

INDUSTRY VOLUMES

INDUSTRY PROFIT

40% 65%

60% 35%

INDUSTRY SIZE

INDUSTRY PROFIT

Source- Investor presentation –BAL, Oct 2007

Profit VS Size- By Segments

More on various segments

• Rs 33k-44k

• Mileage

• Style-Design-Looks

• Platina

• Splendor

• Rs 38k-52k

• Style

• Pick-Up

• Mileage

• Reliability

• Power

• Glamour

• XCD

• Stunner

• Rs 50k-1.7L

• Riding Experience

• Power & performance

• Thrill

• CBZ

• Pulsar

100cc

Price

Value*

*Value refers to the value proposition offered by top selling brands in this segment

Brands

125cc

150+cc

Dominated by Hero Honda

Dominated by Bajaj

Models like Bajaj Avenger and Hero Honda Karizma in the 180+cc – redefining biking. Yamaha is also catching up in this segment.

Premium bikes

Entry with a “big bang” of M&M having “arrived”.

Consistent with the brand image and create equity in 2W

Forge Alliances with foreign players

Entry with a “big bang” of M&M having “arrived”

Value to M&M of Rs 78mn in 1st year

This would make the young consumer more favorably disposed towards M&M as it would shed the “heritage” factor and make them believe that “M&M bikes are for people like me”. This image makeover in this TG is v . critical as the avg age of buying a 2W is 18 yrs

Executive Segment

Insights from ethnography study

Irritants and frustrations while commuting in the entry and executive segment.Long hours of riding bike to work etc

Traffic Jams

Snail pace movement

Exhausted and tired

Late to office and back home

Irritated / Back ache

Less time for self/family/frie

nds

More petrol consumption

Frequent Re-filling of petrol

Pricks the most while paying for the petrol

The comfort bike.

Potential of the concept

Power

Comfort

Price

Mileage

13%

23%

64%Premium

Executive

Entry

21%

Rs 764 mn value to M&M in 1st year!

Defining this Segment

Utilitarian consumers who are very value-oriented and are concerned with the comfort and functionality of their

products.

Factors considered

while Buying

QualityComfortFunctionali

tyPrice

Purchases are made based on

rational calculations

Looking for the most VFM,

without compromising

on quality.

Economical

Dependable

Prudent

Hi TechPioneering

Modern

Parent Corporate Brand

Comfort

Premium Style at

Executive Price

Performance with Mileage

Mahindra Kinetic “Comfort” Bike :BIKE+

VFM

Brand as a product

• A 2W for the urban market

• Comfort as POD• Premium style at

executive price• JR combination of

power/ mileage and style

Brand as a person

• Seeking comfort• Looking for most

VFM w/o compromising on comfort.

• Concerned with functionality

• Not purely image driven

Brand as a symbol

• Metaphors questioning the traditional logic of buying a bike

• Economy of a 100, comfort of a car

• Imagery focusing on the comfort and VFM

• Heritage of VFM and innovative products from parent brand.

Brand Identity

Value Propositio

nFunctional Benefit

• Good looks, GREATER comfort, great value

Emotional Benefit

• Ownership experience of relaxation, feeling at home, style

Self Expressive Benefits

• City companion / extension of lifestyle.

BRAND CUSTOMER RELATIONSHIP

Other Aspects

Need more channel partners end of 2009.

Test marketing in cities like b’lore/Mumbai.

Comfort value is experiential –Test drives CRITICAL

Entry Segment- Rural

The Rural Landscape: Possibilities Unlimited

Source: Ministry of Communications and Information Technology, FK Urban Rural Index, 2005

Product Rural HH’000

%Penetration

Urban HH’000

%Penetration

Total HH’000

%Penetration

Two-wheeler

16195 11% 25813 42% 42008 20%

Current Rural Strategies of Competitors

Players Strategies to tap rural market

Hero Honda •Has created rural vertical•Plans to cover 1 lakh villages under Har Ghar, Har Aangan scheme•To make use of local festivals for promotions•Reaching out to opinion leaders•Use of Hero Honda Finlease or start a finance arm•Expand dealer network

Bajaj •Setting up separate rural dealerships•Launch of two wheelers specifically for rural youth•Selling during festive seasons•Reaching out to opinion leaders and their families•BAFL to take care of financing

TVS •Plans to launch 100 cc bikes for semi-urban and rural youth•Emphasis on value for money and not style•Moves to moderate involvement in rural which currently brings in over 70 % of the revenue, to about 50 %

M&M’s foray into ruralStrengths Weaknesses

Can tap M&M’s huge distribution network of tractors existent to cater to rural

Mahindra image of being a tractor player may affect aspiration value of M&M two-wheelers

The Mahindra brand name is very well known in villages and signifies reliability and trustGreat understanding of the rural mindset and customers viz a viz competitorsMahindra Finance’s extensive reach in rural and semi-urban marketsOpportunities Threats

High growth rate of rural areas and increase in transportation needs

More sensitive to interest rate and credit availability fluctuations

Deep pockets and low two wheeler penetration in rural areas

Competitors working hard on tapping rural markets

From M&M to rural India!Two wheeler Type

Yes/ No

Reasoning

Scooters No •Lower mileages•Lack of sturdiness•Bad roads

<=100 cc Motorcycles

Yes •Cheapest motorcycles•Value for money•Entry level bikes for all the rural youths aspiring for two wheelers•Highest possible mileages

125 cc Motorcycles

No •Aspiration levels in rural either for a two wheeler or a power and image bike (like Pulsar)

150 cc Motorcycles

No •As of today the rural market for high power bikes is on the smaller side

Four pronged Rural strategy

Rural

Regional Marketing Approach

Deep Channel

penetrationWOM

Leveraging Mahindra

Equity

Scooter Segment in Details

Scooter Segment Objective

• Establish a market share of 25% (overall) by FY 13(2013-14)

Exploring Scooters…Shares of Gearless Scooter have increased from 44% in 01-02 to 94% in 07-08. If present trends continue, it would capture almost entire market by 2014.

