A project report on indian automobile industry

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indian byke/bike industry ,automobile industry,primary and secondary data analysis and report.















.72 16. REFERENCES ..73


We are extremely grateful to Ms. Simran Sethi for providing us the honor of carrying out the project, which helped us to put our learnings into experience. Without her guidance we would not have been able to proceed with our project in the right direction. We would like to express our sincere regards to the staff of LBSIM, New Delhi, whose help and guidance enables us to know what exactly consumers preference towards television is all about. We would also like to thank our family friends and relatives who have helped us and supported us in all possible ways. A Project report needs co-operation, guidance and experience of many more other than the persons whose name appears on the cover, we would like to thank each and everyone who have helped us in our endeavor.


The Indian automotive industry consists of five segments: commercial vehicles; multi-utility vehicles & passenger cars; two-wheelers; threewheelers; and tractors. With 5,822,963 units sold in the domestic market and 453,591 units exported during the first nine months of FY2005 (9MFY2005), the industry (excluding tractors) marked a growth of 17% over the corresponding previous. The two-wheeler sales have witnessed a spectacular growth trend since the mid nineties. Two-wheelers: Market Size & Growth In terms of volume, 4,613,436 units of two-wheelers were sold in the country in 9MFY2005 with 256,765 units exported. The total twowheeler sales of the Indian industry accounted for around 77.5% of the total vehicles sold in the period mentionedFigure 1:Segmental Growth of the Indian Two Wheeler Indust




After facing its worst recession during the early 1990s, the industry bounced back with a 25% increase in volume sales in FY1995. However, the momentum could not be sustained and sales growth dipped to 20% in FY1996 and further down to 12% in FY1997. The economic slowdown in FY1998 took a heavy toll of two-wheeler sales, with the year-on-year sales (volume) growth rate declining to 3% that year. However, sales picked up thereafter mainly on the strength of an increase in the disposable income of middle-income salaried people (following the implementation of the Fifth Pay Commission's recommendations), higher access to relatively inexpensive financing, and increasing availability of fuel efficient two-wheeler models. Nevertheless, this phenomenon proved short-lived and the two-wheeler sales declined marginally in FY2001. This was followed by a revival in sales growth for the industry in FY2002. Although, the overall twowheeler sales increased in FY2002, the scooter and moped segments faced de-growth. FY2003 also witnessed a healthy growth in overall two-wheeler sales led by higher growth in motorcycles even as the sales of scooters and mopeds continued to decline. Healthy growth in twowheeler sales during FY2004 was led by growth in motorcycles even as the scooters segment posted healthy growth while the mopeds continued to decline. Figure 1 presents the variations across various product subsegments of the two-wheeler industry between FY1995 and FY2004.6

Demand Drivers The demand for two-wheelers has been influenced by a number of factors over the past five years. The key demand drivers for the growth of the two-wheeler industry are as follows: Inadequate public transportation system, especially in the semi-urban and rural areas; Increased availability of cheap consumer financing in the past 3-4 years; Increasing availability of fuel-efficient and low-maintenance models; Increasing urbanisation, which creates a need for personal transportation; Changes in the demographic profile; Difference between two-wheeler and passenger car prices, which makes two-wheelers the entrylevel vehicle; Steady increase in per capita income over the past five years; and Increasing number of models with different features to satisfy diverse consumer needs.



Segmental Classification and Characteristics

The three main product segments in the two-wheeler category are scooters, motorcycles and mopeds. However, in response to evolving demographics and various other factors, other subsegments emerged, viz. scooterettes, gearless scooters, and 4-stroke scooters. While the first two emerged as a response to demographic changes, the introduction of 4-stroke scooters has followed the imposition of stringent pollution control norms in the early 2000. Besides, these prominent sub-segments, product groups within these sub-segments have gained importance in the recent years. Examples include 125cc motorcycles, 100-125 cc gearless scooters, etc. The characteristics of each of the three broad segments are discussed in Table 1.


