Motorcycles: Likely to hit a speedbreaker - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks


Login Failure
(Please do not use this option on a public machine)
  Sign Up | Forgot Password?  

Motorcycles: Likely to hit a speedbreaker

Jan 20, 2001

The two wheeler market has witnessed a large shift in composition towards motorcycles. Consumers have rushed to this segment, due to its obvious benefits. The attributes of motorcycles are many. Fuel efficient: motorcycles, good styling: motorcycles, exciting two wheeler: motorcycles, trendy: motorcycles, comfort, etc, the list goes on and on. Since the mid 90's this segment has seen an explosion in demand. Rural incomes have been buoyant in the last decade. Since 60 percent of motorcycle demand comes from rural areas, the segment has had a good ride in the past few years despite the fact that they are more expensive than scooters. The rural hinterland prefers motorcycles because of their wider wheel base, which are safer on the rough and bumpy roads of rural areas.

Another very important factor that resulted in the shift in consumer preferences towards motorcycles has been trendier and fuel efficient models in this segment. Scooters have always carried a dowdy dull image and also guzzled large amounts of fuel. The Indo-Japanese motorcycles have literally changed the face of the two wheeler market.

Motorcycles have swept the market
% market share FY96 FY97 FY98 FY99 FY2000 FY2001*
Scooters 46% 44% 41% 39% 33% 25%
Motorcycles 30% 33% 37% 41% 48% 56%
Mopeds 24% 23% 21% 20% 19% 19%
* The figures are from April-November fiscal year 2001

Motorcycles as a result contribute to 56 percent of the two wheeler market currently as compared to scooters which contribute to 25 percent and mopeds 19 percent. In future too, among two wheelers, motorcycles are the only segment which look set to grow at reasonable rates due to the metamorphosis of the Indian consumer.

However, concerns are beginning to cloud the motorcycle growth engine. There is a strong expectation of a slowdown in the motorbike segment in 2001, as agricultural sector growth has been lacklustre since the past two years. This could lead to a slowdown in rural demand as incomes are likely to remain stagnant or decline.

Another pointer towards a likely slow down is that in the past few years motorcycles have eaten into the market share of scooters. In the past five years while the scooter industry reported a 21 percent growth in volumes, the motorcycle segment grew by a whopping 176 percent and the overall two wheeler market by 71 percent. This implies that motorcycles have been nibbling away the scooter segment pie. Scooters now account for only 25 percent of India's two wheeler segment as compared to 47 percent in fiscal year 1995. Hence the scope of eating into the market share of scooters stands reduced as compared to say four to five years back.

Hero Honda leads the segment
Company FY2000 FY2001*
Hero Honda 42.0% 48.0%
Bajaj Auto 24.0% 27.0%
TVS Suzuki 18.0% 17.0%
Royal Enfield 1.0% 1.0%
Others 15.0% 7.0%
* for the period April-November 2000    

Higher competition in the domestic motorcycle industry is also going to slowdown the volumes of existing motorcycle manufacturers. Existing players are likely to be affected, because as the market grows there will be more players vying for this pie. Bajaj Auto, LML, TVS Suzuki and Kinetic are planning to come out with new models in the 4 stroke 100 cc segment, which is market leader Hero Honda's forte. Currently there are around 10-12 models in this segment and we could easily see this figure double over the next one year.

The domestic industry will also face threat from cheaper imports. Chinese motorcycle companies have started offering 125 cc bikes for Rs 25,000 - Rs 30,000 (around US$ 640), even after paying off an import duty of 40 percent. Comparatively, the leading Indian motorcycle manufacturers offer their 100 cc motorcycles at around Rs 40,000 plus (US$ 856). Besides post April 2001, import duties are likely to come down. This could result in higher imports and hence cut throat competition. The only consolation for the domestic players at this stage is that they have wide distribution networks which Chinese players lack.

In order to take competition head on, industry leaders are busy finalising plans to introduce new variants in the 4 stroke 100 cc segment. Currently this segment accounts for 85 percent of the total motorcycle pie. Due to its pricing and wide product offering, this segment will continue to dominate the motorcycle industry. Though a couple of new models are expected in the premium 125-175 cc segment, this segment is not yet that popular among consumers.

BAL market leader in scooters
Company FY2000 FY2001
Bajaj Auto 52.0% 39.0%
LML 20.0% 20.0%
Maharshtra Scooters 10.0% 11.0%
TVS Suzuki 9.0% 16.0%
Kinetic Motor Co. 8.0% 13.0%
* for the period April-November 2000    

Bottomline, there is only one question haunting industry analysts. At what pace the motorcycle segment will grow in future? Though the industry may slowdown as compared to its current robust growth rates, it is unlikely that this industry will wither away like scooters. On the other hand, there is a feeling that the scooter segment is likely to revive again, as it is the lowest cost entry vehicle present in the country. However, scooters are very unlikely to make a come back in such a way so as to be a threat to motorcycles. The main reason behind this being that the profile of the Indian consumer too has changed over time and they prefer trendier, sleekier models.

Despite the likelihood of a slowdown in 2001, there is no denying the fact that the Indian consumer will have a whale of a time choosing between new models, both Indo-Japanese and Chinese.

Equitymaster requests your view! Post a comment on "Motorcycles: Likely to hit a speedbreaker". Click here!


More Views on News

TATA MOTORS Share Price Down by 10%; BSE AUTO Index Down 5.3% (Market Updates)

Apr 12, 2021 | Updated on Apr 12, 2021

TATA MOTORS share price is trading down by 10% and its current market price is Rs 308. The BSE AUTO is down by 5.3%. The top losers is TATA MOTORS (down 10.3%)..

HERO MOTOCORP Share Price Down by 5%; BSE AUTO Index Down 5.1% (Market Updates)

Apr 12, 2021 | Updated on Apr 12, 2021

HERO MOTOCORP share price is trading down by 5% and its current market price is Rs 2,885. The BSE AUTO is down by 5.1%. The top losers are HERO MOTOCORP (down 4.7%) and CUMMINS INDIA (down 5.1%).

FORCE MOTORS Share Price Down by 5%; BSE AUTO Index Down 4.7% (Market Updates)

Apr 12, 2021 | Updated on Apr 12, 2021

FORCE MOTORS share price is trading down by 5% and its current market price is Rs 1,184. The BSE AUTO is down by 4.7%. The top losers are FORCE MOTORS (down 5.2%) and CUMMINS INDIA (down 5.2%).

More Views on News

Most Popular

A Critical Update on the Market (Fast Profits Daily)

Mar 30, 2021

In this video, I'll tell you why I am recommending caution in the market at this time.

My Recent Recommendation Will Profit from the Global Supply Chain Crisis (Profit Hunter)

Mar 31, 2021

A tiny chemical company, started in the Licence Raj era, is a great example of a new wealth creating opportunity.

My Stock Trading Strategy (Fast Profits Daily)

Mar 31, 2021

In this video I'll show you exactly how I go about picking stocks for trading.

What You Need to Find Hundred Baggers (Profit Hunter)

Mar 30, 2021

100 baggers of the last decade share this common trait. Here's how to use it to nail future multibaggers.


India's #1 Trader
Reveals His Secrets

Secret To Increasing Your Trading Profits Today
Get this Special Report,
The Secret to Increasing Your Trading Profits Today, Now!
We will never sell or rent your email id.
Please read our Terms


Apr 12, 2021 (Close)