the two wheeler industry
TRANSCRIPT
BIRLA INSTITUTE OF TECHNOLOGY, (NOIDA
CAMPUS)
ReportOn
The Indian Two Wheeler Industry
ACKNOWLEDGEMENT
I wish to express my sincere gratitude to Mr.Sanjay Nadir, (Manager Accounts) of AVL INDIA PVT. LTD. , Gurgaon , for me with an opportunity to work on this project and learn something new. We are indebted to him for clarifying our concepts by sharing his valued experience in teaching, research and training which have thereby become an unconscious part of our ideas and thoughts.
I would like to thank Mr. DILIP THAKUR Department of
Accounts, AVL INDIA PVT. LTD. , Gurgaon for his valuable
suggestion, guidance and support at all stages of the project.
I would like to thank my family members for their
encouragement, inspiration and moral support.
A special thank to the Almighty for giving us the opportunity
and strength to complete this project.
Last but not least, my sincere gratitude is also extended to
the various other person involved directly and indirectly in
the project for their kindly and valuable suggestion.
ROHIT SINGH
Executive summary
In view of the increased competition due to globalization and the
expansion of economy, all industries need to constantly add more
attributes and features which consumer want in two-wheeler. In
this context companies have to adopt more innovative and
consumer friendly attributes so that their product should be more
popular among the customer.
The project is aimed at studying the reason
why the consumer purchase any particular two wheeler or which
are those attributes which affect more to the consumers in making
the buying decision. Moreover the attributes which satisfy then the
most. In the market there are many players, but Bajaj, Hero Honda,
Honda, TVS Motors etc are the major players in the market.
Let us first identify the current market leaders in each category. In
the economy segment Bajaj is the leader with 46% of the market
share with boxer being the largest selling bike in this segment. In
the executive segment Hero Honda is the clear leader with 67%
market share with splendor and passion leading the market in this
segment .
The research assigned to me was to study
the parameters or the features that affect most of the customer
satisfaction in two wheeler industries. There were many features
which affect the two wheeler industry but the importance among
all of them were the following: -
1. Fuel efficiency
2. Maintenance
3. Availability of the product
4. Resale value
5. Look and style
6. Image of the brand
By the study conducted on the customer satisfaction in two wheeler industry it will make companies more delighted about which attributes to inculcate in the product and which attribute is of the least importance.
Introduction
Evolution of Indian two wheeler Industry
The two-wheeler industry in India has been in existence since 1955. It
consists of three segments viz Scooter, Motorcycles, and Mopeds. The
increased sales volume of this industry is proof of its high growth.
In 1971 sales were around 0.1 million units per annum.
But by 1988 the figure had risen to 3 million units per annum. Similarly
capacity of production have increased from 0.2 million in seventies to more
than 4 million in the late nineties.
(1960-69)
The automobile industry being classified as one of important under the
Industry Policy Resolution of 1948 was therefore controlled and regulated
by the government. In order to encourage manufacturing besides restricting
imports of complete vehicles, automobile assembler firms were phased out
by 1952 and only manufacturing firms allowed to continue production of
automobile was licensed; which meant that a firm required a licensing
approval in order to open a plant.
It also meant that the government determined
a firm’s capacity of production. During this period collaborations with
foreign firms were encouraged.
(1970-80)
This was a period during which the overall growth rate of the two-
wheeler industry was high. Furthermore, the levels of restriction and
control over the industry were also high. The former was the result of
the steep oil price hikes in the year 1974 following which two-
wheeler became popular of personal transport because they offered
higher fuel efficiency over car.
(1981-90)
The technological backwardness of the Indian two-wheeler industry was
one of the reasons for the initiation of reforms in 1981. Foreign
collaborations were allowed for all two-wheelers up to an engine capacity
of 100cc. Between 1974-79 sales of two-wheeler increased by 60%, while
that of cars declined by 21% and jeeps grew only by 11%. Indian
motorcycles in the seventies had two major drawback viz-low fuel
efficiency and high weight. Worldwide however, there was a trend towards
using high strength, low weight materials for various components that
resulted in vehicles that were compact and lower weight.
(1991- 1999)
The reform that began in the late seventies underwent their most significant
change in 1991 through the liberalization of the economy. The two-wheeler
industry was completely deregulated. In the area of trade, several reforms
were introduced with the goal of making Indian exports competitive. The
two-wheeler industry in the nineties was characterized by an increase in the
number of brands available in the market, which caused to compete on the
basis of fuel efficiency improved by (60-100)% in the new vehicles. In the
seventies Motorcycle mileage was on an average between 25 to 50 kmpl. For
Mopeds it improved from 50 to 80 kmpl. Output of the engine also increased
from 3-4 hp to 10hp per 100cc.
In the Motorcycle segment, the new 100cc models
compared well against the existing heavier models of 250cc, as they were
lighter and more fuel-efficient.
Some Interesting Facts About two-wheeler industry
In India,
India is second largest manufacturer and producers of two-wheeler in
the world. It stands next only to Japan and China in terms of the
number of the two-wheeler produced and domestic sales.
Indian two-wheeler industries have made
beginning in early fifties when automobile products of India started
manufacturing scooters in the country.
In 1948 Bajaj auto began trading in imported Vespa scoops and three-
wheelers.
In the initial stage, automobile product of India dominated the scooter
segment; it was later overtaken by Bajaj auto limited. Although
various government, private enterprises entered the fray for scooter.
Under the regulated regime foreign companies were not allowed to
operate in India. It was a complete seller market with the waiting
period of getting a scooter from Bajaj auto being as high as 12 years.
The Motorcycles segment was no different with only three
manufacturers viz Enfield, Escorts and Ideal Jawa were two stroke
bikes. While Enfield and Rajdoot were four stroke.
With the availability of fuel efficient, low power bikes, demand
swelled resulting in Hero Honda then the only producer of four stroke
bikes gaining o top slot.
In 1990 the entire automobile industry saw a drastic fall in demand.
This resulted in a decline of 15% in 1991 and 8% in 1992, Barring
Hero Honda, all the major producers suffered from recession in 1993
and 1994. Hero Honda showed a marginal decline in the year 1992.
Industry structure
The scooter market is dominated by 150cc vehicles from Bajaj auto and LML
with the rest being served by 100cc variometric scooter from Kinetic Honda.
SCOOTER NORTHERN WESTERN
SOUTHERN
PERCENTAGE 46 27.5 15.7
The Indian Motorcycle segment is dominated by Bajaj, Hero Honda and TVS
Motors.
MOTORCYCLES WESTERN SOUTHERN NORTHERN
PERCENTAGE 40 27.5 17.4
In terms of two-wheeler vehicle population Tamilnadu stands first with a
population of 6.73 vehicles, Maharashtra t stands second with a population of
6.21 vehicles and Gugrat stands third with 5.16 mn of vehicles as on 31
March 2005.
STATES TAMIL NADU MAHARASHTRA GUJARAT
POPULATION OF VEHICLES (MN) 6.73 6.21 5.16
Market Share in Motorcycle Segment
COMPANIES YEAR’2007
YEAR’2008
YEAR’2009
BAJAJ
28.7%
21.9% 24.3%
ESCORTS 14% 13.6% 15.9%
HERO HONDA 42.4%
38% 36%
TVS SUZUKI 11.3% 13.5% 17.3%
Four players viz Hero Honda, TVS Motors, Escorts, Bajaj dominated Motorcycle
segment. The market share of each of the players is as given above. Nearly 80% of the
Motorcycle sales are of Japanese Motorcycle with rest coming from Indian Motorcycles.
But majority of the sales is of 100cc-125cc vehicles. The Japanese range of Motorcycle is
costlier due to import content and royalty payments.
HERO HONDA
Hero Honda is the only two-wheeler company in the country with a 100% Motorcycle
exposure. Although its sales have growth at a good clip over the past year a bigger
Motorcycle pie and greater competition has resulted in a fall in the company’s market
share 5% in August 2001 to 47% this August.
To counter the competition the company is looking to create
as intermediate category with its latest model, the 133cc AMBITION this bike is targeted
at users who wish to use high-end model but would not like to shell out premium models.
Hero Honda is taking it easy on launches besides AMBITION,
it is looking at a 200cc bike next fiscal and a relaunch of CBZ, which has been steadily
looking out to Bajaj comparable PULSAR.
The company is upbeat about demand as is reflected in its progressive capacity
bikes from 1.5 million units a year in fiscal 2002 to be increased to 2 million units this
fiscal, which can be ramped up to 2.4 million units. The warranty program is expected to
add Rs 10 crore to costs for the year, which is a fraction of the Rs 464 crore net profits it
generated in fiscal 2002.
