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CHAPTER – I

INTRODUCTION

Sr.No. Title Page No.

1.1 World History Of Two Wheeler 2 - 7

1.2 Motorcycle Engineering 8 - 17

1.3 Indian Two Wheeler Industry 18 - 24

1.4 Two Wheelers; Market Size & Growth 25 - 27

1.5 Segmental Market Share 28 - 33

1.6 Trends In Two Wheelers Industry In India 34 - 42

1.7 Two Wheeler Industry In Pune 43 - 46

1.8 Significance of Study 47 - 58

1.9 Objectives Of The Research Work 59

1.10 Scope of The Study 60

1.11 Hypothesis 61 – 62

1.12 Statistical Methods 63

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Introduction:

1.1. World History of Two Wheelers:

The bicycle is a two wheeled, lightweight machine, which is propelled by human power. It

is efficient, cheap, easily manufactured and one of the world’s most popular form of

transport.

The first pedal driven bicycle was built in Scotland in 1839. (Source:- Foale, Tony (2006).

Motorcycle Handling and Chassis Design. Tony Foale Designs.)

Since then, the basic design of a frame, wheels, brakes, handlebars and saddle has been

gradually improved, with the addition of chain, gear system and pneumatic tyres (Tyres

inflated with air).

The recent invention of the mountain bike (All Terrain Bike) has an important

development with its’ strong, rugged frame, wide tyres and 21 gears, a mountain bike

enables riders to reach rough and hilly areas that were previously inaccessible to cyclists.

Although all bicycles are made up of some basic components, they can vary greatly in

design, a racing bike, such as Eddy Merchx Model, with its’ light frame, steep head and

seat angles is built for speed. Its design forces the riders to adopt the ‘Aerotuck’ a

crouched, aerodynamic position. While a touring bike resembles the racing bike in many

respects. It is designed for comfort and stability on long distance journeys.

Touring bikes are characterized by more relaxed frame angles, heavy chain stays and

supports the rear panniers and a long wheel based (The distance between the wheel axes)

for reliable handling.

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All round bicycles known as ‘Hybrids’ combine with the lightweight and speed of sports

bike with the rugged durability of mountain bikes. Bicycles that are not designed for

conventional roads use include time –trial bikes that have a short head tube, sloping top

tube, ‘aero’ handle bars and aerodynamic tubing.

Most ‘Human Powered Vehicles’ (HPVs) are recumbent – the rider has a recumbent

position, which maximizes power output and minimize drag (Resistance). Essential to the

safety of all riders are helmets and both front and rear lights, locks protect against theft.

Rear wheel consists of:-

� Tyre � Hub

� Spokes � Rim

Bicycle frame consists of:-

� Saddle � Seat Post � Seat Post quick release post

� Seat stay � Top tube � Rear

� Seat tube � Bottom cup � Rear drop - outs

� Top race � Steered tube � Bottom bracket shell

� Down tube � Bottom race � Front derailleur

� Head tube � Cable guide � Expander bolt

� Straddle wire � Front cantilever brake � Handle bar system

Gear system:-

� Top strap � Lock washer � Top clip

� Pedal � Rear derailleur � Freewheel lock nut

� Chain � Jockey wheel � Fixed cup

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� Adjustable cup � Left crank arm

In general:-

� 24 tooth chain ring � 17 tooth sprocket � 23 tooth sprocket

� Spoke guard � Caged ball bearing � Crank bolt

� Gear shift � Brake lever � Rear brake cable

� Front brake cable

1936 Schwinn Exelsior C Model

(Source:- Foale, Tony (2006). Motorcycle Handling and Chassis Design. Tony Foale Designs.)

The Motorcycle

The motorcycle has evolved from a motorized cycle – a basic bicycle with an engine into a

sophisticated, high performance machine.

The Britannica Encyclopedia describes a motorcycle as a bicycle or tricycle propelled by

an internal-combustion engine (or, less often, by an electric engine).