2001-02

2002-03

2003-04

2004-05

2005-06

2006-07

2007-08

0.00%10.00%20.00%30.00%40.00%50.00%60.00%70.00%80.00%90.00%

100.00%

GearlessGeared

2001-02

2002-03

2003-04

2004-05

2005-06

2006-07

2007-08

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

Bajaj AutoHonda ScootersKinetic MotorTVS Motors

Market Share of Kinetic has gone down to 3.28%, while Honda has picked up to 59%.

Snapshot of the Gearless Segment

Parameter Description

Total Market size by Volumes (2008)

990732 units

% of Two Wheeler Market by Volumes

13.69%

CAGR for 100-125 cc (most attractive segment)

31.35%

The Present Offerings

Young girls

•Bajaj Kristal DTS-I•Hero Honda Pleasure•TVS Scooty Pep+•Kinetic Flyte

Unisex/Family

•Honda Dio•Honda Activa

Men•Honda Aviator•Kinetic Blaze

The NEED Gap

Honda Activa

Scooty Pep

Kinetic BlazePositioned Explicitly at young girls

They are perceived as too delicate, fragile. So, safety concerns in city usage.

Consumer Insight: The girls wants a Scooty which is not TOO GIRLY, which the MEN can also drive.

Unisex Looks

Slightly heavy for the girl to drive.

The NEED Gap

Honda Activa

Scooty Pep

Kinetic BlazePositioned Explicitly at young girls

They are perceived as too delicate, fragile. So, safety concerns in city usage.

Consumer Insight: The girls wants a Scooty which is not TOO GIRLY, which the MEN can also drive.

Unisex Looks

Slightly heavy for the girl to drive.

Need for a Scooty, targeted at women (as she is the key influencer), but not delicate or girlish in appearance, so that the men in the household can also drive,

Further, no too bulky , so that the girl herself can drive smoothly.

Filling the Gap

Honda Activa

Scooty Pep

Kinetic BlazePositioned Explicitly at young girls

They are perceived as too delicate, fragile. So, safety concerns in city usage.

Consumer Insight: The girls wants a Scooty which is not TOO GIRLY, which the MEN can also drive.

Unisex Looks

Slightly heavy for the girl to drive.

Not girly or delicate in appearance!

Less bulky, so easily handled by women!

Need to connect with the TG

• Make a unisex model but target it to women

Unisex

“A Transport solution for YOU , to be the new (Transformed) YOU because only we (M&M, Kinetic ) understand YOU”

LEVERAGING ON THE EQUITY OF MAHINDRA (Innovative, easy to ride) and KINETIC (Pioneer in introducing gearless scooter concept)

Other AspectsNeed to reassure the older set of women that even they can ride and how it can transform their lives

TG• Metros• TierI/II• SEC A1/A2/B1• IN THE AGE BAND OF 18-40 YEARS

Distribution• Apart from traditional channels, concept of network marketing to

be explored to break the barrier in the older TG.

E-Scooters

The Case for E-Scooters

E Scooters

Less air pollution

Reduced noise

pollution

Low price & high

mileageEasy to handle

The problem with e-scooters which are inhibiting their growth:

The need for charging after covering a certain distance. Also, there is a lack of Eco-System for E-Scooters right now, ranging from

absence of repair shops to charging points.Need to replace the battery in each year.

Advantages to Mahindra and Mahindra

Opportunities

Government Incentives to spur growth

Export Revenue

sGoes with the Green Warrior Image

Ecosystem Development

‘Bijlee’Electric 3-wheeler

Lithium Ion Battery

Create Ecosystem

Competitive

Advantage

Expertise

developed

• Charging Stations

• Service Centers

CAVEATCultural AND Operational changes post-acquisition

Successful Acquisition of Kinetic

Turnaround from

Kinetic culture to

M&M culture

Reduced time to market for new productsStreamlining of

operations

Blue-chip Mantras – Achieved!

Leadership• Attainment of No. 2 or No. 3

player spot in all segments

Global Potential

• Long term plans to export entry level bikes to Asian countries like Sri Lanka, Bangladesh, African countries including Nigeria and most parts of South America

Innovativeness •Introduction of comfort as a lifestyle element in the 125 cc segment bikes •Introduction of electric scooters in SEC B2/ C •Introduction of a gearless scooter to the hitherto un-catered to segment of elderly women, at the same time offering a vehicle for the family

Ruthless focus on financial returns

• Setting of aggressive financial targets to reach No. 2 or 3 position in the respective segments in 5 years

• Attainment of 323 throughout operation period

Customer Centricity

•The vehicles in each segment ranging from e-Scooters to gearless scooters to 125 cc bikes are styled to cater to customer needs in unique ways

Projected value (in Rs mn) for M&M

7M/FY 08

FY 09 FY 10 FY 11 FY 12 FY 130

10000

20000

30000

40000

50000

60000

70000

PremiumExecutiveEntry

2008-09

2009-10

2010-11

2011-2012

2012-13

2013-14

0

2000

4000

6000

8000

10000

12000

Gearlesse-Scooter

Motorcycles

Scooters

THANKS

We are open to questions