Economic Analysis

of Indian Two
Wheeler Industry
Introduction
Two wheelers
industry
•India is the second largest producer of two wheelers

•Two wheeler segment contributes the largest volume amongst all

the segments in automobile industry

•The industry is growing at 30% annually.

•The sales of two wheelers in the period 2006 - 07 was 7,857,548,

which was a growth of 11.41 %.
 History
•Indian two wheeler industry is as old as 53 years.

•Bajaj auto began trading in imported Vespa Scooters in 1948

.
•Until the mid 80’s, there were only three major motorcycle
manufacturers in India namely Rajdoot, Escorts, and Enfield

•The two-wheeler market was opened to foreign manufacturers in the

mid 80’s.

•In 1984, Hero group entered the market in joint venture with Japan’s
Honda Group
Two wheelers
industry
MARKET STRUCTURE
AND SHARE
 Market structure
Two wheelers
industry
AUTOMOBILE

COMMERCIAL PASSENGER 2-WHEELER

3-WHEELER
VEHICLE VEHICLE

MOTORCYCLE SCOOTERS MOPEDS

Segment Wise Analysis Of Indian two
Wheeler Industries
Segment Two wheelers
Description Share in Share in CAGR

industry
2001-02 2006-07

A1 Scooter with engine 5% 0% -33.9%

capacity < 75 cc
A2 Scooter with capacity 5% 10% 32.9%
between 75-125 cc

B2 Motorcycle with 62% 66% 14.9%

capacity 75-125
B3 Motorcycle with 5% 17% 44.8%
capacity
between125-250cc
B4 Motorcycle with 1% 1% 5.7%
capacity above250 cc

C1 Mopeds 10% 5% -2.7%

 Breakup of Industry by Segment
m opeds
5%
s cooters m otercycles
12% s cooters

m otercycle m opeds
s
83%
 Market Share Of Key Player In
2006-07

O thers, 3%
HMSIL, 9% Hero Honda
TVS Motor Hero Honda, Bajaj Auto Ltd
co., 19% 42%
TVS Motor co.
HMSIL
Bajaj Auto
Ltd, 27% O thers
India has the lowest penetration of two
wheeler as compared to following
countries:
 Major players in 2- wheeler industry
HERO HONDA

•Established in 1984 – Joint Venture

•Largest manufacturer of 2- wheelers in India
•Manufacturing units – Daruhera & Gurgaon
•Its sales has been increasing from 1.3 million units in 2001 to 3 million
bikes in 05-06.

Product segmentation

Up to 100cc – CD Dawn, CD Deluxe, Splendor plus, Splendor NXG,

Passion plus.
100 to 135cc – Glamour, Super Splendor.
More than 150cc- Achiever, CBZ- extreme, Hunk, Karizma.
 Bajaj
•Established in 1945 and started selling imported 2- wheelers.
•It is India's largest and the world's 4th largest two- and three-wheeler
maker
•In 1959, it started manufacturing 2- wheelers in India.
•In 1970, the company managed to sell 1,00,000 vehicles
•It is based in Pune, Maharashtra with plants in Akurdi and Chakan,
Waluj, Pantnagar in Uttaranchal

Product segmentation

Up to 100cc – Platina,
100 to 135cc – XCD- 125 DTS Si, Discover 135, Kristal DTSi.
More than 150cc- Pulsar- 150, 180, 200, 220 DTSi, Avenger DTSi.
TVS Motors
•Third largest 2 wheeler manufacturer in India.
•It is a flagship company of the $4 billion TVS group.
•The company has 4 plants- Hosur, Mysore, Himachal Pradesh,
and one at Indonesia
•TVS Motor Company is the first two wheeler manufacturer to be
honored with the hallmark of Japanese quality- The Deming Prize
for Total Quality Management.

Product segmentation

Up to 100cc – Scooty pep+, Star City

100 to 135cc – Flame, Victor GLX
More than 150cc- Apache RTR
 FINANCIAL ANALYSIS- HERO HONDA
• Hero Honda reported
13.75% growth in total sales
in fy07as compared with 100000
HERO HONDA

fy06. 10000 5195 5997 7559 8870 10090

RS IN CRORES
581 728 810 971 858
1000

• Profit after tax (PAT)

100

10
decreased by 11.6% 1
2002-03 2003-04 2004-05 2005-06 2006-07
SALES AND OTHER YEARS
INCOME