1984
- The Company was Incorporated on 19th January, at New Delhi. The Company
Manufacture motor cycles upto 100 cc capacity. The Company was promoted by Hero
Cycles (P) Ltd. (HCPL).
- The Company entered into a technical-cum-financial collaboration agreement with
Honda Motor Co. Ltd., Japan (HML). As per this collaboration agreement, HML was to
furnish complete technical information and know-how and trade secrets and other
relevant data.
- Hero Honda CD-100 is the first four stroke motorcycle to be introduced in India in
100cc range. Its most attractive features are fuel efficiency and its light weight. CD-100
will be equipped with electronic ignition system, illuminated speedometer, 4 speed gear
box, neutral and flasher indicators, etc.
- 15 No. of equity shares subscribed for by the promoters, etc. In November, 119,99,985
No. of equity shares issued at par of which 71,99,985 shares reserved for allotment as
under:
- (i) 31,19,998 shares to Hero Cycles (P) Ltd., Hero Investments (P) Ltd., and Bahadur
Chand Investments (P) Ltd.
- (ii) 31,20,000 shares to Honda Motor Co. Ltd., Japan and
- (iii) 9,59,987 shares to friends and association of promoters. Out of the balance
48,00,000 shares, 2,40,000 shares were reserved for subscription by the employees of the
Company and 96,000 shares by business associates.
The remaining 44,64,000 shares were offered at par for public subscription during
November.
1985
- The Company embarked on its 2nd phase of expansion of increasing its installed
capacity from 1,20,000 to 1,50,000 vehicles per annum by the addition of several critical
aluminum and steel components.
1986
- 36,00,000 rights equity shares issued at par in prop. 3:10.
1987
- The Company offered 6,00,000 - 15% secured redeemable non-convertible debentures
of Rs 100 each for cash at par on rights basis in the proportion 1 debenture: 18 equity
shares.
- Another 3,00,000 - 15% debentures were allotted to retain oversubscription. The
debentures were to be redeemed at a premium of Rs 5 per debenture on the expiry of the
7th year from the date of allotment of the debentures.
- 3,75,000 rights equity shares issued at par in prop. 3:10.
1989
- The Company introduced a new model "Sleek" during July.
- 850 No. of equity shares forfeited.
1990
- The Company was planning to launch a new model motor cycle-CD 100 SS
sutiable to semi-rural conditions. In the domestic market the Company was reported to
have a market share of 46%.
- 850 forfeited shares reissued.
1994
- The Company proposed to expand the capacity of existing plant at Dharuhera to
2,40,000 nos. per annum. Another plant with an installed capacity of 1,50,000 nos. per
annum at Gurgaon Industrial Estate was being set up.
- The Company issued 39,79,500 bonus shares to the existing shareholders in the ratio of
1:4. The Company also issued 28,557 number of fractional coupons representing 14,250
shares against which shares shall be allotted to presenting the same for consolidation and
allotment.
- The Company's production and turnover increased to 1,83,490 motorcycles and
Rs.483.85 crores respectively due to growth in demand for two wheelers and declining
inflation.
1995
- 14,420 bonus shares issued by way of consolidation of fractional coupons. - A new
Technical Collaboration Agreement has been signed with Honda Motor Co. Ltd., Japan
for the period upto the year 2004 which includes technology related to models of higher
Engine displacement.
- The Company alloted 39,79,500 No. of Equity Shares of Rs. 10/- each as Bonus shares
on 7th February, by way of capitalisation of General Reserves.
- The Company had issued 28557 No. of Fractional Coupons representing 14.250 shares
against which the Shares shall be alloted on presenting the same for consolidation and
allotment.
1997
- Hero Honda Motors has launched its newest motorcycle, the Street, a 100 cc bike
designed for use in congested urban traffic conditions.
- Hero Honda Motors Ltd (HHML) has set up a new motorcycle plant in Gurgaon, near
Delhi for the manufacture of the Honda Super Cub 100 cc stepthro bike.
- Hero Honda has set up a new state-of-the-art plant, heralding a new phase of
development of motorcycle industry in India, to provide the most modern and
technologically advanced production facilities.
- Hero Motors of the Rs.1,600 crore Hero group, as part of its globalisation plan, has set
up a plant in Brazil for manufacturing hero winner scooters.
- A new step thru model `Street-100' with unique feature was launched on 24th January.
1998
- The company proposes to increase the share capital to 5 crore equity shares of Rs. 10
each, 4 lakh cumulative redeemable preference shares of Rs. 100 each and 4 lakh
cumulative convertible preference shares of Rs. 100 each with power to increase or
reduce it from time to time.
- The company further proposes to capitalise Rs. 19,96,87,500 from general reserve to
share capital through issue and allotment of bonus shares. Altogether, 1,99,68,750 fully
paid bonus shares will be allotted and distributed to members of the company holding
equity shares of the company in the proportion of one bonus share for every fully paid
equity shares of Rs.10 each.
- Motorcycles major Hero Honda is considering entry into scooters in collaboration with
partners, Honda Motors, after the Japanese company decided to walk out of Kinetic
Honda, their scooter venture with the Firodias of Pune.
- Honda Motors recently pulled out of its joint venture with the Firodias in which it held a
51 per cent equity stake.
- Honda Motor Company Ltd of Japan (Honda) and Kinetic Honda Motor Ltd (KHML)
have signed a five-year licence and technical assistance agreement under which KHML
will continue to receive the technical knowhow, critical vehicle parts and access to
Honda's markets even after the sale of Honda stake in KHML to Kinetic Engineering Ltd
(KEL).
- The Company changed the paradigm in two-wheelers by launching the most powerful
and fast bike- CBZ(ee) with a unique feature of Transient Power Fuel Control (TPEC)
system.
- 23,962,500 bonus shares issued in prop. 1:1.
1999
- Hero Honda Motors Ltd (HHML) and 20th Century Finance Corporation Ltd have
signed a Memorandum of Understanding (MoU) for financing of Hero Honda
motorcycles.
- The company, a joint venture between Honda Motor Company of Japan and Hero group
of India to produce four-stroke motorcycles, also aims to increase its share by 1 per cent
to 38.6 per cent during the current fiscal.
- Leading two-wheelers manufacturer Hero Motors has formed a joint venture with
Briggs Stratton of US to develop and manufacture four-stroke engines for mopeds and
scooters in India, a top company.
- Honda Motor Company of Japan has decided to re-enter the scooter market in India as
also foray into three-wheelers in a joint initiative with its existing joint venture company
Hero Honda Motors Ltd.
2000
- Hero Honda Motors Ltd. and Tata Finance Ltd. have signed a national tie-up agreement.
The Company is the largest manufacturer of motorcycles in the country.
- The Company will relaunch its stepthru Stree Smart on Baisakhi 13th April.
- Hero Honda Motors Ltd (HHML), has launched an upgraded version of the existing
step-through motorcycle - the Hero Honda Street.
- The Company was ranked as the 9th Highest Value Creator among 12 industry groups
within the Bombay Stock Exchange top 100 companies over a five year period (1994-99).
2001
- Hero Honda Motors Ltd. has launched a new 100cc motorcycle named `Passion'.
- The Company has secured shareholders' approval for splitting one equity share of Rs 10
each into five equity shares of Rs 2 each in the ratio of 1:5.
- Hero Honda Motors Ltd. has become the largest seller of motorcycles amongst all
Honda companies and ventures in the world by selling one million motorcycles during
the current financial year.
- Credit rating Agency Crisil has reaffirmed outstanding `AAA' rating assigned to the
proposed Rs 15 crore non-convertible debenture issue, Rs 16 crore commercial paper
programme and fixed deposit programme of Hero Honda Motors.
- Promoter-Chairman of the country's largest motorcycle manufacturing company, Hero
Honda Ltd, Brijmohan Lall Munjal has bagged the prestigious Ernst & Young
Entrepreneur of the Year (EOY) award here on September 27.
2003
Company has stabilized ERP programs in the areas of Human Resources, Plant maintenance and operations.
The current capacity of both the plants put together is 2.2 million vehicles. The Company is also looking at expanding its capacity further. Study has been carried out to identify potential location for the third plant. A decision regarding the same will be taken after due consideration arising out of the recommendations of the study.
2004
Hero Honda sold over 2 million motorcycles and recorded a 23% growth over last year’s 1.68 million sales. Not only that, your Company’s sales growth was higher than the industry average of 14%. Ccompany also improved its market share to 48% and 37% in motorcycles and two-wheelers respectively.
Company has emerged as one of the best performing companies in the country. The Company has retained its number one position as the single largest two-wheeler manufacturer of the world for the third year in a row. Splendor, the world’s largest selling brand, for the fourth consecutive year not only retained its position but also achieve the 1 million sales mark.