A motorcycle (also called a motorbike, bike, or cycle) is a single-track, two-wheeled

motor vehicle. Motorcycles vary considerably depending on the task for which they are

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designed, such as long distance travel, navigating congested urban traffic, cruising, sport

and racing, or off-road conditions.

Motorcycles are one of the most affordable forms of motorised 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 and other powered two and three-wheelers) in use worldwide, or about 33

motorcycles per 1000 people. (Setright, L.J.K. The Guinness book of motorcycling facts and feats.

Guinness Superlatives. pp. 8–18. ISBN 0851122000, 9780851122007. )

This 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. As of 2002, India with an estimated 37

million motorcycles/mopeds was home to the largest number of motorised two wheelers in

the world. China came a close second with 34 million motorcycles/mopeds.

The first internal combustion, petroleum fueled motorcycle was the Petroleum Reitwagen.

It was designed and built by the German inventors Gottlieb Daimler and Wilhelm

Maybach in Bad Cannstatt, Germany in 1885. This vehicle was unlike either the safety

bicycles or the boneshaker bicycles of the era in that it had zero degrees of steering axis

angle and no fork offset, and thus did not use the principles of bicycle and motorcycle

dynamics developed nearly 70 years earlier. Instead, it relied on two outrigger wheels to

remain upright while turning. The inventors called their invention the Reitwagen ("riding

car"). It was designed as an expedient testbed for their new engine, rather than a true

prototype vehicle. Many authorities who exclude steam powered, electric or diesel two-

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wheelers from the definition of a motorcycle, credit the Daimler Reitwagen as the world's

first motorcycle.

If a two-wheeled vehicle with steam propulsion is considered a motorcycle, then the first

was the French Michaux-Perreaux steam bicycle of 1868. This was followed by the

American Roper steam velocipede of 1869, built by Sylvester Howard Roper of Roxbury,

Massachusetts. Roper demonstrated his machine at fairs and circuses in the eastern U.S. in

1867, and built a total of 10 examples.

In 1894, Hildebrand & Wolfmüller became the first series production motorcycle, and the

first to be called a motorcycle (German: Motorrad). In the early period of motorcycle

history, many producers of bicycles adapted their designs to accommodate the new

internal combustion engine. As the engines became more powerful and designs outgrew

the bicycle origins, the number of motorcycle producers increased.

In 1901, the Werner Bothers established the most viable location for the engine by

positioning it low in the center of the chassis. The new Werner became the basis for the

modern motorcycle. Motorcycles are used for many purposes – for commuting, delivering

messages, touring and racing and different machines have been developed according to the

demands of different types of riders.

The Vespa scooter for instance, which is small wheeled, economical and easy to ride was

designed to meet the needs of the commuters. Sidecars provided transport for the family

until the arrival of cheap cars, caused their popularity to decline.

Enthusiastic riders generally favour larger capacity machines that are capable of greater

performance and offer more comfort; four cylinder machines have been common since

the Honda CB 750 arrived in 1969. Despite advances in motorcycle technology, many

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riders are attracted to the traditional looks of motorcycles like the twin cylinder Harley

Davidson Glides exploit the style of the classic American V-twin engine, where the

cylinders are placed in V-formation.

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1.2. Motorcycle Engineering:-

Motorcycle construction is the engineering, manufacturing, and assembly of components

and systems for a motorcycle which results in the performance, cost, and aesthetics

desired by the designer. With some exceptions, construction of modern mass-produced

motorcycles has standardized on a steel or aluminum frame, telescopic forks holding the

front wheel, and disc brakes. Some other body parts, designed for either aesthetic or

performance reasons may be added. A petrol powered engine typically consisting of

between one and four cylinders (and less commonly, up to eight cylinders) coupled to a

manual five- or six-speed sequential transmission drives the swingarm-mounted rear

wheel by a chain, driveshaft or belt.

