Automobile industry is one of the fastest growing industries of the world. With more than two million automobiles rolling out each year, on roads of India; the industry is set to grow further. Automobile industry made its entry in India in nineteenth century. Today India is the largest three wheeler market in the world and is expected to take over China as the largest in the coming year.
Nowadays customers are more aware about the services offered by the company. As far as considering the growth in automobile industry the services provided by the company plays a vital role in capturing the market share and satisfying the customers. If the service quality of a company increases, the sales and profit will automatically increases. So service quality is a reliable attribute in increasing the popularity of the products as well as the company.
Motorcycle history begins in the second half of the 19th century. Motorcycles descended from the "safety bicycle," a bicycle with front and rear wheels of the same size and a pedal crank mechanism to drive the rear wheel. Despite some early landmarks in its development, motorcycles do lack a rigid pedigree that can be traced back to a single idea or machine. Instead, the idea seems to have occurred to numerous engineers and inventors around Europe at around the same time. In developing world there is a large demand for small, cheap motorcycles in the developing world, and many of the firms meeting that demand now also compete in mature markets.
A motorcycle (also called a motorbike, bike, moto or cycle) is a two or three wheeled motor. Motorcycles vary considerably depending on the task they are designed for, such as long distance travel, navigating through congested urban traffic, cruising, sport and racing, or off-road conditions
Motorcycles are one of the most affordable forms of motorized transport in many parts of the world and, for most of the world’s population, they are also the most common type of motor vehicle. There are around 200 million motorcycles (including mopeds, motor scooters, motorized bicycles, and other powered two and three-wheelers) in use worldwide, or about 33 motorcycles per 1000 peoples and compares to around 590 million cars, or about 91 per 1000 people.
Most of the motorcycles, 58%, are in the developing countries of Asia ‘ Southern and Eastern Asia, and the Asia Pacific countries, excluding Japan ‘ while 33% of the cars (195 million) are concentrated in the United States and Japan. In 2006, China had 54 million motorcycles in use and has an annual production of 22 million units. As of 2002, India, with an estimated 37 million motorcycles/mopeds, was home to the largest number of motorized two wheelers in the world. China came a close second with 34 million motorcycles/mopeds.
The Indian two-wheeler (2W) industry has shown a strong volume growth over the last two-years, having grown by 25% in 2009-10 and 27% in 2010-11 to reach 13.3 million units. This strong double-digit growth has been driven by multiple factors. One reason, of course, is statistical as this period of high double-digit growth has showed up after a rather sedate previous two years, when the two-wheeler industry volumes had shrunk by 5% in 2007-08 and had grown by a mere 5% in 2008-09. In addition to the contribution of pent-up demand, the two-wheeler industry growth over the last two years has been supported strongly by the various underlying factors including India’s rising per capita GDP, increasing rural demand, growing urbanization, swelling replacement demand, increasing proportion of cash sales and the less measurable metric of improved consumer sentiment.
ICRA expects the 2W industry to report a volume CAGR of 10-12% over the next five years to reach a size of 21-23 million units by 2015-16 as it views the fundamental growth drivers – comprising of expected steady GDP growth, moderate two-wheeler penetration levels, favourable demographic profile, under developed public transport system and utility quotient of a 2W – to be intact. Additionally, the entry of new the players in the industry, multitude of new model/ variant launches, growing distribution reach, cheaper ownership costs on a relative basis are expected to be some of the other prime movers for industry growth over the medium term. In ICRA’s view, while the trend in rising commodity prices, hardening interest rates and increasing fuel costs may lead to some moderation in industry growth over the short term, the growth over the medium to long term is expected to remain in double digits.
The two-wheeler automobile industry is continuously striving for synergy between technology and systems to provide products and services that meet the quality, performance and price aspirations of the Indian buyers, as the demand for a more fuel efficient and look-wise appealing two-wheelers, which can also provide a comfortable drives on the rise. The Indian two-wheeler (2W) industry recorded sales volumes of 3.4 million units in Q3, 2011-12, a growth of 11.0% (YoY) but flat (QoQ). Although the YoY volume growth of the industry remained in double digits, the pace of growth during the last quarter was at its lowest gear in the last three years. The deceleration in growth was contributed mainly by the motorcycles segment which grew at a much lower rate of 9.2% (YoY) in Q3, 2011-12; even as the scooters segment continued to post 20%+ (YoY) expansion. Overall, ICRA expects the domestic 2W industry to report a volume growth of 13% in 2011-12 as we expect growth to fade further in Q4, 2011-12 due to base effect.
In an environment where the northward movements of inflation, fuel prices and interest rates have been the nemesis of the Indian automobile industry at large, the 2W industry has been the most resilient reflected in its healthy volume growth of 15.0% (YoY) in 9m, 2011-12. The growth has been supported by various structural positives associated with the domestic 2W industry including favourable demographic profile, moderate 2W penetration levels (in relation to several other emerging markets), under developed public transport system, growing urbanization and expected strong replacement demand, besides moderate share of financed purchases. ICRA expects these strengths, coupled with the OEMs’ thrust on exports, to aid the 2W industry to report a volume CAGR of 10-12% over the medium term to reach a size of 21-23 million units (domestic + exports) by 2015-16.