Table 1 Two-Wheelers: Comparative Characteristics Scooter Price*(Rs. as in January 2005) Stroke Engine Capacity (cc) Ignition Engine Power (bhp) Weight (kg) 90-100 > 100 60-70 6.5-9 7-8 and above 2-3 Kick/Electronic Kick/Electronic Kick/Electronic 90-150 100, 125, > 125 50, 60 2-stroke, 4stroke Mainly 4-stroke 2-stroke > 22,000 > 30,000 > 12,000 Motorcycle Moped


Fuel Efficiency (kms per litre) Load Carrying High Highest Low 50-75 50-80+ 70-80

*Ex-showroom Mumbai Compiled by INGRES

Segmental Market Share The Indian two-wheeler industry has undergone a significant change over the past 10 years with the preference changing from scooters and mopeds to motorcycles. The scooters segment was the largest till FY1998, accounting for around 42% of the two-wheeler sales (motorcycles and mopeds accounted for 37% and 21 % of the market respectively, that year). However, the motorcycles segment that had witnessed high growth (since FY1994) became larger than the scooter segment in terms of market share for the first time in FY1999. Between FY1996 and 9MFY2005, the motorcycles segment more than doubled its share of the two-wheeler industry to 79% even as the market shares of scooters and mopeds stood lower at 16% and 5%, respectively. Figure 210

Trends in Segmental Share in Industry Sales (FY1996-9MFY2005)

While scooter sales declined sharply by 28% in FY2001, motorcycle sales reported a healthy growth of 20%, indicating a clear shift in consumer preference. This shift, which continues, has been prompted by two major factors: change in the country's demographic profile, and technological advancements. Over the past 10-15 years the demographic profile of the typical twowheeler customer has changed. The customer is likely to be salaried and in the first job. With a younger audience, the attributes that are sought of a two-wheeler have also changed. Following the opening up of the economy and the increasing exposure levels of this new target audience, power and styling are now as important as comfort and utility. The marketing pitch of scooters has typically emphasised reliability,11

price, comfort and utility across various applications. Motorcycles, on the other hand, have been traditionally positioned as vehicles of power and style, which are rugged and more durable. These features have now been complemented by the availability of new designs and technological innovations. Moreover, higher mileage offered by the executive and entry-level models has also attracted interest of two-wheeler customer. Given this market positioning of scooters and motorcycles, it is not surprising that the new set of customers has preferred motorcycles to scooters. With better ground clearance, larger wheels and better suspension offered by motorcycles, they are well positioned to capture the rising demand in rural areas where these characteristics matter most. Scooters are perceived to be family vehicles, which offer more functional value such as broader seat, bigger storage space and easier ride. However, with the second-hand car market developing, a preference for used cars to new two-wheelers among vehicle buyers cannot be ruled out. Nevertheless, the past few years have witnessed a shift in preference towards gearless scooters (that are popular among women) within the scooters segment. Motorcycles, offer higher fuel efficiency, greater acceleration and more environment-friendliness. Given the declining difference in prices of scooters and motorcycles in the past few years, the preference has shifted towards motorcycles. Besides a change in demographic profile, technology and reduction in12

the price difference between motorcycles and scooters, another factor that has weighed in favour of motorcycles is the high re-sale value they offer. Thus, the customer is willing to pay an up-front premium while purchasing a motorcycle in exchange for lower maintenance and a relatively higher resale value. Supply Manufacturers As the following graph indicates, the Indian two-wheeler industry is highly concentrated, with three players-Hero Honda Motors Ltd (HHML), Bajaj Auto Ltd (Bajaj Auto) and TVS Motor Company Ltd (TVS) - accounting for over 80% of the industry sales as in 9MFY2005. The other key players in the two-wheeler industry are Kinetic Motor Company Ltd (KMCL), Kinetic Engineering Ltd (KEL), LML Ltd (LML), Yamaha Motors India Ltd (Yamaha), Majestic Auto Ltd (Majestic Auto), Royal Enfield Ltd (REL) and Honda Motorcycle & Scooter India (P) Ltd (HMSI).

Figure 3 Shares of Two-Wheeler Manufacturers in Industry Sales (FY2000-9MFY2005)13

Although the three players have dominated the market for a relative long period of time, their individual market shares have undergone a major change. Bajaj Auto was the undisputed market leader till FY2000, accounting for 32% of the two-wheeler industry volumes in the country that year. Bajaj Auto dominance arose from its complete hold over the scooter market. However, as the demand started shifting towards motorcycles, the company witnessed a gradual erosion of its market share. HHML, which had concentrated on the motorcycle segment, was the main beneficiary, and almost doubled its market share from 20% in FY2000 to 40% in 9MFY2005 to emerge as the market leader. TVS, on the other hand, witnessed an overall decline in market share from 22% in FY2000 to 18% in 9MFY2005. The share of TVS in industry sales fluctuated on a year on year basis till FY2003 as it changed its product mix but has declined since then.


