Flooding the Indian Motorcycle Market

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Background Note

The two-wheeler segment was the fastest growing segment in the Indian automobile industry. India is the second largest user and third largest manufacturer of two-wheelers in the world. The restrictive policy of the government towards the passenger car industry in the pre-liberalization era, the rising demand for personal transport and the inefficiency of the public transportation system were some factors responsible for the strong growth in the two-wheeler segment.

The Indian two-wheeler market is broadly classified into three major segments - scooters, motorcycles and mopeds. Bajaj Auto laid the foundations of the Indian two-wheeler industry in 1948 by trading in imported Vespa scooters. In 1952, Enfield India Ltd. started manufacturing motorcycles, followed by Ideal Jawa and Escorts in the 1960s. The motorcycle segment registered a healthy growth during the 1960s and accounted for 36% of the total two-wheeler sector sales in 1971-72. For over two decades, the industry operated in a seller's market with Bajaj Auto and Automobile Products of India (API) being the only leading players. During this period, little attempt was made to control costs or offer new, innovative products, which restricted the choice of the consumer. However the scenario changed with the de-licensing of the sector in the 1980s. The number of manufacturers increased drastically and the focus shifted to branding and product features.

Scooters dominated the two-wheeler market until 1990, accounting for an estimated 60% of the market. Bajaj Auto was the undisputed leader in the scooter market, followed by LML and Kinetic. The healthy growth of the 1980s continued through to the 1990s, and the two-wheeler segment registered a growth of 14%. Till the 1980s, Enfield, Escorts and Ideal Jawa were the only major players in the motorcycle segment.

From the mid 1980s, the segment gradually picked up momentum and its high growth potential forced all the major two-wheeler players to focus on the segment. Almost all leading players entered into joint ventures and technical collaboration agreements with various foreign companies - mainly Japanese two-wheeler giants like Honda, Suzuki, Yamaha and Kawasaki Heavy Industries Ltd. (Refer Table I for Tie-ups).

In 2000, the motorcycle market was characterized by the presence of sub-segments based on price - the premium segment (Rs 45,000 and above), the mid-segment (Rs 40,001-45,000) and the entry segment (upto Rs 40,000). Major players in the premium segment were Hero Honda, Enfield, Escorts Yamaha, TVS-Suzuki and Bajaj. In the mid-segment, the activity zone with high competition, Hero Honda was the market leader with a 35% share, followed by Bajaj and TVS Suzuki.

In the entry segment, Bajaj Auto was the leading player followed by Hero Honda and Escorts and TVS-Suzuki (Refer Table II). All the segments in motorcycle market, specifically the high-growth mid-segment were characterized by intense competition. In terms of marketshare in 1999-00, Hero Honda was the leader (43%), followed by Bajaj Auto (24%), TVS-Suzuki (19%), Yamaha (14%) and Royal Enfield (1%) (Refer Table III).

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