With 5 new launches, namely CD Dawn, Karizma, Splendor+, Passion Plus and
Ambition 135 during the year, the entire product range gave a fresh and contemporary
image to the customers.
2005
Company sold 2.62 million bikes. Hero Honda tightened its grip in the motorcycle segment with a 50 per cent share (up from 48 per cent). Your Company also accounted for 40 percent of the Indian two-wheeler market (up from 37 percent in the previous fiscal). During the year, Hero Honda maintained its one-million vehicle lead over its nearest competitor and for the fourth successive year, the company retained its slot at the top as the world's largest two-wheeler manufacturer.
2006
Launched new engine platforms in 125cc and 150cc categories, and is planning several new launches in the forthcoming year. We've already introduced cutting-edge Fuel Injection technology in one of our products, Glamour FI, making Hero Honda the first two-wheeler Company in India to do so. Over time, we expect to cascade this technology across other models.
Apart from successfully launching of 4 new models during the year in review, Company
made its debut in the scooter market with the 100cc offering called "Pleasure" targeting
women commuters and home makers. The products, which are mostly sold through a
chain of unique all-women retail outlets, were received well by the market, and we hope
to gain critical mass over the next few years.
2007
In the price or the entry segment, Hero Honda launched a new offering, the CD Dawn Deluxe as part of its strategy to give customers value for money. This bike ended the financial year with a 33.4 per cent share in the entry segment.
In the premium segment, Hero Honda, clocked a 28 per cent growth and sold 1,09,000 units, translating to a 13.6 per cent share. Hero Honda’s presence in this segment was marked by strong performances by the re-launched premium offering, CBZ X-treme. From a segment share of 1.2 per cent in October, CBZ X-treme commanded a segment share of more than 20 per cent by the end of March. The sparkling performance of this bike came about even as the rest of the industry went into a tailspin in the last quarter of 2006-07. During the year, Hero Honda also sold more than 90,000 scooters, by focusing exclusively on the women commuter segment. Hero Honda will continue to grow this unique niche segment in the years to come.
2008
Company inaugurated its third plant – the “Shrine of Technology” in the holy city ofHaridwar in Uttarakhand. The plant will have an initial production capacity of 0.5 million units which would be scaled up to a million units by 2008-end. The total capital outlay on the new manufacturing facility has been around 375 crores.
The new plant will employ flexible production techniques enabling production of different models in the Company’s portfolio. In addition to manufacturing for the domestic market.
REVENUE SHARE MARKET SHARE
MOTORCYCLES 100 36%
OTHERS - -
SALES RS 12,540 CR
NET PROFIT RS 1282 CR
YEAR NO. OF UNITS SOLD MARKET SHARE%
2009 37,22,000 36.1%
2008 33,37,142 38.5%
2007 33,36,756 42.4%
MARKET SHARE OF HERO HONDA
2009
36.1%
2008
2007
38.5%
42.4%
BAJAJ AUTO LIMITED
Around 56% of Bajaj auto limited revenues comes from Motorcycle sales. It is looking to
increase this further for which it has lined up some product initiatives. To start with, it
planned to take its premium segment bike PULSAR national September 2002 and launch
of CROMA in early 2003.
Also, Bajaj auto limited is currently developing a 125cc
Motorcycle in collaboration with Kawasaki for both the domestic and export markets.
The launch is started in early July.
Bajaj is doing all right on the Motorcycle front. The same cannot be said for geared
scooter, though. Although the company continues to be the leader in the geared scooters;
segment (Motorcycle 40.6%) the segment is seeing negative growth sales fall 35% in the
June quarter on a year basis.
Bajaj auto is well placed to whether a slowdown, chief
being reserves of Rs 2700 crore and lowest Motorcycle costs as a proportion of sales in
the industry.*(54.7% against Hero Honda’s 69.3% and TVS Motors 72.5%). Its current
price of Rs 380 discounts ,its annualized fine quarter earnings just and times definitely
worth a ride.
2005
Sales for the year 2005-06 was Rs . 85.5 billion as against Rs. 65.42 billion in 2004-05 an increase of 31 percent included in this.
2007
Chakan 4-wheeler plant – The “Lite” range of 4 wheeler vehicles, both in Passanger and Cargo segement of the industry, are under re-design, to sharpen the comptetive positioning of the products.
2008
Bajaj Auto issued and allotted Global Depository Receipts (GDRs)on April 2008 to the shareholders of BHIL (formerly BAL) pursuant to the scheme of demerger sanctioned by the Hon’ble High Court of Judicature at Bombay vide its order dated 18 December 2007 and the underlying shares against each GDR were issued in the name of the overseas depository, i.e. Deutsche Bank Trust Company Americas (DBTCA).
REVENUE SHARE (%) MARKET SHARE (%)
MOTORCYCLE 56 63.5%
OTHERS - -
SALES RS 121,181 MN
NET PROFIT RS 17036 MN
YEAR NO.OF UNITS SOLD MARKET SHARE%
2009 331,707 24.3%
2008 264,332
21.9%
2007
216,109 28.7%
MARKET SHARE OF BAJAJ AUTO
2009
2008
2007
24.3%
21.9%
28.7%
TVS MOTOR COMPANY LTD
History of the company
1982
The company was incorporated as Indian Motorcycle Pvt. Ltd. on 15th July. Its name
was changed to Indo Suzuki Motorcycles Pvt. Ltd. and it was converted into a public
limited company on 12th January, 1984. It was promoted by Mr. N. Krishnan in
collaboration with SuzukiMotor Co. Ltd. Japan; Sundaram-Clayton, Ltd., a member of
the Company to the extent of Rs 70 lakhs.
The company entered into a technical know-how and assistance agreement with Suzuki
Motor Co. Ltd., of Japan on 22nd September. As per the terms of the Colloboration,
Suzuki agreed to furnish complete technical information and know-how, trade secrets and
other data.
-All shares taken up by promoters etc.
1984
The company received a letter of intent for the manufacture of 20,000 spark ignition
operated out board motors and 30,000 internal combustion spark ignition engines upto
500cc per annum.
59,40,000 shares issued at par in 1984. 7,00,000 shares allotted to Sundaram Clayton,
Ltd. Chennai, 70,000 shares allotted to Anusha Investments (P) Ltd. Chennai, 20,00,000
shares allotted to Suzuki Motor Co., Ltd., Japan; 2,20,000 shares allotted to employees
and business associates and 29,70,000 shares offered to the public.
1985
A new company "Lakshmi Auto Components Pvt Ltd." was incorporated for the
manufacture of critical engines and transmission parts.
1986
The company acquired the assets of the moped division from Sundaram Clayton Ltd. The
cost of acquisition was met partly by rights issue of equity shares. The company
subscribed to 39,20,000 equity shares of Rs.10 each of Lakshmi Auto Components Pvt
Ltd, whereupon it became a subsidiary of the company.
The name of the company was changed from Indo Suzuki Motorcycles Ltd. to TVS
Suzuki Ltd with effect from 18th August.
1988
The company obtained a letter of intent for expanding the capacity to 4,00,000 Nos. two
wheelers.
1989
Working was adversely affected due to labour unrest which resulted in a lock-out from
28th February 1990. The lock out was lifted in the second week of June 1990.
1990
The company launched a 34cc miniped to take advantage of the Motor Vehicle Act that
exempts such vehicles from the payment of road tax. The Company worked for only 10
months due to lock-out.
1991
The technical aid agreement entered into with Suzuki Motor Co., Japan which expired in
August 1991 was extended for three more years with the approval of the Government of
India.
1992
The Company launched two new models of motor cycles viz. `Sumurai' and `Shagur'.
1993
The Company launched a new model of moped viz. `TVS Scooty'.
1995
The Company was studying the feasibility of opening a second plant at a different
location to meet the growth in demand for two wheelers in the near future. It also
proposed to introduce upgraded version of mopeds. In addition, during the year, the
Company undertook to develop new models of motorcycles.
1996
The company is taking steps to meet the increase in demand for its products and improve
the market share.
A statement relating to the subsidiary, M/s Lakshmi Auto Components Limited, Chennai,
and a copy of its annual accounts for the year ended 31st March, 1996 are attached to the
Balance Sheet pursuant to section 212 of the Companies Act, 1956.
As per the requirements of section 217(1)(e) of the Companies Act, 1956 read with the
Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988,
the information regarding conservation of energy, technology absorption and foreign
exchange earnings and outgo are given in annexure I to this report.
1997
TVS-Suzuki plans to set up an auto ancillary estate through joint venture with some of its
existing components suppliers. The proposed project is to come up at a new 57 - acre site
near TVS-Suzuki's existing plant at Hosur.
- Leading two-wheeler manufacturer in the country, TVS Suzuki, will soon set up a new
2.5 lakh capacity scooter plant in Mysore.
