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Copy and paste won’t work in the Indian two-wheeler market any more. Two-wheeler makers are increasingly realising that if bikes and scooter sales have to grow, they have to be made for India – from conception and design to final manufacturing.
Imported models tweaked for India have failed to catch the fancy of consumers here given their high costs and lack of India-specific features and design cues.
Investing more in R&D
The result: Manufacturers are investing hundreds of crores in local research and development (R&D) to not only create Indian models but also export them. The market is growing so rapidly that local R&D is the only way to keep pace with consumer demand and bring down prices – almost a necessity for broadening the market pie.
“With local R&D, the development period is reduced, and it reaches the market faster. So we can pump in more launches in a shorter time,” Honda Motorcycle and Scooter India’s Vice-President for Sales and Marketing, Yadvinder S Guleria, told Business Line .
His views are echoed by Toshikazu Kobayashi, Managing Director, Yamaha Motor Research and Development India: “We have to quickly develop new models in tune with Indian requirements. It is essential, therefore, to use local materials, people and processes to meet customer demands.”
In 2012, India overtook China to become the world’s largest motorcycle market with sales of about 14 million units. With only seven per cent penetration, the market is poised for exponential growth. Inadequate public transport and emergence of a young working population make India a ripe market for affordable two-wheelers.
Abdul Majeed, Executive Director at professional services firm PricewaterhouseCoopers India, said it is important to have local R&D as the requirements of the Indian market are different from others, especially with regard to style and fuel efficiency. “One size does not fit all. Some customers want a trendy bike while others want durability. Catering to all these requirements at a location outside India is not possible,” he added.
Until now, Yamaha had adopted a strategy of building its brand image by rolling out high-value-added products. But now, it is working to expand the product line-up with affordably-priced models to widen its customer base. With that aim, Yamaha set up its first R&D centre (its fifth worldwide) in Surajpur, Uttar Pradesh, in April.
Last October, Honda India too shifted its R&D functions from Gurgaon to Manesar, where it has a technical centre, to bring all development-related operations under one roof. It has invested Rs 150 crore at this centre.
Hero MotoCorp is setting up a technology and integrated R&D centre in Jaipur with an investment of Rs 400 crore. It will employ 500 people and will have labs for components, engine and complete vehicle testing. Besides, it will also have a variety of test tracks, simulating actual road conditions in India and other parts of the world.
Other local giants, Bajaj Auto and TVS Motor, have been investing in local R&D for many years. But the numbers have gone up substantially in the last few years. For TVS, its R&D expenses increased 55 per cent from Rs 78 crore in FY09 to Rs 120 crore in FY12. Bajaj upped its R&D investment by 24.8 per cent year-on-year to Rs 156 crore in FY12.
Honda’s Guleria said that for testing the aerodynamics of vehicles, the company’s two-wheelers are currently taken to Thailand and Japan. The same is done when testing the chassis and other components. “This increases costs. With local R&D, the biggest advantage will be saving on logistics and manpower cost, as well as time,” he added. This will, obviously, bring down the prices of two-wheelers.
Yamaha’s Kobayashi points out that the cost of developing a two-wheeler in Japan is eight times more than in India. “High costs lead to a higher selling price. That is why R&D in India is so essential now.”
Yamaha’s target
Yamaha, which sold 3.5 lakh two-wheelers in 2012, is targeting sales of 5 lakh vehicles this year, which it hopes to achieve by strengthening its mass-market scooter business and low-end models in particular.
Yamaha will also export India-developed products, initially targeting some countries in Africa.
Surely, local R&D seems to be making a lot of business sense for manufacturers. And as PwC’s Majeed said, “Innovation is no more an option. The survival in this market will become very difficult if players don’t innovate.”
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