Technology Hitherto, technology transfer to the Indian two-wheeler industry took place mainly through: licensing and technical collaboration (as in the case of Bajaj Auto and LML); and joint ventures (HHML). Table 2 Technological tie-ups of Select PlayersNature of Alliance Bajaj Auto Technological tie-up Technological tie-up Technological tie-up HHML KEL KEL Joint Venture Technological tie-up Tie up for manufacturing and distribution LML Technological tie-up Daelim Motor Co Ltd Aprilia of Italy Motorcycles Scooters Company Kawasaki Heavy Industries Ltd, Japan Tokya R&D Co Ltd, Japan Kubota Corp, Japan Honda Motor Co, Japan Hyosung Motors & Machinery Inc Italjet, Italy Product Motorcycles Two-wheelers Diesel Engines Motorcycles Motorcycles Scooters

Hero Motors Technological tie-up


Auto limited

Bajaj Auto is a major Indian automobile manufacturer. It is India's largest and the world's 4th largest two- and three-wheeler maker. It is based in Pune, Maharashtra, with plants in Akurdi and Chakan (Pune),Waluj (near Aurangabad) and Pantnagar in Uttaranchal. Bajaj15

Auto makes and exports motorscooters, motorcycles and the auto rickshaw. The Forbes Global 2000 list for the year 2005 ranked Bajaj Auto at 1946. Over the last decade, the company has successfully changed its image from a scooter manufacturer to a two wheeler manufacturer. Its product range encompasses scooterettes, scooters and motorcycles. Its real growth in numbers has come in the last four years after successful introduction of a few models in the motorcycle segment. The company is headed by Rahul Bajaj who is worth more than US$1.5 billion. Bajaj Auto came into existence on November 29, 1945 as M/s Bachraj Trading Corporation Private Limited. It started off by selling imported two- and three-wheelers in India. In 1959, it obtained license from the Government of India to manufacture two- and three-wheelers and it went public in 1960. In 1970, it rolled out its 100,000th vehicle. In 1977, it managed to produce and sell 100,000 vehicles in a single financial year. In 1985, it started producing at Waluj in Aurangabad. In 1986, it managed to produce and sell 500,000 vehicles in a single financial year. In 1995, it rolled out its ten millionth vehicle and produced and sold 1 million vehicles in a year. BAJAJ PULSAR16

Bajaj Pulsar is a motorcycle brand owned by Bajaj Auto in India. The two wheeler was developed by the product engineering division of Bajaj Auto in association with motorcycle designer Glynn Kerr Tokyo R&D. Currently there are four variants available -with engine capacities of 150cc, 180 and two variants with capacities of 220 cc. More than a million units of Pulsar were sold by November 2005. A Pulsar 200 variant was discontinued in July 2009. With monthly sales of more than 48,000 units in June 2009, Pulsar is the leader in the 150 cc segment in India with a market share of 43%. Before the introduction of the Pulsar, the Indian motorcycle market trend was towards fuel efficient, small capacity motorcycles (that formed the 80-125 cc class). Bigger motorcycles with higher capacity virtually did not exist (except for Enfield Bullet). The launch and success of Hero Honda CBZ in 1999 showed that there was demand for performance bikes. Bajaj took the cue from there on and launched the Pulsar twins in India on November 24, 2001. Since the introduction and success of Bajaj Pulsar, the Indian youth began expecting high power and other features from affordable motorcycles.

DTSi DTSi stands for Digital Twin Spark Ignition, a Bajaj Auto trademark. Bajaj Auto holds an Indian patent for the DTSi technology. The Alfa Romeo Twin-Spark engines, the BMW F650 Funduro which was sold in India from 1995 to 1997 also had a twin-spark plug technology, and the Rotax motorcycle engines,more recently Honda's iDSI Vehicle engines use a similar arrangement of two spark-plugs. However very few small17

capacity engines did eventually implement such a scheme in their productio...