- TVS-Suzuki (TSL) - a joint venture between the TVS group and Suzuki Motor
Corporation, Japan - was the first company to launch a 100-cc motorcycle in the Indian
market.
- Credit Analysis & Research Ltd (Care) has assigned the credit rating of CARE AA+
(double A plus) to the proposed non-convertible debenture issue of Rs.100 crore by TVS-
Suzuki Ltd (TSL).
- TVS Suzuki is a joint venture between Saundaram Clayton Ltd. of the TVS group and
Suzuki Motor Corporation, Japan.
- The company proposes to introduce kick start facility.
- TVS Suzuki Ltd (TSL), the second largest two-wheeler manufacturer in the country,
will be restructuring its entire vendor-base in the next five years with the objective of
creating robust vendors to meet its future expansion plans.
- TVS Suzuki Limited is officially launching its new moped model, the XL Super.
- The Rs. 100 crores non-convertible debentures of TVS-Suzuki Limited rating of AA +
(high safety with higher standing) has been retained by CARE.
1998
- TVS Suzuki Ltd, one of the leading two-wheeler manufacturers in the country, has
crossed the Rs.1,000-crore turnover mark in 1997-98.
- TVS will be the first company in the country to introduce the 4 stroke scooter in the
Indian market.
- TVS' new-generation state-of-the-art four-stroke scooter Spectra, of which we gave you
an exclusive preview last month, was launched in spectacular fashion at the TVS
Millennium Show on October 1 in New Delhi.
- TVS Suzuki Ltd on October 1 launched its new generation 4-stroke scooter `TVS
Spectra' in Delhi.
1999
- TVS Suzuki is all set to launch a scaled-down version of Spectra -- the recently
launched four-stroke scooter.
- The company is set to launch Spectra on a nation-wide basis in April.
- Suzuki has indicated to the TVS group that if it did not agree to the Japanese company's
acquiring a majority stake, it should allow Suzuki to set up a 100 per cent subsidiary.
2000
- The Company, pioneers of Indo-Japanese motorcycles in the country, has launched its
latest offering, Suzuki Fiero, in the Kerala market.
- The Tamil Nadu based TVS-Suzuki has launched the 150 CC four-stroke powerhouse
Suzuki Fiero in Tamil Nadu, close on the heels of its launch in Rajasthan, Karnataka and
Kerala.
- Two-Wheeler major, TVS-Suzuki Limited is set to create a special cell to tap the
institutional segment.
- The Company proposes to relaunch its four-stroke scooter, Spectra, in July.
- Two-wheeler major TVS Suzuki is all set to cross the magic one million mark during
the current fiscal with 12 new models lined up over the next 18 months.
- Motorcycle giant, TVS Suzuki, has forged an alliance with Brand Dotcom to leverage
the latter's online expertise brand building on the Net.
- TVS-Suzuki Ltd on August 30th, formally launched its indigenously developed 4-stroke
motorcycle, TVS Victor, here. The price has been fixed at Rs 41,187, (ex-showroom,
Chennai).
- The TVS group and Suzuki Motor Corporation September 27 parted ways from their
15-year-old joint venture with the former buying out the 25.97 per cent stake of the
Japanese company for Rs 9 crore.
2002
- TVS Motor Company Ltd has informed that the Board declared an interim dividend of
Rs 9.00 per share on 2,31,00,070 equity shares of Rs 10/- each fully paid up, aggregating
to Rs 231.00 million.
2003
- TVS Motor launched four new mobikes on June 4, including a brand new 100-cc
mobike to be called the Centra. The bike will give the mileage of 98.6 km per litre.
Named thus because it will target the central part of the mobike market and also offer
almost a century in terms of mileage, the Centra will roll out of the company's Mysore
facility. Its launch will be backed by two new 125-cc variants of the best-selling Victor: a
Max version for the rural market which will be simpler and more rugged with steadier
shock absorbers and another urban, more stylish version.
2004
Star of Asia Award to Mr. Venu Srinivasan, CMD TVS Motor Company by Business
Week International.
He was also honoured with Doctorate in Science by University of Warwick, United
Kingdom.
Mr Venu Srinivasan was conferred with the prestigious JRD Tata Corporate Leadership
Award for the year 2004.
Asian Network for Quality Award 2004 - TVS Scooty Pep won the prestigious
'Outstanding Design Excellence Award' from Business World and National Institute of
Design
2007
During the year 2007-08, the Company launched various new products and variants TVS Flame, Apache RTR, StaR Sport, StaR City 110 cc, Scooty TeenZ Electric, TVS Tru4 Oil . SAP ACE AWARD 2007 For TVS MOTOR COMPANYNew Delhi, 27 August 2007: TVS Motor Company Limited has won this year’s SAP ACE 2007 Awards for Customer Excellence in the Most Innovative Netweaver Category. An eminent jury comprising of powerful industry names judged the company on various stringent parameters including use of SAP solutions to enable strategic decision making, SAP as a change agent for business transformation and to manage growth.“
2008
During the year 2008-09, the Company recorded a growth of 5% in two wheeler sales in line with the industry growth of 5%. The Japan Institute of Plant Maintenance (JIPM) has awarded the coveted Total Productive Maintenance (TPM) Excellence Award to TVS Motor Company in the first category. The company won the award for its exemplary implementation of TPM processes in its Plant II in Hosur and its Mysore plant.
"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.
NEW LAUNCHES
BAJAJ AUTO launched an all-new 135cc Motorcycle. It is the manufacturers first
135cc four-stroke Motorcycle and is fairly placed squarely between the 115cc
HOODIBABA and 150cc PULSAR. The logic behind this is to offer the customer a rung
in the ladder of Bajaj Motorcycles, between performance and economy. Targeted at the
executive family-commuting segment it is priced between Rs 56,500-Rs 58,500.
Kawasaki heavy industries of Japan and Bajaj auto have
collaborated at the design stage with this machine, though critical components such as
engine, gearbox and carburetor are all Kawasaki designs.
THE HONDA ETERNO came as a surprise, more as it does not have an electric start or
DC horn. What’s not missing is the Honda quality. The scooter feels well built and the
modern design is a departure from the conservative, classic Vespa look we’re use to
seeing on geared scooters. The ETERNO has proved economical and has consistently
returned between 53 and 57 kilometres to the litre.
Balancing Acts
Balancing Act by TVS FIERO over highly popular BAJAJ PULSAR 135cc and HERO
HONDA’S still-potent and handsome CBZ by launching APACHE RTR 180.
TVS- APACHE RTR 180
LIST PRICE – 74,000 Rs.
TOP SPEED –125KPH
0-60KPH IN 4.35SEC
KPL 47.00(OVERALL)
BAJAJ PULSAR 135CC
LIST PRICE - 56,500 Rs.
TOP SPEED- 108KPH
0-60KPH IN 5.25 SEC
KPL 65(OVERALL)
HERO HONDA NEW KARIZMA ZMR
LIST PRICE – 1,02,000 Rs.
TOP SPEED- 126KPH
0-60KPH IN 3.70 SEC
KPL 53.0(OVERALL)
YAMAHA SZ 153cc
LIST PRICE - 58000 Rs
TOP SPEED - 120KPH
0-60KPH IN 5.5 SEC
KPL 60.0(OVERALL)
Recently relaunched TVS- APACHE RTR 180
against the reigning champ, the BAJAJ PULSAR, and the evergreen HREO HONDA CBZ.
It was described in the mar’03 issue the F2 gets major improvements over the earlier
FIERO, particularly in the styling and handling and stability departments.
So, are the changes enough to make the F2 a more complete
package, to displace the PULSAR from its seemingly unshakeable throne? And let’s not
forget the CBZ, arguably still the best looker in this company, and with the most
powerful engine to boot. Pricing will always, be a critical factor, as will fuel efficiency.
Sure, the buyer in this segment is less concerned with mileage than the 100cc customer,
but is still does matter. The PULSAR is the most competitively priced here, while the F2
is the most fuel-efficient.
Scooter majors revamp marketing strategies
Kinetic Engineering Ltd and TVS Motors are refurbishing their marketing and ad plans.
Kinetic Engg strategy includes a revamped corporate image and its marketing plan
includes mass media ad campaigns, retail initiatives, below-the-line activities and direct
marketing plans. To announce its revamped corporate image, Kinetic plans to launch an
aggressive television ad campaign with a new strapline 'Kinetic: Because You Deserve
The Best' soon. Earlier, the adline was—Kinetic—What's Next?
The company has earmarked an ad budget of Rs 8 crore for the next six months. And to
support its mass media ad campaign, its showrooms would be revamped to give a new
look and its sales personnel put in new uniforms. Kinetic's distribution network includes
400 retailers.
