When Piaggio decided to launch its Vespa in India two years ago, the idea was to position it as a ‘lifestyle, iconic, timeless and ageless product'. In the process, the scooter would create for itself an exclusive premium space in a segment where Honda rules the roost with its Activa.
Last week, the Italian automaker unveiled a three-year global plan (2014-17) where it pretty much reiterated its two-wheeler strategy for India. It was quick to acknowledge that the country is the “biggest and fastest growing” two-wheeler market in the world, especially in scooters.
Yet, India remained “highly concentrated and competitive” with local manufacturers playing a lead role in bikes and scooters, a list that includes Hero MotoCorp, Bajaj Auto and TVS Motor. In addition, Honda remains a formidable force to reckon with while Yamaha and Suzuki are as keen on carving out a share of the pie.
Amid this high-voltage competitive arena, Piaggio believes it is important to strengthen its “distinctive offering” through product premium positioning (the Vespa starts with a price tag of Rs 65,000 plus) and marketing activities. This would need to be accompanied by enlarging its basket with the Vespa range and new scooters as well as premium bikes like Moto Guzzi and Aprilia. Most importantly, the Baramati plant near Pune will play a big role in the global roadmap by virtue of its cost-effective manufacturing base.
For the moment, Vespa numbers are way short of the capacity created at 1.5 lakh units annually. Piaggio also conceded as much in a recent financial results presentation by stating, “Vespa run rate falls short of our expectations; we are stepping up efforts to increase sales.” Yet, this scooter has never been meant to be part of the numbers game with the focus being on its ‘heritage and unique values'.
Ravi Chopra, Chairman and Managing Director of the Indian operations, had told this writer on more than one occasion that the Vespa’s premium positioning has a strong connect with customers keen on owning a scooter which is upmarket and stylish. “It was never our intention to compete in the mass market. We had to be in a niche of our own and the strategy is working just fine,” he had said.
According to him, the Vespa is just not a scooter but a way of life. “The idea is to awaken a sleeping potential consumer who does not have such a product. He wants to be part of an exclusive community and make a statement,” Chopra said.
While India will be among the most important market for Piaggio’s two-wheeler plans, it is also eyeing growth in the Asia-Pacific region which today accounts for 30 per cent of bike and scooter sales worldwide and expected to touch 14.7 million units over the next three years. Going forward, scooters are expected to dominate the landscape, especially in the high-end segment where the middle-class buyer base could triple by 2020.
Growing APAC marketThe company believes it is important to ‘”maintain positioning” in Vietnam, which will be its key production hub, while leveraging on the new Vespa Primavera. Likewise, Indonesia, Thailand, Malaysia and Taiwan will be vital growth engines of the future where Piaggio will explore opportunities for mid-size bikes.
As in the case of India, the company will be up against stiff Japanese competition from the likes of Honda, Yamaha and Suzuki. The next big step for Piaggio will be China though its two-wheeler market will be a good five million units behind India by 2017 (13 million to 18 million units).
The move to focus on emerging economies is only inevitable considering that its bastion, Europe has seen volumes fall by over 50 per cent since 2007. Yet, Piaggio believes the “basic drivers of demand” are still in place. There are signs of recovery happening during this calendar with growth in 2017 projected to be 20 per cent higher than 2013 (1.3 million from 1.1 million), but still 40 per cent lower than 2007 (2.3 million units).
From the India perspective, bikes and scooters are a small part of Piaggio’s business model which focuses largely on three and four-wheelers. In its investor presentation last week, the company continues to be upbeat on growth prospects in these segments where the likes of Bajaj Auto, Tata Motors and Mahindra & Mahindra are big players.
Going forward, Piaggio is keen on increasing its share in exports from India beyond the present level of five per cent. This will largely include Africa and Latin America which promise plenty. In the domestic three-wheeler business, the recently launched Apé City Pax will be a key part of the passenger segment in Indian cities.