• The company registered a PROFIT AFTER TAX

compounded annual growth

rate (CAGR) of 18% from
the period fy03 to fy07 in
sales and 10% in PAT
FINANCIAL ANALYSIS-HERO HONDA
• EPS decreased to Rs.42.96
during fy07 as compared with
48.06 in the last year.
HERO HONDA
100 69.82 61.86 56.25 46.88 46.29
36.47 40.59 48.64 42.96
Dividend payout ratio has
29.08
•

RATIOS AND RUPEES

10 11.32 12.36 10.85 11.06 8.58
declined from 69.82 in fy03 to
46.29 in fy07. 1
0.15 0.15 0.13
0.09
0.1 0.06

• Debt/Equity ratio declined 0.01

continuously from .15 in fy03

2002-03 2003-04 2004-05 2005-06 2006-07
YEARS
to .06 in fy07. EARNING PER SHARE
DEBT/EQUITY RATIO
DIVIDEND PAYOUT RATO

• Net profit ratio declined

NET PROFIT RATIO

continuously from 11.32 in fy03

to 8.58 in fy07.
FINANCIAL ANALYSIS- BAJAJ LTD.
• Bajaj auto ltd reported
24.5% growth in total sales
in fy07as compared BAJAJ AUTO LIMITED

with fy06. 10000 4310.6 4916.8 5927

7488.11 9317.47

1124.27 1286.92
1000 731.5 766.8
538.4

RS IN CRORES
• Profit after tax (PAT) 100

increased by 14.5%. 10

1
2002-03 2003-04 2004-05 2005-06 2006-07
• The company registered a YEARS
SALES AND OTHER

compounded annual growth INCOME

PROFIT AFTER TAX

rate (CAGR) of 22% from

the period fy03 to fy07 in
sales and 24% in PAT.
 FINANCIAL ANALYSIS- BAJAJ LTD.

• EPS increased to Rs.122.35

during fy07 as compared B A J A J AU T O L IM IT E D

with Rs.108.87 in fy06. 1000

1 2 2 .3 5
100 53 73 76 1 0 8 .8 7 E A R N IN G P E R
39 40 4 1 . 8 93 8 . 2 4

RATIOS AND RUPEES

30 SHARE
10 1 2 . 9 4 1 5 . 3 8 1 3 .3 6 1 3 . 5 91 2 . 2 9
D E B T / E Q U IT Y
R A T IO
• Dividend payout ratio has 1
0 .2 6 0 .2 7 0 .2 9 0 .3 0 .29 D IV ID E N D P A Y O U T
R A TO

increased from 30 in fy03 to

0 .1
N E T P R O F IT R A T IO
2 0 0 2 -2 0 0 3 - 2 0 0 4 -2 0 0 5 -2 0 0 6 -
03 04 05 06 07
38.24 in fy07. YEARS

• Debt/Equity ratio was in the

range of .26 to .30 during
the past 5 years.
 FINANCIAL ANALYSIS-TVS
• TVS motors ltd reported
18.8% growth in total sales TVS
in fy07as compared with 10000
2726 2856 2955 3306 3928
fy06. 1000

RS. IN CRORES
128 137 138 117
100
67

• Profit after tax (PAT) 10

decreased by 42.75% 1
2002-03 2003-04 2004-05 2005-06 2006-07
YEARS
SALES AND OTHER
• The company registered a INCOME
PROFIT AFTER TAX

compounded annual growth

rate (CAGR) of 9.5% from
the period fy03 to fy07 in
sales but 12% decrease in
PAT
 FINANCIAL ANALYSIS- TVS
• EPS decreased to Rs.2.8
during fy07 as compared TVS

with Rs.4.93 in the last year. 100

56

RATIOS AND RUPEES

30.09 34.72
23.03 25.88 25.52
Its EPS shows a continuous 10 5.96
4.8
5.79 4.93
4.74 2.8
decline from Rs.56 in fy03 1
4.64
3.55
1.69

to Rs.2.8 in fy07. 0.28

0.2
0.27
0.5 0.78

0.1
2002-03 2003-04 2004-05 2005-06 2006-07
YEARS
• Dividend payout ratio EARNING PER SHARE