As part of its direct marketing strategy, the company has launched 'Kinetic Marketing
Services' as part of which its sales personnel would go to the doorsteps of potential
customers.
TVS Motor Company Ltd is also stepping up its below-the-line activities in an effort to
promote the new avatar of TVS Victor. TVS recently launched TVS Victor with a slew of
new features as part of its marketing strategy. The accent seems to be on an 'effective
marketing mix' in the Indian two- wheeler industry which is worth five million units.
TVS Motors Company recently relaunched its popular bike TVS Victor with a host of
new features to woo customers.
To promote the new Victor, TVS is focussing on below-the-line activities like consumer
promotions and rolled out an ambitious consumer promo tilted 'Balla Ghumao' which will
run till the end of August this year.
Change in the manufacturing view & strategy of two wheeler market
Till 1990, the two wheeler Industry was mainly dominated by metal body geared scooters
and the number of producers were less than five. This oligopolistic market structure has
changed with the entry of lighter, 100 CC motorcycles. This has resulted a shift in the
consumer’s preference from scooters to Motorcycles. India is considered as the second
largest manufacturer of two wheelers in the world. The two wheeler segment in India can
be classified in to three major segments-Scooters, motor cycles and mopeds. During the
year 2000-01, the sale of motor cycles crossed 48 per cent where as the sale of Scooters
have receded. This shift in demand and sales position in the two wheeler segment may
continue. As a result of this, the sale of Scooter segment is expected to fall further and the
sale of motor cycles will go up further. This trend has also influenced the production
strategy of major two wheeler-manufacturing companies. The expansion plans adhered
by Bajaj Auto, LML and TVS have given more stress to the motorcycle segment. With
the incremental capacity addition of these companies, there will be an estimated
production of 2.20 million vehicles by the year-end of 2001-2002. There will be a
corresponding growth in the demand for Motor cycles. This segment is expected to grow
at an average of 22 per cent in the year 2001-2002.
Changing strategy of two wheeler market.
Changing product portfolio: In the past two years, Bajaj Auto has successfully
revamped its strategy to emerge as the number two player in motorcycles. From a
company that was predominantly a scooter and three-wheeler manufacturer, Bajaj
Auto now derives nearly half of its revenues from motorcycles (14% in FY01).
Going forward, the company plans to introduce models that will cover the entire
price spectrum. This initiative should continue to fuel growth.
Growth potential: In the last ten years, the two-wheeler industry has grown at a
CAGR of about 10%, which we expect to continue in the long term. Motorcycle
demand would be primarily driven by replacement demand, upgradation,
affordable credit and introduction of motorcycles in the utility segment (just to put
things in perspective, bank rate has come down from 10.5% in FY98 to 6.25% in
1HFY03). With its 'Boxer' range, Bajaj Auto has already established itself in the
entry-level motorcycle segment. It is now set to tap the sub Rs 30,000 category,
which is likely to be the growth engine for the future.
Kawasaki partnership: Bajaj is in the process of developing a '125 cc world
bike' based on Kawasaki's technology platform, which is slated for a 4QFY03
launch. Kawasaki intends to utilise Bajaj's facilities as a global outsourcing
base for the 125 cc bike, particularly for South East Asian markets. If
successful, this could push topline growth of the company into a new
trajectory over a period of time.
Changing demographic profile: Studies by research agencies like The
National Council for Applied Economic Research (NCAER) on Indian
households puts forth the latent growth potential for the two-wheeler industry.
As per the study, the consuming class that was estimated at 17% of total
households in FY95 is expected to touch 46% by FY07. Poor urban transport
infrastructure, urbanisation, rising double income families and robust growth
of the services sector offers good long-term growth prospects for lead players
like Bajaj Auto
Competition: Given the long-term growth potential of the motorcycle
segment, existing manufacturers expanded their capacities while new players
have tied up with transnational companies to tap the local market. Hero Honda
triggered a price war in 1QFY03 with a special discount and other players
followed suit. If demand fails to meet capacity expansion, industry will suffer
in the near-term.
Scooters losing sheen: Bajaj also has presence in segments like geared
scooters and step-thrus that are losing out to trendier and fuel-efficient
motorcycles and ungeared scooters (geared scooter demand has fallen at a
CAGR of 14% in the last six years). While the company expects demand for
scooters to stabilise, there is a strong possibility that low-end motorcycles will
continue to eat into the scooter segment. Since this division is the cash cow
for the company, as sales contract, margins will come under pressure.
Equity exposure: Bajaj Auto, traditionally, has had a high exposure to stock
markets. The company's total investment of surplus funds in FY02 was Rs 22
bn, a rise of 38% YoY. Of this, investment in equities (including equity
mutual funds) amounted to Rs 8.5 bn, an 18% rise YOY. Given the volatility
in stock markets, this is a cause of concern. Despite huge surplus funds, the
company's dividend payout ratio has also been lower historically (27% in
FY02).
Margin pressure: As the product profile changes in favor of motorcycles,
margins are likely to come under pressure. This is because, going by industry
standards, the company enjoys better margins in scooter and 3 wheelers than it
does in the motor cycle segment.
Bajaj limited, with a capacity of 2.3 m vehicles, had a 28% market share in the
two-wheeler segment in FY02. The company has traditionally been a key
player in the geared scooter segment. But the shift in consumer preference
towards motorcycles had caught the company unawares. However, over the
last two years, Bajaj fought back with a slew of new motorcycle launches that
have met with success. This has resulted in the company gaining about 23% of
the motorcycles market share in FY02, up from 16% in FY00. The company's
sales mix (in volume terms) consists of 30% geared scooters, 48%
motorcycles and the rest from step thrus, ungeared scooters .
While the economic growth has been lacklustre, the Indian two-wheeler
industry has bucked the trend by growing at a CAGR of 9% in the last five
years. Segments like geared scooter, moped and step-thrus are losing out to
motorcycles and ungeared scooters. Affordability, new product launches and
better fuel efficiency have been the key growth drivers for the motorcycle
segment. The motorcycle category grew at a CAGR of 33% in the last five
years to touch 2.8 m units in FY02. We expect demand to remain robust.
Various Methods used for product development
In the New Economy, the product development process must give top priority to certain
critical issues such as eliminating any design errors right at the start of the process. Thus
the mantra is "design right, first time". This is imperative to avoid unnecessary wastage
of time and productivity. After arriving at the right design, prototypes are developed
expeditiously. Then these are tested meticulously for performance and durability in all
parameters in order to finalise the design.
Design
The primary purpose of product design is to understand the customers' requirements.
Bajaj Auto's design team is in close touch with the market and continually collects data,
which is a crucial input in the design process.The next step in the design process is
conceptualising the new product. At this stage, the designers have a brainstorming
session, where they submit all their ideas in the form of sketches. The best of which are
short-listed and converted into a product form. The finalised interpretation of the new
design is converted into a three-dimensional clay model, which becomes the basic
reference of the new product.
Digitisation of this clay model is achieved using a highly accurate co-ordinate measuring
machine. This digitised data is then used to generate accurate surface models using
advanced software programs such as Alias, Unigraphics, Pro Engineer,etc. We also use
software programs like AutoCAD, Moldflow, Ansys, Sysnoise, Ricardo suite of software
for advanced Computational Fluid Dynamics (CFD) analysis, valve dynamics and cam
dynamics during the design stage.
Vehicle engineers use these sophisticated computerised tools to analyse various critical
parameters such as stress on components, kinemetic and dynamic factors, as well as noise
levels. This makes it unnecessary to actually build a physical prototype, as was the case
in the past. Also, optimisation of the designs is achieved early in the product development
cycle, as the engine components can be run in virtual reality on the computer screen.
The designers make 3-dimensional solid models, which can be rotated and sectioned so
that the designers have a complete idea of each component. These solid models are then
passed on to our tool design engineers, or our vendors in India and abroad, for designing
tools and dies. Keeping up-to-date with the latest technologies, Bajaj Auto's talented and
tireless engineers and designers are constantly improving their expertise.
Prototype manufacturing
This is a crucial phase in the product development process, where prototypes are created
by Bajaj Auto's prototype shop based on the final designs approved by the designers.
These prototypes are painstakingly tested both in the laboratory and on the road.
Our state-of-the-art prototype shop has excellent manufacturing facilities, which are
essential to ensure that the exact design specifications are accurately incorporated in the
prototypes. Some of the sophisticated machines at the Bajaj Auto prototype shop include:
Rapid prototype equipment-this enables stereo-lithographic facilities, which can produce
any part of a 3 dimensional computer design file. Once produced, this part can be tested
for proper fitting in the assembly, clearances between the mating parts, or can be used to
produce multiple parts of the prototype test vehicle. This equipment ensures that every
minute detail is replicated in the prototype part.
