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Shyam G. Menon

Mumbai , Nov. 18

JUST how important is Hero Honda or for that matter how relevant is Tata Motors' plan for a people's car? To figure it out, discount first the high-decibel advertising by car manufacturers and try this simple analysis of monthly sales figures from the Society of Indian Automobile Manufacturers(SIAM).

In 2002-2003, the total Indian vehicle sales was 59,99,320 units, of which 48,73,989 units were two-wheelers. A market share of 81.24 per cent, in itself an accepted norm, except that the percentage share has held steady, if not marginally risen, since 1995-1996. That year, almost eight fiscals ago, the market share of two-wheelers in total domestic automobile sales was 76.93 per cent, growing to 77.34 per cent by 1999-2000 and 78.26 per cent by 2000-2001.

By end-October 2003, two-wheelers' share in automobile sales so far this fiscal was 80.21 per cent. On the other hand, from 1995-1996 to 2002-2003, the overall market grew by 81.41 per cent. Thus, for all the dust kicked up by the giants of the car industry, their claims fall in 20 per cent of the market place, shared further with three-wheelers and commercial vehicles. To be precise, the passenger vehicle industry (cars and utility vehicles), accounted for 12.59 per cent of April-October 2003 sales.

This puts a spin on who owns the domestic automobile market. From SIAM's members, 13 companies each from the Indian and foreign side arguably form the main players in the domestic automobile market. In April-October 2003 sales, the Indian side accounted for 53.12 per cent share, the foreign side 46.37 per cent. But the balance is different for two-wheelers and passenger vehicles. In the former, Indian companies lead with 57.96 per cent share, in the latter, foreign subsidiaries dominate with 73.55 per cent share.

But a catch lies in the details. The Indian leadership in two-wheelers is qualified, for this figure excludes Hero Honda, its ownership evenly divided between the Indian promoter and Honda, each holding 26 per cent stake. Given co-branding and technology dependence, the company appears more Honda than Hero, its numbers taking overall Honda market share in total domestic automobile sales to 32.70 per cent. This, despite Honda SIEL, the Japanese major's 4-wheeler foray, accounting for just 1.65 per cent of total passenger vehicle sales.

Yet Hero Honda is a fence-sitter. Take its volumes off and - forget Honda - the 46.37 per cent foreign share aggregated over 13 separate subsidiaries spanning cars to two-wheelers crashes to 18.02 per cent. With Hero Honda sales alongside, the Indian leadership in total automobile sales rises to 81.47 per cent, and that in two-wheelers alone to 93.30 per cent.

The impact of presence in two-wheelers hits home, if the picture for Honda's rival, Suzuki, is examined. Though its subsidiary Maruti Udyog had a 45.93 per cent share of the passenger vehicle market, its share in total automobile sales was 5.78 per cent. Even as Suzuki is yet to open its independent two-wheeler account here, TVS Motor Company, Suzuki's erstwhile partner in two-wheelers, had a 17.28 per cent share in overall automobile sales for April-October 2003.

Clearly, if you want sheer domination of Indian volumes, two-wheeler play is a must. Which in turn has its lessons for segment leadership in cars, particularly entry-level models.

Manufacturers, save Maruti, delight in pointing to the sectoral shift in the car market. The big story therein being the fall from grace of the Maruti 800, `A' segment sales at present accounting for 25.25 per cent of total car sales. In comparison, compact cars are ahead at 53.05 per cent, even mid-size cars have 19.04 per cent share. But growth rate trends worry - `A' segment grew by 30.49 per cent, while compact cars seem sluggish at 12.24 per cent. On the other hand, mid-size models are growing fast at 41.42 per cent.

It is too early to argue that `A' segment growth includes any two-wheeler buyers. You can buy five executive segment motorcycles or 13 Bajaj Bykes (the cheapest motorcycle around) for the price of a Maruti 800. The costliest motorcycle - the Kawasaki Eliminator - is still 2.3 times cheaper than the cheapest car. But what should worry Tata Motors, given its presence in compact cars, are the comparatively slow growth rate in that segment and the higher growth rate in mid-size cars. The Tatas have Indigo in the mid-size segment, but if resurgent `A' segment growth is also considered, you have a pincer situation developing in compact cars.

On the other hand, baiting two-wheeler buyers into car purchase is difficult for as the figures show, from 1995-1996 to end-October 2003, the market share of two-wheelers in total automobile sales actually rose a couple of percentage points to 80.21 per cent. A way out would be to go down and meet the two-wheeler buyer or tempt the used car buyer who is already purchasing a car at price levels not far from the Eliminator's.

The big question is - how? The Tatas think they need a separate product, Maruti believes it already has the answer in the little 800.

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