1901 Werner Motorcycle

(Source:- Seeley, Alan (2004). The Motorcycle Book: Everything You Need to Know about Owning,

Enjoying, and Maintaining Your Bike. MotorBooks/MBI Publishing Company.)

The first Werner motorcycle looks like a bicycle. It was introduced in 1901. It consist

various component parts like:

� Vacuum Operated inlet valve

� Bicycle type saddle

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� Pulley with rear brake

� Fuel tank

� Electric ignition control

� Inlet –over exhaust (IOE) engine

� Alloy crankcase

� Twisted rawhide drive belt

� Cat iron cylinder barrel

Until World War I, the largest motorcycle manufacturer in the world was Indian,

producing over 20,000 bikes per year. By 1920, this honour went to Harley-Davidson,

with their motorcycles being sold by dealers in 67 countries. By the late 1920s or early

1930s, DKW took over as the largest manufacturer.

After World War II, the BSA Group became the largest producer of motorcycles in the

world, producing up to 75,000 bikes per year in the 1950s. German company NSU held

the position of largest manufacturer from 1955 until the 1970s.

In the 1950s, streamlining began to play an increasing part in the development of racing

motorcycles and the "dustbin fairing" held out the possibility of radical changes to

motorcycle design. NSU and Moto Guzzi were in the vanguard of this development both

producing very radical designs well ahead of their time. NSU produced the most advanced

design, but after the deaths of four NSU riders in the 1954–1956 seasons, they abandoned

further development and quit Grand Prix motorcycle racing. Moto Guzzi produced

competitive race machines, and by 1957 nearly all the Grand Prix races were being won

by streamlined machines.] The following year, 1958, full enclosure fairings were banned

from racing by the FIM in the light of the safety concerns.

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From the 1960s through the 1990s, small two-stroke motorcycles were popular worldwide,

partly as a result of East German Walter Kaaden's engine work in the 1950s.

Today, the motorcycle industry is mainly dominated by Japanese companies such as

Honda, Kawasaki, Suzuki, and Yamaha, although Harley-Davidson and BMW continue to

be popular and supply considerable markets. Other major manufacturers include Piaggio

group of Italy, KTM, Triumph and Ducati.

In addition to the large capacity motorcycles, there is a large market in smaller capacity

(less than 300 cc) motorcycles, mostly concentrated in Asian and African countries. An

example is the 1958 Honda Super Cub, which went on to become the biggest selling

vehicle of all time, with its 60 millionth unit produced in April 2008. Today, this area is

dominated by mostly Indian companies with Hero Honda emerging as the world's largest

manufacturer of two wheelers. Other major producers are Bajaj and TVS Motors. For

example, its Splendor model has sold more than 8.5 million to date.

1963 Vespa Grand Scooter

It was introduced in 1963, which has small wheel than the motorcycle and was easy to

ride. It consists following elements:-

� Throttle � Front brake lever � Twist grip gear change

� Clutch lever � Head light � Horn

� Shock absorber � choke � petrol tap

� foot brake � drum brake � rubber foot mat

� Centre stand � Silencer � Kick starter

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� tail light � cooling grille � engine cover

� Monocoque chassis � Seat strap � Seat

1969 Honda CB 750

In 1969, Honda CB was the newly introduced with high technology and modifying the

existing model. It was designed according to the customers demand. It consists of the

following components like:-

� Mirror � Front brake lever � Indicator

� Telescope fork � Mudguard stay � Disc brake

� Clutch cover � Passenger footrest � Heat shield

� Exhaust pipe � Tail light � Shock absorber

� Seat strap � Oil Tank � Seat

Harley Davidson FLHS Electra Glide

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(Source:- Seeley, Alan (2004). The Motorcycle Book: Everything You Need to Know about Owning,

Enjoying, and Maintaining Your Bike. MotorBooks/MBI Publishing Company.)