Five-axis machine- used for making 1:1 master models. A designer can touch and feel his
design and models can be painted to get a physical idea of the product.
Flexible machining centres- unlike production, where the manufacturing is of a repetitive
nature, R&D prototypes are all different. This flexibility in manufacturing is essential to
create prototype samples more rapidly. Therefore, Bajaj Auto has carefully selected a
range of flexible machining centres, which can give high accuracy with the requisite
flexibility to handle several different designs.
Testing
Prototype testing is another extremely crucial phase in the product development cycle.
True to life testing in the shortest possible time is a challenge faced by engineers. Bajaj
Auto identified this need early in our company's history and has been continuously
upgrading its testing laboratories over the last decade.
Today, we have servo-hydraulic fatigue testing equipment for the entire range of vehicle
and structural components. All types of road conditions can be simulated and gruelling,
accelerated tests are conducted. These simulated tests can cover thousands of kilometres
in a few weeks and are fast, safe and repetitive.
Bajaj Auto R&D has also acquired the robotic chassis dynamometer system where a run
of several thousand kilometres can be accumulated on the power plant and transmission
in only a few weeks. Any shortcomings in the design phase are promptly detected under
such rigorous testing.
In today's world, reducing exhaust emission is of paramount importance. With the ever-
growing vehicle population, Bajaj Auto faces the challenge of designing vehicles with
excellent performance and least impact on the environment. To help achieve this
endeavour, Bajaj Auto has the highly sophisticated Horiba exhaust emission
measurement system. This is run round the clock, helping our engineers to optimise their
designs for the lowest impact on the environment.
Lastly, we have a bank of engine dynamometers that help engineers to optimise engine
performance and assess exhaust pollutants in the engine development phase.
Laboratory testing apart, Bajaj Auto also has test riders who continuously test vehicles on
all types of roads and weather conditions to ensure suitability of the designs before
commercial production. These rigorous tests give us an accurate insight into the
performance of the components and assemblies. We also have an extensively used and
gruelling in-house test track, which has varied gradients and a high-speed circuit, over 3
kilometres long. A judicious mix of accelerated laboratory tests and road & track tests
gives us immense insight. Riders are not unnecessarily subjected to fatigue whereas the
test vehicles are continuously subjected to rigorous tests, bringing out their true mettle.
Bajaj strategy towards environment protection
Bajaj Auto are fully aware of the need to protect our environment and all our efforts in
R&D go to ensure that our vehicles have the least impact on the environment. Exhaust
emission reduction is a long and never-ending journey towards "Zero Emission". The
mission to improve our designs from the environmental point of view was declared over a
decade ago. We made a complete road map towards achieving low emissions.
Bajaj Auto first started improving 2-stroke engines. Engine emissions were reduced and
catalytic converters were developed with good performance and adequate life.
Simultaneously we embarked upon the development of 4-stroke engines. Over the last
five years we have developed 4-stroke engines for all our products. With 4-stroke engines
we are able to substantially reduce hydrocarbon emissions.
Not stopping at this, Bajaj Auto's engineers developed catalytic converters for 4-stroke
engines. We have developed "secondary air induction" system that helps in to eliminate
unburnt fuel in the exhaust. Engine-out-emission is thus reduced substantially.
The next area in emission reduction is fuel injection. The Chairman's message to the
R&D team is "Anticipation is the key". True to this, we started developing direct
injection systems for our 2-stroke engines in the last decade with Orbital Engine Co.,
Australia, a well renowned and pioneering automotive R&D organisation. Subsequently
we decided to shift our focus to 4-stroke fuel injection since this would be a better
solution from environmental considerations. We are actively working in this area and
hope to come out with noteworthy solutions.
Alternate fuel is an area that is being actively pursued all over the world as a solution to
reduce emissions. We have indigenously developed CNG and LPG 4-stroke 3-wheelers
in the last two years and over 15,000 vehicles are already on road. Our customers are
extremely satisfied with these vehicles. We are working with well renowned
organisations in the world in the field of CNG and LPG systems to further improve the
designs and bring them to international standards.
Bajaj Auto has an ongoing demonstration program for electric vehicles involving US-
AID and a US R&D company in this field. Prototype vehicles have been developed and
are undergoing rigorous testing in Delhi and Agra.
Our quest for reducing emissions will continue.
Research & development objectives and setup
The objective of Bajaj Auto's R&D is to contribute towards making life a better
experience for society as a whole. At Bajaj Auto, we intend to achieve this objective by
giving priority to environmental concerns, which include minimising toxic emissions and
optimising the use of natural resources while also keeping in mind the exact requirements
of the customers in a fast changing world racing towards modernisation.
We intend to use R&D not only to develop products better and faster, but to also evolve
technologies that are eco-friendly, more fuel-efficient and cost effective.
Our strength in R&D comprises 500 dedicated professionals who work as team members
on a platform concept. These platforms comprise of engineers skilled in product
engineering, manufacturing engineering, component development, project management
and quality assurance. The primary objective of these platforms is to develop newer,
better, more efficient and less polluting vehicles for both the Indian and International
market.
Our foreign technology partners, like Kawasaki, Kubota and Tokyo R&D, collaborate
closely with the platform teams, with transfer of the latest technology and R&D
assistance. Our designs are also subjected to an exacting and critical assessment from our
technology partners.
Indian Two-wheeler Industry: Changing gears
The Indian two-wheeler industry is experiencing a major shift in its shape and structure.
The established players in the industry are taking a hard look at their portfolio of products
and are in the process of reshuffling them to meet the expectations of customers. The
beneficiary is of course the consumer, who has an increased array of products to choose
from.
The last four-five years have brought about a great change in the consumer preferences
for two-wheelers. The market leaders of yesteryears are being driven to maintain their
leadership position in the forthcoming years. Those who have had a great going in the last
few years are fighting hard to retain their new supremacy. The two-wheeler industry is
perhaps the most happening place in terms of new models launched, upgraded products
and innovative marketing techniques. Gone are the days of regulation when the
production of scooters and motorcycles was limited to two or three brands and the
number of products produced was decided by the Government; today the Indian two-
wheeler market is highly competitive with numerous players who offer anything and
everything a consumer demands and that too at affordable price. From a sellers market
where one had to wait for a scooter for 12 years to the days when you can just walk into
any showroom and drive out in the vehicle of your choice, the market of two-wheelers in
India has come a long way. But this is only the beginning of the transformation.
The industry
The Indian two-wheeler industry is dominated by three players, Bajaj, Hero Honda and
TVS Suzuki, who account for 80 percent of the total two-wheeler market. The other
players including Kinetic Engineering, LML and others account for the remaining 20
percent of the market. The industry can be divided into three broad segments: Scooters,
motorcycles and mopeds. In the scooters segment Bajaj is the market leader, Hero Honda
is the market leader in the motorcycles segment and in the segment of mopeds, TVS
controls the major chunk of the market.
Most Indian players in the two-wheeler industry had been into some kind of strategic
alliance, technical collaboration or joint venture with foreign players, mainly Japanese
firms. Hero-Honda, is a joint venture between the Munjal-promoted Hero Group and
Honda Motor Co. of Japan; TVS-Suzuki was an alliance with TVS and Suzuki Motors
(till September 2001); Bajaj-Kawasaki a joint venture between Bajaj Motors and
Kawasaki; and Yamaha-Escorts, a joint venture between Escorts and Yamaha Motor
Corp. (till June 2001).
Indian automobile market, be it the two-wheeler segment, the three-wheeler segment or
the car segment, is yet to come to a stage where all the models are developed
indigenously. For years now, Indian companies have been dependent on their foreign
joint venture partners or collaborators to provide them with the technical know-how. This
trend too is in for a change. Leading the pack in this arena is Bajaj, which has been
successful at designing models in-house. Bajaj's Saffire and Spirit, have been able to bag
the scooter of the year award for 2001 and 2000 respectively. In fact, its Spirit was
adjudged the "Indigenous product design of the year" for the year 2000. The recently
launched Pulsar from the Bajaj stable is yet another home-grown product, albeit in
tandem with Japanese design house, Tokyo R&D. Bajaj has been laying increased
emphasis on its R&D so as to be able to launch new products to tap the markets at all
possible price points. Other companies too are adapting the strategy of designing and
developing products indigenously. TVS's Victor is yet another development in this
direction and this indigenously built model has been a success in the markets.
