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By Ramnath Subbu
After scaling yearly high sales in October 2002, there has been a decline in motorcycle sales till February. According to the Society of Indian Automobile Manufacturers (SIAM), Sales in October were 3.67 lakh units and it reached a low of 2.93 lakh units in December and in February this year these were 3.09 lakh units. R. L. Ravichandran, Vice President, Business Development & Marketing, Bajaj Auto (BAL), expected the motorcycle segment to grow at 20 per cent in 2003-04 against 16-17 per cent now and not less than 15 per cent over the next two years. Motorcycle sales grew by 20 per cent in 2001 and 37 per cent in 2002. According to Ajay Dwivedi, Head, Corporate Ratings, Credit Rating and Information Services of India (Crisil), "There are actually opposing effects now in the market. Rural demand has been affected by drought in the north and eastern part of the country. But on the other hand with increasing urbanisation, low market penetration and improving ease of ownership are the positives for growth". There is a tendency for the larger players, to develop products on their own, having already absorbed technology from their collaborators. All leading players in the motorcycle industry have joint ventures with world leaders — Bajaj-Kawasaki, Hero-Honda, TVS-Suzuki, LML-Daelim and Kinetic-Hyosung. The future is likely to see fragmentation of market share and higher segmentation. Honda Motor Company of Japan is positive about renewal of Hero Honda's technical agreement with Honda when it comes up for consideration in June 2004. The Japanese player's own subsidiary now manufacturing scooters is free to make motorcycles from next April and there are queries about what models would be routed through Hero Honda. Both Munjals and Honda Motor Company hold 26 per cent each in Hero Honda and 80 per cent of the company's revenues come from Splendor and Passion. The company's Dawn and Ambition were unable to break Bajaj's dominance in the economy and power segments. On the other hand, TVS has already proven itself having developed the successful Victor and the same goes for Bajaj, which has developed its highly successful Pulsar in-house. BAL's Caliber 115 signals the company's thrust into the executive segment where it is not strong. The company leads in the premium segment with Pulsar, and in the economy end, it offers Boxer. The company plans to have a 25 per cent market share in the executive segment in future where it now has only 7 per cent through its Caliber and Caliber Croma. The executive segment constitutes 54 per cent of the motorcycle market with fast moving products such as Hero Honda's Splendor and Passion, TVS's Victor and LML's Freedom. BAL already has a 45 per cent market share in the entry level motorcycles and 40 per cent in the premium segment. TVS, which was earlier selling two-stroke Shogun, Shaolin and Samurai, is slowly phasing out Samurai and replacing it with the four-stroke Max. It is also launching a new Fiero this month and variants of the Victor this calendar year. "As such there is little differentiation between the top three players. What could happen in future is decline in profitability due to the price war and offers. The differentiating factor could be pre-empting consumer preference," said Mr. Dwivedi. Further, he said the market growth in future, would be led by the lower end segment, the entry level motorcycles. "While the growth impetus on the existing models would slow down, the newer models would give the manufacturers the volumes. In essence, the newer models will drive future growth," said Mr. Dwivedi.
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