DEBT/EQUITY RATIO

increased from 23.03 in DIVIDEND PAYOUT RATO

fy03 to 34.72 in fy07. NET PROFIT RATIO

• Debt/Equity ratio increased

from .28 in fy03 to .78 in
fy07.
COMPARATIVE FIANANCIAL ANALYSIS
• Hero Honda is a leader in terms of sales. It recorded Rs.10,090
crores of sales during fy07.
• Its growth in sales was only 13.75% as compared with Bajaj auto
and TVS motors who recorded a growth of 24.5% and 18.8%
respectively.
• Its CAGR in sales is 18% which is less than Bajaj auto’s CAGR
which is 22% during the past five years.
• The highest PAT was reported by Bajaj Auto which was
Rs.1286.92 crores.
• Hero Honda and TVS motors PAT was Rs.858 crores and
Rs.67crores respectively.
• This high PAT was achieved due to the company’s high net profit
margin ratio which was 13.59% way higher than Hero Honda and
TVS motors which was 8.58% and 1.69% respectively.
Continued…
• Bajaj auto’s operating profit is Rs.1221.84 crores which is more than
Hero Honda and TVS motors which is 1201.96 crores and 139.95
crores respectively.

• This high operating profit was achieved due to lower cost of sales
which was Rs.8095.63 crores as compared with Hero Honda which
was Rs.8703.99 crores.

• Hero honda should go for capacity expansion as its debt as compared

to its equity is just .06

• Bajaj auto and TVS motors are having a debt equity ratio of .29 and .
78 respectively.

• As far as EPS is concerned Bajaj auto paid Rs.122.35 as compared to

Hero Honda and TVS motors which paid Rs.42.96 and Rs.2.8
respectively.
 Capacity expansion
Hero Honda

•HHML(Hero Honda Motors Ltd) increased the capacity of its

plants from 1.8 million units in FY2003 to 2.25 million in FY2004
and has been able to achieve 92% capacity utilization.

•Hero Honda has embarked on a green field expansion plan (initial

investment of Rs 2.5 bn).HHML added to its gross fixed assets at a
higher rate compared to sales growth.
•Hero Honda to pump Rs 150 crore more in its Haridwar Facility.
Bajaj

•In the first phase it has proposed to expand motorcycle capacity to

3.6 million per annum by 2007-08.

•Expansion of capacities at its existing plants in Akurdi and Chakan

.
•Greenfield project at Pantnagar in Uttaranchal, which commenced
operations in 2007

•Greenfield project at Chakan to manufacture the new range of 3 / 4-

wheelers which is expected to commence operations in 2009.

•The company is also considering major expansion into the Far East
markets followed by South America
 TVS

•The company spent about Rs 120-crore in capital expenditure last

year — in expanding capacities for the Victor and to make room
for the new vehicles that are to be launched this year
 Pricing policy

Hero Honda :

•They have been pricing their products at higher range and focusing
on the quality.

•Their strategy involves giving value to the customers.

 Bajaj

•They have been pricing their 100 & 125 cc bikes at a little lower
price and giving more quality in their products.

•However in 150 and more cc market segment, they are pricing

their products at same rate as their competitors & focusing more
on technological advancements.
 TVS Motors

•Their pricing strategy has been aggressive and they are

pricing their products at a lower rate and also providing more
features in their products.

•But in popular products like scooty they have priced their

products in similar range to the competitors.
 Price segmentation
• Following are prices of some of the popular products
in the market currently:
 Product Differentiation
•The process of describing the differences between products or
services available.
•This shows the unique aspects of different products.
•Without differentiation, the economy will become monopolistic,
people will not have any more options i.e. no substitutes and there
will be no competitors at all.
•In fact the product remains the same , but it is all the way that how
the product is distributed and marketed
•For e.g.:-
• Bajaj Pulsar DTSi 200 cc has an oil cooled engine.
•Glamour has mileage meter which shows trip mileage.
•Bajaj Discover & Pulsar has exhaustec silencer.
•Apache & Pulsar has digital meter.
•CD Dawn, CD deluxe & Platina promises good mileage etc.
 Product Diversification – TVS and
Hero Honda
The various fields apart from automobiles in which Hero Honda
holds a share are:-
•Munjal castings
•Munjal Showa limited
•Hero Cold Rolling Division
•Hero Corporate Services

Diversified fields of TVS are as follows:-

•TVS Motors has entered the three-wheeler business with the

launch of 200 cc auto rickshaw 'TVS King' in Kerala
•TVS is also manufacturing the mobile video monitor for car, truck
or SUV .
 Product Diversification - Bajaj
•Diversification is a form of growth marketing strategy for a company.
•Diversification can occur either by expanding into a new segment of an

industry in which the business is already in or outside the scope of the

existing business unit.
•Bajaj is already in 2 & 3- wheeler industry, and it is now coming in the
4- wheeler industry
•Apart from that Bajaj has share in the following:-
Bajaj electrical ltd
Bajaj finance
Bajaj Hindustan Mill
 MARKETING STRATEGIES

•Marketing is establishing relationship with the customer which

enables the repurchase of the product.