Lure of the Indian two-wheeler market
Indian companies had relied heavily on their foreign counterparts for technical support,
design of the model etc., while they provided the distribution and branding in the Indian
market. Now that the Indian market for motorcycles is fairly developed and consumers
are well aware, most of these foreign manufacturers are planning to enter the market on
their own. The inadequacy of the public transportation system, the upwardly mobile
middle class, which has the disposable income and the intent to own a two-wheeler and
the sheer size of the Indian market is proving to be an attractive factor to many
multinational companies. India's two-wheeler industry is the second largest market in the
world after China. Honda Motors, whose tie-up with Hero-Honda is going to expire soon,
has already entered the fray with Honda-Activa. Others are also queuing up.
Yamaha Corporation, which was operating in India through a joint venture with Escorts
Group, had decided to call it quits in mid-2001 by buying off Escorts' 50 percent share in
the joint venture. Yamaha now plans to tap the Indian market on its own with models
such as RX-135, RXZ, YBX125, YD125, and ACE. Its name has become fairly
established while the joint venture had been in operation for two decades. On its own
now, Yamaha has started implementing its ambitious plans for the Indian market and has
embarked on a challenge 21 project, a time-bound initiative that is aimed at reorienting
and revitalizing the entire Indian operations in order to achieve a competitive edge.
Yamaha has set for itself the target of capturing 21 percent of India's motorcycle market
by 2003. India is one of the few countries where Yamaha, the world's second largest
motorcycle manufacturer operates a fully-owned subsidiary.
Changing preferences
There has been a great change in the customer preferences from the erstwhile all
pervasive scooters to the sleek motorcycles and other high-powered trendy motorbikes.
Numbers speak much more about the loss in volumes of scooter sales. The shift has
occurred in a short span of time, in fact so short that many players in the industry are yet
to fully acknowledge the shift. They are yet to mold their product portfolios to take
advantage of this shift. As recently as 1994, scooter sales accounted for 48 percent of the
total two-wheeler volumes. By 2001, however, their share in the two-wheeler sales fell to
less than 25 percent by 2001. The tables turned in favor of motorcycles, which accounted
for 57 percent of the total two-wheeler volumes for the 2001 fiscal rising from a dismal
28 percent in 1994 and this trend of increased sales of motorcycles continued. The
production and sale of motorcycles has been continuing at a pace of 20 percent and 25
percent respectively during the first half of the current fiscal year.
One of the factors that contributed to the steep decline of scooter sales in 2001 is the sales
tax rationalization in the budget of 2001, which resulted in a sharp fall in the sales of
geared scooters in 2001. This raised duties on geared scooters in western region of the
country, which accounts for a substantial portion of the industry's volumes. In addition to
that stringent environmental norms forced companies to install catalytic converters, thus
adding up to the costs of the scooters and making them more unattractive. The trends of
sales in two-wheeler industry as a whole are on the decline. From a growth rate of more
than 20 percent during the fiscal of 1995, the industry has come down to a zero percent
growth rate by the fiscal year 2001. The scooters and the mopeds segments have been on
the decline for some time now. But the robust growth in the motorcycle segment has been
the only saving grace in the two-wheeler industry.
The period between 1994-2001 has been characterized by the software boom,
private industry emerging as a substantial employment provider and coming of age of
the generation that had started to feel comfortable and adopt western culture from the
satellite television. The young earning men today increasingly prefer motorcycles to
scooters unlike the generation of their fathers where a geared scooter was "the two-
wheeler". The shift is not limited to urban consumers. Even in the rural market,
consumers prefer motorcycles for their sturdiness and ability to sustain bad road
conditions. The stricter environment norms such as the euro emission norms are forcing
companies to install catalytic converters in the existing vehicles or go in for four-stroke
engines to reduce pollution. This has added up to the costs of scooters while most
motorcycles are in tandem with these new norms.
Adding to the woes of geared scooters, a number of ungeared scooters are flooding the
market. Vehicles in this segment such as TVS Scooty, Bajaj Sunny, and Kinetic Honda
have found an instant market with the elderly population, women and teenagers, who find
these vehicles more comfortable with fewer hassles as compared to the geared scooters.
The sales of these ungeared scooters have also been on the rise, registering a growth rate
of around eight percent in the last financial year. In addition, the segment of buyers who
would have gone for mopeds five years earlier are today showing interest towards the
ungeared scooters, adding up to the volumes of these vehicles. The obvious reason is that
the pricing of both these segments of vehicles is so close that the borders are fast getting
wiped away in the minds of consumers. One who is going in for a moped would not
hesitate to spend a thousand or two more to get a scooterette offering better features.
Ensured success
The story of motorcycles in India is a good case study of how fortunes change overnight.
Motorcycles in India were hardly popular and Hero Honda was the only player, which
had carved a niche for motorcycles. Its market was small and limited while scooters ruled
the roost but today, it is one of the biggest success stories. Its established presence in the
motorcycle segment had stood it in good stead in this phase of boom in motorcycle sales.
The fact that no other player commanded the brand name which Hero Honda enjoyed in
motorcycle segment also added up to its success. In addition most other players such as
Bajaj, TVS, LML etc., took time to assimilate the change in customer preferences and
come up with models to buck the trend. Meanwhile Hero-Honda's designs were ready on
the platter. Its R&D had been able to come up with models such as CBZ, Passion etc., in
the premium segment to capture the hot demand. Riding high on the expectations of
consumers, Hero Honda has successfully crossed over the one million units mark in
motorcycle sales. Its popular model Splendor is the largest selling motorcycle in the
world.
To give a boost to its youthful image the company has chosen Saurav Ganguly and
Hrithik Roshan as brand ambassadors. The company has also embarked on in-film
advertising in a forthcoming Hindi movie. In order to expand its reach to rural areas, the
company has recently launched a marketing initiative in towns with a population of less
than 50,000 in Uttar Pradesh. As a part of this initiative, it started a mobile workshop and
showroom, through which people will be able to gather knowledge about the companies'
vehicles and can also buy them. These mobile marketing efforts are focused on Splendor
and Joy.
Wooing the market
The story of Bajaj scooters is just the opposite. The undisputable leader in the scooters
segment was found wanting when it came to motorcycles. Its products in the motorcycle
segment were few and far between and it did not and does not enjoy a brand name in the
motorcycle segment, till a year ago. Ambitious products such as Eliminator are yet to be
accepted by the market. But of late the company seems to have awakened to the changes
in the market. It has repositioned its focus on motorcycles and is planning to increase the
production of motorcycles by around 60 percent from its current levels of 60,000 units
per month. The company is fast trying to establish itself as a major player in all the price
points in the motorcycle market. At the entry level, it has its "Boxer" series of bikes, in
the executive segment it offers, "Caliber", "Caliber Croma" and "Aspire".
To cater to the premium segment the company has "Pulsar". And "Eliminator", the only
cruiser bike in India, tops the product portfolio of Bajaj. In fact, this positioning has
boosted its sales of motorcycles from 3,14,641 to 4,60,868 units for the three quarters
ending in November 2001. With a jump of 85 percent in the sales of its motorcycles,
Bajaj has become the second largest manufacturer of motorcycles. Bajaj has intensified
its efforts to position itself as a strong player in the growing motorcycle segment. The
result is that Bajaj's motorcycle sales are constantly on the increase and are more than
offsetting the loss in the geared scooter segment. The biggest challenge for Bajaj would
be to reposition itself in the minds of consumers from a company trusted for its scooters
to an all-round producer and seller of all kinds of two-wheelers, precisely what the
company is now doing, with its "Hamara Bajaj" campaign. If Bajaj's strategies pay off,
Hero-Honda would suddenly be fighting for market share against a formidable
competitor. In the section of ungeared scooters too, Bajaj is coming up with a number of
new models that would take it a long way to increase its market share with Sunny, Rave
etc.
Differing destinies
TVS-Suzuki, the tie-up between TVS Group and Suzuki is a major player in the Indian
two-wheeler market. The company has changed its name from TVS Suzuki to TVS
Motor company following the break up with Suzuki Motors in September 2001. In spite
of the break up the company's motorcycle sales have registered a 40 percent growth till
December 2001. The company's "Scooty" is the No. 1 selling scooterette brand in India
with its excellent design and commands a market share of 36 percent. The market leader
is the vehicle of first preference with youth, women and students. TVS also has an
established presence in the moped segment with its TVS Champ line of vehicles. In the
motorcycles segment too, the company has steadily carved a niche for itself. The popular
brands from the TVS stable are Suzuki Samurai, Max 100 R, and Suzuki Shogun. The
Suzuki Shaolin is India's first 5 speed, 140 cc motorcycle which had kept TVS Suzuki
one step ahead of the market demands. The company has recently launched "TVS
Victor", which has been an instant hit in the market. Victor has been consistently
generating sales of more than 30,000 since its launch.
