Flooding the Indian Motorcycle Market

TABLE V
INDIAN TWO WHEELER INDUSTRY - CHANGING PROFILE

Year	Total In ‘000	Overall Growth	Scooter		Motorcycle		Moped
Year	Total In ‘000	Overall Growth	No.	%	No.	%	No.	%
1993	1,503.36	-6.4	709.73	47.2	379.06	25.2	414.57	27.6
1994	1,770.22	17.75	840.17	47.5	472.58	26.7	457.47	25.8
1995	2,209.23	24.8	1,033.52	46.8	652.01	29.5	523.7	23.7
1996	2,660.04	20.41	1,223.43	46	809.53	30.4	627.08	23.6
1997	2,963.49	11.41	1,301.05	43.9	978.68	33	683.76	23.1
1998	3,042.85	2.68	1,262.70	41.5	1,131.31	37.2	648.84	21.3
1999	3,403.43	11.85	1,325.87	39	1,395.66	41	681.9	20
2000	3,745.55	-0.8	901.88	24	2,156.03	58	687.64	18

Source: Society of Indian Automobile Manufacturers (SIAM). No. Number of Units (in ‘000)

The demand shift from scooters to motorcycles in the 1990s was without parallel in any comparable product category in India ¹. This was mainly attributed to the change in customers'preference towards fuel-efficient and aesthetically appealing models, which scooter manufacturers failed to provide. The delayed launch of new, advanced scooter models, fear of four stroke scooters being prone to increased skidding risks and vibrations and the difficulty of maintenance also contributed to this shift.

Interestingly, the growth in the motorcycle segment was mainly driven by the demand from rural and semi-urban consumers. An estimated 60% of the demand for motorcycles came from rural and semi-urban customers. The rise in their disposable incomes on account of good monsoons in the 1990s provided the normally conservative rural and semi-urban customers with extra money that induced them to experiment with new, innovative products (Refer Exhibit I).

Advanced technology, larger wheelbase, higher ground clearance and the ability to ride on bad roads with less effort and less danger of skidding and decreased maintenance cost were the other factors that encouraged customers to choose motorbikes over other two-wheelers.

Besides the brand launches, the other major development in the motorcycle segment during 1998-2001 was the break-up of the various joint ventures. By the end of 2001, Escorts and TVS ended their agreements with Yamaha and Suzuki respectively. The joint venture agreement (Hero Honda) between Hero Motors and Honda Motors was also scheduled to end in 2004.

The reasons for these break-ups were varied and included differences over issues such as launch of new models, ad spend, marketing strategies, the foreign counterparts'inability to offer fuel-efficient and innovative technology etc. As a result of these break-ups, Indian companies were forced to invest heavily in research and development for manufacturing indigenously developed models. Analysts remarked that this was just the beginning of a turbulent phase for Indian motorcycle manufacturers.

THE FUTURE

EXHIBIT I - KEY NATIONAL INCOME STATISTICS

[1] Business Line, January 2001.