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Sunday, Apr 14, 2002

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Two-wheeler market: Gathering speed

B. Krishnakumar

IN fiscal 2001-02, the two-wheeler industry is revving up, with the entry of more players, newer models, a comeback by Bajaj Auto and a late launch of two new models by TVS Motors. The recent developments in the motorcycle market indicate that the market standing and performance of two-wheeler producers is set to change dramatically — a far cry from the scene three years ago, when it looked as though there was no stopping Hero Honda from growing well ahead of the industry.

Though Hero Honda has managed to sustain its recent trend of robust growth, and retained the market leader status in the motorcycle segment, its growth has tended to taper off in the last few months. TVS Motor and Yamaha have managed to enhance their market share over the past six months as Bajaj Auto did, now comfortable in the second slot and with growth prospects too. The entry of new players has led to higher degree of price and product differentiation in the motorcycle market. LML and Kinetic — that earlier had presence predominantly in the scooter segment — recently entered the motorcycle market.

Changes in market share

During the 11-month period ended February 2001, Hero Honda has managed to prevent any major loss in market share despite the rapid volume growth posted by its nearest competitors, Bajaj and TVS Motor.

Hero Honda's market share has, in fact, improved from about 48 per cent during 1999-2000 to 49 per cent during the 11-month period ended February 2002. But this does not reveal the changes now underway. Notably, much of the improvement in market share was achieved during the first half of the fiscal. Bajaj, on the other hand, has seen its market share oscillate in the 23.9-25.4 per cent range during this period.

TVS Motor Company (erstwhile TVS Suzuki) has, however, been the real exciting story. The company's presence in the motorcycle market was marginalised on account of a high proportion of two-stroke models in the motorcycle segment.

In the last six months, backed by the successful launch of four-stroke models, Fiero and Victor, TVS Motor 's market share increased steadily since October 2001. Along with TVS, Yamaha too gained market share during this period. The success of the YBX model followed by Crux appears to have helped the company gain market share.

Apart from the overall increase in motorcycle market, both these companies have managed to grab market share at Hero Honda's expense. After improving to about 50.5 per cent in November 2001, Hero Honda's market share declined to 47.14 per cent in February 2002. On the other hand, TVS Motor's share increased to 17.54 per cent in February 2002 compared to 15.98 per cent in October.

The problem with Hero Honda is that the volume growth of its flagship brand, Splendor, was affected recently. Though this was offset to some extent by the success of the recently launched Passion, the other recent product launches, such as CBZ and Joy, have enjoyed only a muted success.

Bajaj continued to pursue market share by adopting an aggressive pricing strategy. The launch of the Boxer motorcycle model in the under-Rs 36,000 price range has played a key role in driving volume growth. Besides, Caliber and Croma also managed a fair degree of success.

New launches galore: With the entry of more players, the number of models has also increased. From just a handful during the early 1990s, there are now over 30. Apart from the new entrants, the existing producers too have turned aggressive in new launches.

With more companies vying for prominence, new product offerings are set to rise. Increase in the number of models and the entry of new players would shorten the product life cycle. Companies would be forced to come up with new products to sustain market shares. Pricing, a key strategy: Companies have already resorted to innovative pricing and product positioning to enhance market share.

Apart from new model introductions, the motorcycle market has been segmented further based on product features and pricing strategy.

Earlier, motorcycles were positioned in the popular Rs 42,000-45,000 price band. In a bid to garner volume growth, Bajaj launched Boxer, targeted at the lower price segment, priced lower than other four-stroke motorcycles and a few two-stroke models. This strategy paid off and Bajaj has managed to log substantial volume growth the previous fiscal. However, there has also been a flurry of activity in the more popular Rs 45,000-50,000 price segment.

The new entrants and established heavyweights now have a presence in this price category: Hero Honda's Passion, TVS Motor's Victor, Kinetic's Challenger and Yamaha's Crux.

This suggests that despite Boxer's success, companies have altered strategy to capture higher volumes. Producers have shifted attention to the higher-end premium price segment in which the motorcycles have higher engine capacity and are more powerful.

Apart from price differentiation, there have been changes in product features too. In a bid to target the lower price segment, Bajaj and TVS have launched motorcycles that do not require batteries.

There are cosmetic features, such as a side stand indicator and a tachomoter; motorcycles have also been equipped with self-start mechanism, hitherto a feature only in scooters.

Pampered by choice: What do the stars foretell? The consumer would be the eventual beneficiary with more products to choose, at highly competitive prices.

The market share of two-wheeler companies would change, in tune with the success of the new models.

Companies would feel the pinch in the form of heavy burden of sales promotional expenses and pressure on profitability as a result of growing competitive pressure.

And the days of Hero Honda running away with market share may well be behind the industry unless it is successful with some new models.

Come 2004, Honda might also enter the scene, making the two-wheeler story more interesting.

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