Product plan

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  Increasing disposable incomes
  

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  Low operating cost
  

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  Higher fuel efficiency of New-generation motorcycles
  
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  Greater reliability resulting in low maintenance cost
  

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  Low interest rates translating to low financing and acquisition costs hence greater affordability.
  

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  Inadequate urban & rural public transportation infrastructure
  

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  Ease of use in congested city centers
  

Key Market Trends

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  Eclipse of scooter segment
  

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  Emergence of new motorcycle sub-segments
  

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  Upto 110cc
  
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  125 cc (fastest growing)
  
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  150cc+
  

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  Shrinking product life-cycles
  

With the two-wheeler market, especially the motorcycle market, becoming extremely competitive and the life cycle of products getting shorter, the ability to offer new models to meet fast changing customer preferences has become imperative. In this context, the ability to deliver newer products calls for sound technological backing and this has become one of the critical differentiating factor among companies in the domestic market. Thus, the players have increased their focus on research and development with some having indigenously developed new models as well as improved technologies to cater to the domestic market. Further, with exports being one of the thrust areas for some Indian two-wheeler companies, the Indian original equipment manufacturers (OEMs) have realized the need to upgrade their technical capabilities. These relate to three main areas: fuel economy, environmental compliance, and performance.

The 150+ cc segment, which constitutes 10% of the motorcycle segment, has not seen a growth which the other segments (110cc, 125cc) have seen over past 3-4 years. Over the past 3-4 years, the share of 125 cc (executive) segment increased significantly (refer chart 3).

Taking into account the key market trends, it is forecasted that the same growth (as in 125cc) will be seen in 150cc+ segment in the years to come.

The threat of new entrants is high, because of the high capital investment (as in plant and machinery) required in the industry. The market runs on high economies of scale and on high economies of scope. However, threat of new products from competitors is high. Owning a strong distribution network is important and is very costly. All these make the barrier high enough to be a deterrent for new entrants. As mentioned in the previous paragraph, the increasing demand for performance segment bikes have resulted companies building their technological and R&D capability to deliver more differentiated products. Category attractiveness is high since it is an emerging niche. Since Bajaj has a good brand name it can make it difficult for new competitors to enter this segment.

Buyers in automobile market have more choice to choose from and the increasing competition is driving the bargaining power of customers uphill. With more models to choose from in almost all categories, the market forces have empowered the buyers to a large extent.

Suppliers of auto components are fragmented and are extremely critical for this industry since most of the component work is outsourced. Proper supply chain management is a costly yet critical need.

Company and Competitor Analysis

Bajaj Auto Ltd. (BAL) is one of the oldest and the largest manufacturer of automobiles in India and has been the market leader in scooters. Bajaj Auto is the flagship of the Bajaj Group of Companies. Bajaj is currently India's largest two- and three-wheeler manufacturer and one of the biggest in the world. BAL is currently outperforming the industry growth rate in two-wheeler segment with 32% growth in year 2004-05 v/s industry growth of 19% (Chart C). Market share in Motorcycles is improving with every passing year. It has also increased from 28% in 2004-05 to 31% in 2005-06. Annual turnover for the year 2005-06 is Rs. 81.06 billion v/s Rs. 63.23 billion a year before - an increase of 28% which is very healthy. BAL has significant presence in all the three basic segments - Price Segment, Value Segment and Performance Segment - and has been showing increased sales in all the segments over years.

SWOT Analysis

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  Highly experienced management
  
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  Product design and development capabilities
  
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  Extensive R & D focus
  
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  Widespread distribution network
  
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  High performance products across all categories
  
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  High export to domestic sales ratio
  
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  Great financial support network (For financing the automobile)
  

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  Hasn't employed the excess cash for long
  
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  Not a global player in spite of huge volumes.
  
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  Not a globally recognizable brand (unlike the JV partner Kawasaki)
  

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  The competition catches-up any new innovation in no time.
  
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  Threat of cheap imported motorcycles from China.
  
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  Margins getting squeezed from both the directions (Price as well as Cost)
  
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  TATA Ace is a serious competition for the three-wheeler cargo segment.
  

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  Double-digit growth in two-wheeler market.
  
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  Untapped market above 180 cc in motorcycles.
  
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  More maturity and movement towards higher-end motorcycles.
  
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  The growing gearless trendy scooters and scooterette market.
  
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  Growing world demand for entry-level motorcycles especially in emerging markets.
  

Hero Group, the world’s largest bicycle manufacturers and the Honda Motor Company of Japan. Today it is the world’s largest two-wheeler manufacturer. Hero Group belongs to the Munjal family and came into existence in 1956. It manufactured bicycle components in the early 1940’s and later became the world’s largest bicycle manufacturer. HHML manufactures a range of motorcycles with brands like CD Dawn, Splendor, Passion, CBZ, Karizma, Ambition and Achiever. It is the market leader in two-wheelers and its Splendor range of bikes is the largest selling motorcycle in the country.

Hero Honda is seen as the major competitor for Bajaj’s new product in this category, where Hero Honda Karizma has a major share.

In the 150cc+ segment Hero Honda competes with its brands like: CBZ, CBZ extreme (new), Karizma. Karizma has close to 14% market share in the premium segment.

TVS Motors is the third largest company in the two-wheeler industry with a market share of 16%. Infact, it is the only Indian company without a foreign collaboration in the two-wheeler industry. When the company opted out of the collaboration with Suzuki in 2002, many believed that TVS was headed towards extinction. But the company proved the doomsayers wrong and came out with a very successful `TVS Victor'. However, since then growth has slowed. However, TVS managed to achieve a CAGR of 11%. Thus while competitors were cashing on this boom, TVS' market share was declining due to lack of a 4 stroke model in its stable. This fall has been somewhat restricted with the introduction of `Victor' in 2003. Also, this year they have introduced Apache in the 150cc+ segment

Honda Motors and Scooters India( HMSI) ( Unicorn )

Honda Motor and Scooters India (HMSI) had launched its first motorcycle in India in 2004 — the four stroke 150cc Unicorn, priced at Rs53,000.