DEMAND DRIVES
The demand for two-wheelers has been influenced by a number of factors over the past five years. The key demand drivers for the growth of the two-wheeler industry are as follows:
‘ Inadequate public transportation system, especially in the semi-urban and rural areas;
‘ Increased availability of cheap consumer financing in the past 3-4 years;
‘ Increasing availability of fuel-efficient and low-maintenance models;
‘ Increasing urbanization, which creates a need for personal transportation;
‘ Changes in the demographic profile;
‘ Difference between two-wheeler and passenger car prices, which makes two-wheelers the entry level vehicle;
‘ Steady increase in per capita income over the past five years; and
Increasing number of models with different features to satisfy diverse consumer
MARKET CHARACTERISTICS OF TWO WHEELERS
The three main product segments in the two-wheeler category are scooters, motorcycles and mopeds. However, in response to evolving demographics and various other factors, other sub segments emerged, viz. scooterettes, gearless scooters, and 4-stroke scooters. While the first two emerged as a response to demographic changes, the introduction of 4-stroke scooters has followed the imposition of stringent pollution control norms in the early 2000. Besides, these prominent sub-segments, product groups within these sub-segments have gained importance in the recent years.
The Indian two-wheeler industry has undergone a major change over the past 20 years with the preference changing from scooters and mopeds to motorcycles. The scooters segment was the largest till FY1998, accounting for around 42% of the two-wheeler sales (motorcycles and mopeds accounted for 37% and 21 % of the market respectively, that year). However, the motorcycles segment that had witnessed high growth (since FY1994) became larger than the scooter segment in terms of market share for the first time in FY1999. Between FY1996 and 9MFY2005, the motorcycles segment more than doubled its share of the two-wheeler industry to 79% even as the market shares of scooters and mopeds stood lower at 16% and 5%, respectively.
While scooter sales declined sharply by 28% in FY2001,motorcycle sales reported a healthy growth of 20%, indicating a clear shift in consumer preference. This shift, which continues, has been prompted by two major factors: change in the country’s demographic profile, and technological advancements.
Over the past 11-16 years the demographic profile of the typical two-wheeler customer has changed. The customer is likely to be salaried and in the first job. With a younger audience, the attributes that are sought of a two-wheeler have also changed. Following the opening up of the economy and the increasing in exposure levels of this new target audience, power and styling are now as important as comfort and utility.
The marketing pitch of scooters has typically emphasized reliability, price, comfort and utility across various applications. Motorcycles, on the other hand, have been traditionally positioned as vehicles of power and style, which are rugged and more durable. These features have now been complemented by the availability of new designs and technological innovations. Moreover, higher mileage offered by the executive and entry-level models has also attracted interest of two-wheeler customer. Given this market positioning of scooters and motorcycles, it is not surprising that the new set of customers has preferred motorcycles to scooters. With better ground clearance, larger wheels and better suspension offered by motorcycles, they are well positioned to capture the rising demand in rural areas where these characteristics matter most.
Scooters are perceived to be family vehicles, which offer more functional value such as broader seat, bigger storage space and easier ride. However, with the second-hand car market developing, a preference for used cars to new two-wheelers among vehicle buyers cannot be ruled out. Nevertheless, the past few years have witnessed a shift in preference towards gearless scooters within the scooters segment. Motorcycles, offer higher fuel efficiency, greater acceleration and more environment-friendliness. The declining difference in prices of scooters and motorcycles in the past few years, the preference has shifted towards motorcycles. Other than a change in demographic profile, technology and reduction in the price difference between motorcycles and scooters, another factor that has weighed in favour of motorcycles is the high re-sale value they offer. Thus, the customer is willing to pay an up-front premium while purchasing a motorcycle in exchange for lower maintenance and a relatively higher resale value.
KEY PLAYERS OF TWO WHEELER INDUSTRY
‘ Hero motocorp
‘ Bajaj auto
‘ TVS
‘ Honda
‘ Mahindra
‘ Yamaha
‘ Suzuki
The two wheeler segment has played a very important role in giving a push to the automobile industry in India. In fact, the production, sales and exports of the two wheelers is a fair indication of the growing importance of country’s manufacturing economy. An overview of the two wheeler industry makes this clear that the two wheelers are among the most sought after automobiles in India for some time and the trend is likely to stay for a while. The economic growth, need for better conveyance and gradually improving road infrastructure coupled with better credit and financing options, have acted as a major catalyst in encouraging the growth and development of the two wheeler segment in India. Further, the new and improved features on the two wheelers, their stylish and trendy looks and a rage with the country’s youth who form a substantial influence in determining the consumer behavior have ensured that the two wheelers remain on top of the automobile industry’s agenda in India.