Another major player in the motorcycles sector is Kinetic Group, with its Kinetic
Engineering Ltd and Kinetic Motors. Kinetic Motors was started as a joint venture with
Honda Motor of Japan in 1994 and was transformed into a technical collaboration by
1998. Kinetic Motors is the largest manufacturer of gearless scooters in India. The
company is also a leading exporter of scooters worldwide. The company has also won the
"exports award for excellence" nine years in a row. Starting from humble beginnings with
Luna in 1970 the company today is a strong player in the ungeared scooters segment with
its highly popular "Kinetic Honda". The company is also making its way into the
motorcycle segment with products such as "Kinetic Challenger" and Kinetic GF. The
other products from Kinetic include Kinetic Style, Kinetic Marvel etc. As recently as
January this year, Kinetic has launched a new scooter with the brand name, Kinetic Nova.
The company is also planning to position Kinetic Nova as "International Fashion
Statement".
The Indian two-wheeler market has become highly competitive with each and every
player trying to tempt the customers towards its products. In the endless game for
supremacy, the beneficiary would be the customer, who has a wider choice of vehicles,
lesser price to pay and is carried in luxury. The market today is predominantly a buyers
market where customer is the king.
Modifying basics of two wheeler industry
The two-wheeler industry is passing through a very interesting phase. Developments such
as the entry of more number of players into the motorcycle market, price discounts
offered by producers, monsoon failure and growing competitive pressure have changed
the underlying basics of the industry.
The impact of these developments is reflected in a change in market share, a divergent
trend in share price and the sharp swing in the price-earnings multiple. Hero Honda
continues to be the market leader in the motorcycle segment with a 44.7 per cent share.
But it has ceded vital market space to competitors such as Bajaj (23.7 per cent) and TVS
Motor (19.2 per cent).
The Hero Honda share, which peaked at around Rs 400 in April 2002, has since been on
a steady downtrend. Its competitors (such as Bajaj and TVS Motor), though, have seen
their share prices recover sharply from the lows recorded in October 2002. The reasons
for this kind of a disparate trend are not far to seek.
Effect of monsoon failure
With more than 40 per cent of the motorcycle demand flowing from the rural sector, the
success or failure of monsoon has a major influence on the sales volume. After a robust
growth in the first quarter of the previous fiscal, motorcycle offtake tapered during the
second-half.
During April-June 2002, motorcycle sales had zipped ahead by 50.9 per cent to 9.1 lakh
units. However, in the last quarter of the previous fiscal, the sales growth dropped to 7
per cent to 8.9-lakh units. The sharp slowdown in growth rate is explained by the drought
that prevailed across most parts of the country last year.
But for the recovery in the industrial economy and a soft interest rate regime, the
situation would have been worse. Also, price discounts and attractive hire purchase
schemes have helped stem the declining trend in demand.
However, these cannot sustain the demand for long unless there is a normal monsoon in
the current year. A sub-normal monsoon in the current year could have a direct negative
impact on the two-wheeler offtake, motorcycles in particular.
Discounts galore
The slowdown in the demand has prompted two-wheeler majors to offer attractive
discounts to lure customers. Hero Honda took the lead in April 2002 when it announced a
Rs-1,001 discount across all products.
Earlier, TVS Motor had dropped the price of its two-stroke motorcycle, Max 100, and
this had the desired impact of higher sales volume. The impact of competitive pressure
and slowdown in growth is better reflected by TVS Motor's recent move to offer a
discount of Rs 2,003 even for its top-selling four-stroke model, Victor.
Bajaj has also been offering discounts and attractive financing options to protect its
interest in the industry.
The success of the latest Pulsar has helped the company to stay clear of adopting an
aggressive price reduction strategy. Besides, the recently launched Caliber 115 has also
enjoyed a fair degree of success. As a result, and aided by its cash-rich status, the
company has been able to hold its ground.
Traits of consumer durables
In stark contrast to the situation that prevailed in the 1990s, the two-wheeler industry has
now acquired the traits of any other consumer durables industry, of price wars, celebrity
endorsements and ever-increasing sales and other promotional outgo. In the 1990s, the
profit margin of the top companies was not subject to the kind of strain that is being
witnessed in the recent quarters. The entry of more players into the fast-growing four-
stroke motorcycle market has led to higher competitive pressure for the companies.
Earlier, Hero Honda and Bajaj were the only producers of four-stroke motorcycles. Now,
TVS Motor, Kinetic, LML along with Bajaj and Hero Honda are jostling for space in the
four-stroke market.
This has led to an increase in the number of models and a consequent reduction in
product lifecycle. In the past couple of years, more than ten new four-stroke motorcycle
models have hit the Indian roads — the popular ones include Victor, Passion and Pulsar.
The few past year also saw the launch of Byk, Ambition and Caliber 115.
This has resulted in an increase in overall expenses, including promotional costs, for the
companies. Apart from the capital expenditure, new product launches have an
inflationary impact on expenses of a recurring nature, such as sales promotion and staff
cost.
This, coupled with the discounts that are being forked out, could have a negative impact
on the profitability of the two-wheeler industry in the near term; at least until the volume
growth manages to compensate this.
The pressure on margins is not fully manifest owing to the cost control and indigenisation
efforts undertaken by two-wheeler companies. Going forward, the constituents of the
two-wheeler industry too would find profit margin being consistently under pressure once
the scope for cost control diminishes. Growth in volume would the key driver of financial
performance even as the scope for margin expansion wanes.
Tracking changes more difficult
Though Bajaj and Honda Motorcycles have been successful, the task of assessing or
anticipating swings and changes in consumer preferences may not be an easy task. This is
borne out in the case of Hero Honda's CBZ and the four-stroke scooter venture of Bajaj
and TVS Motor.
While Pulsar turned out to be a huge hit for Bajaj, Hero Honda's CBZ (launched much
ahead of Pulsar) failed despite possessing similar features. Similarly, both Bajaj and TVS
Motor did not make any progress in their four-stroke scooter venture. But the latest
entrant — Honda Motorcycle — has enjoyed a huge success in this segment through the
Activa. The inherent difficulty in assessing and addressing the developments or changes
in the industry would mean a higher degree of uncertainty to the earnings growth of two-
wheeler companies. That the success or failure of even a single product can have a major
influence on the earnings performance would aggravate the uncertainty problem.
Along with these factors, Honda Motorcycle's decision to venture into the motorcycle
market next year could compound the problems for companies such as Hero Honda, Bajaj
and TVS Motor.
Strain on valuations
The cumulative impact of these developments is reflected in the form of a divergent and
volatile trend in share price movement of two-wheeler companies — Bajaj, Hero Honda,
TVS Motor .
Similarly, the pick-up in sales volume of Hero Honda's Ambition,Splendor and CD Dawn
models have resulted in a sharp recovery in share price of the company from the low of
Rs 180 to the current level of about Rs 230.
Considering that the stock market hates uncertainty, especially when it is associated with
earnings stream, the valuation levels are likely to be stressed in the future. This kind of a
trend is already reflected in the valuation of software stocks. A similar kind of a trend
could probably emerge in two-wheelers as well.
From an investment perspective, the earlier approach of buy, hold and sell at a later date
will probably lose validity. The investment holding period would tend to get shorter and
riding the momentum associated with company-specific developments could well be the
order of the day.
Taking into account the higher degree of uncertainty associated with earnings and the
likelihood of a drop in valuation levels, existing holders of two-wheeler companies may
look for opportunities to reduce exposures. Evidence of increase in motorcycle sales or
signs of normal monsoon can be used to take exposures in two-wheeler majors.
CONCLUSION
The Indian two-wheeler industry is dominated by three players, Bajaj, Hero Honda and
TVS who account for 80 percent of the total two-wheeler market. The other players
including Kinetic Engineering, Honda,Yamaha and others account for the remaining 20
percent of the market. The industry can be divided into three broad segments: Scooters,
motorcycles and mopeds. In the scooters segment Bajaj is the market leader, Hero Honda
is the market leader in the motorcycles segment and in the segment of mopeds, TVS
controls the major chunk of the market.
The competition in the two-wheeler industry is increasing day by day. But there
are two big companies in two-wheeler industry, which are regularly trying to compete
with each other they, are HERO HONDA and BAJAJ.
Although the features and reliability of both HERO HONDA and
BAJAJ are quite same but the market share of HERO HONDA was 38.5% and that of
BAJAJ AUTO LIMITED was 21.9% in the year 2008. HERO HONDA market share was
36.1% and that of BAJAJ AUTO LIMITED was 28.7%. From this it is very clear that
market share of BAJAJ was low than that of HERO HONDA.
BIBLIOGRAPHY
Information regarding the project is collected from various
sources like magazines, Internet etc. which include: -
www.herohonda.com
www.bajajauto.com
www.tvsmotors.com
www.indiainfoline.com
www.autocarindia.com
Magazines like auto car India
Newspapers