•In marketing “you” is the most important word.

•Marketing involves all the process that takes from the

manufacturer’s house to the market of end user.
 ATTRIBUTES OF TWO WHEELER
MARKETING
It involves two concepts :
Traditional concept– It implies production, sales and profit making.
•

MANUFACTURER SALES PROFIT MAKING

 Features of traditional concept:

• Middle class was identified as the market of end user.

• Not too much focus was on technology development and its

use.

• Complete customer satisfaction was not on top of priority list.

 Continued..
Modern concept-
It implies production, sales
customer satisfaction which will in turn pave
the way for profit making.

MARKETING
CUSTOMER PROFIT
MANUFACTURE &
SATISFACTION MAKING
SALES
 Features of modern concept:

• Constant use of advanced technology

• Improved customer service

• Emphasizes on customer satisfaction

• Creation of brand image and sustaining it for a long period.

• Youth were identified as the market of end user

 STRATEGIES APPLIED (PRESENT
SENARIO)
• Consistent innovation in product development
for example- Bajaj went into the bike segment with it
is model pulsar.

• High frequency of launching products with new

technologies
 STRATEGIES APPLIED (Contd…)

• Help of mother brand

for example-Bajaj has created a brand image so a
new product launched has a tag line “ a Bajaj product”

• Use of effective advertisement.

for example- Hero Honda’s advertisement
touched the chords of emotional Indians.
 MARKET ANALYSIS
• Conversion of “problem of choice” into abundance
of choice.”

• Change of the market scenarios from monopolistic

to perfect competition.
 Reasons
• Change in the taste and preference of the consumers

• Increase in the average income of people.

• Increase in population.
 Two wheelers
EXPORT TRENDS OF TWO
industry
WHEELER
Continued…
Two wheelers
industry
•Majority of exports are to Bangladesh, Sri lanka, Bhutan and Nepal
.
•Motorcycles constitute 88% of the total two wheeler export.

• Most of bikes exported with engine capacity below 125 cc.

 INVESTMENT TREND
Two
•Two wheeler industry
wheelers
investment rose industry
from 2.7
billion$ in fy03 to 10.1
billion$ in fy08 with a CAGR
of 21.7%.

•In Fy 06-07 the motorcycle

exports from India was
321,321 units.

•Till fy16 the CAGR will be

14.2% from fy08.
Is the competition healthy?

•Perfect competition refers to the market structure where competition

among the sellers and buyers prevails in its most perfect form.

•The price is determined by the forces of market, individual sellers

have no control over the price at which they sell.

•Market is increasingly becoming a price war field

 Is competition healthier or not ?
• Big players who have huge market share vs small players who are yet
to establish.

• Big players at advantage- Huge volumes>low component

prices>Low final price>high profits.

• Small players trapped in- Low volumes > High component prices >
High final price > Low profitability

OR

• Low volumes > Low component prices > Low final product price >
High volumes > Low dependability > Low customer satisfaction >
Low volumes > Low profitability. Thus the fat gets fatter while the
small gets smaller and it may eventually get wiped out.
Two Wheelers Manufacturers –
Growth Factors
•The taxes, excise, and other duties have been lowered by the
Government

•The latest two wheelers are fitted with economic engines

•The options of financing has become easier and user friendly

•Rapid Product introduction and Shorter Product life Cycle.

 Demand drivers
Factors increasing the demand:
•Increasing prices of cars which P
are substitute goods for r
i
traveling. c
e
•Inadequate public /
u
transportation system, n
i
•Increasing disposable income. t

Quantity demand
•Favorable age demography
and tastes and preferences.
Factors decreasing the demand:

•Increasing prices of
P
complementary goods i.e. r
petrol. i
c
e
•Increasing cost of input i.e.
/
metal prices, etc. u
n
i
•Increasing rate of interest on
t
financial purchase
Quantity demand
Scope and opportunities

•Large untapped market in semi-urban and rural areas.

• Pricing policies
•Market with engine efficiency of more than 200cc in motorcycles.
• Marketing strategies
•Two
• Export trends
wheelers with alternative fuel options.

• Conclusion
Two
Thank
wheelers
industry
you