This bike was introduced in America, which has traditional look. It consists of following

components:-

� Front brake lever � Exhaust pipe � Hand grip

� Gear box � Passenger foot rest � Mirror

� Exhaust clamp � Crash bar � Clutch cable

� Disk brake � Cast alloy wheel � Mud guard

� Fuel tank � Air filter � Manufacturer’s logo

The motor cycle chassis is the main body of the motor cycle, to which the engine is

attached. Consisting of the frame, wheels suspension and brakes, the chassis performs

various functions. the frame, which is built from steel or alloy, keeps the wheels in line to

maintain the handling of the motorcycle and serves as a structure for mounting other

components. The engine and the gearbox unit are bolted into place, while items such as

the seat, the mud guard and the fairing are more easily removable. Suspension and

cushions the rider from irregularities in the road surface. In most suspension systems, coil

springs controlled by an oil damper are usually incorporated in a telescopic fork; the rear

employs a pivoted swing arm. The suspension also helps to retain maximum contact

between the tyres and the road, necessary to effective braking and steering. Drum brakes

were common until the 1970s, but modern motorcycles use disc brakes, which are more

powerful.

� Headstock � Foot rest hanger � Brake master cylinder

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� Brake pedal � Clutch cable � Swing arm pivot

� Hydraulic brake hose � Brake torque arm � Telescopic fork leg

� Fork slide � Light alloy wheel � Disc brake caliper

� Axle � Disc brake � Floating disc brake

� Axle adjustor Radiator Exhaust pipe

� Engine cover � Rear sub frame � Engine mounting bolt

� V 4 engine unit � Shock absorber � Oil cooler

� Radiator pipe � Multiplate clutch � Oil level windows

� Oil sump � Braking tube Engine mounting plate

� Body work mounting

point

� Shock absorber top

mounting

� Square section steel

tubing

Types of tyres

1. Racing Slick Tyres: - In this type, there is no fixed pattern.

2. Tubeless Sports Tyres:- It has radial groove

3. Trail Tyres:- It consists of knobby tread pattern

4. General Use Tyre: - This tyre has hard wearing rubber compound.

Motor Cycles Engines

Motorcycle engines must be light weight and compact, and have a good power output.

They have between one and six cylinders, can be cooled by air or water, and the capacity

of the combustion chamber varies from 59 CC (Cubic Centimeters) to 1500 cc. two types

of internal combustion engines are common; the four stroke, which is used in cars and the

two strokes. A basic two stroke engine has only three moving parts – the crankshaft, the

connecting rod, and the piston- but the power output is high. The engine fires every two

strokes (rather than every four), giving a ‘Power Stroke’ every revolution. Power is

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conveyed from the engine to the rear wheel by the transmission system. This usually

consists of a clutch; a gearbox and a final drive system. Clutches are multiple devices,

which run in oil. Gearboxes have a five or six speeds and operated by foot pedal. Shaft

and belt drives systems are used in some cases, but chain drive to the rear wheel is most

common.

Exterior of Standard Two - Stroke Engine

It consists of following sub components like:-

� Spark Plug Cap � Fuel Tap � Carburetor Mounting

� Kick Starter � Carburetor � Gear lever

� Engine cover � Clutch Activation Arm � Case Screw

� Exhaust Port � Cooling Fin � Cylinder Head

(Source:- Walker, Mick (2006). Motorcycle: Evolution, Design, Passion. JHU Press.)

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Multiple Clutch

It consists of:-

� Fibre Plate

� Outer clutch drum connected to the inner clutch drum

� Springs force plates together

� Metal plate

� Key locks, fibre plate which is connected to the outer drum

� Straight cut primary drive gear

Transmission System

It consists of:-

� One two six gears

� Gear lever selector shaft

� Spines for mounting gear lever

� Bearing

� Output shaft

� Input shaft

� Spines for mounting final drive sprocket

� Gear tooth

� Selector fork

� Aluminum outer casing

� Copper oil feed pipe

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Fuel economy

Motorcycle fuel economy varies greatly with engine displacement and riding style ranging

from a low of 29 mpg-US (8.1 L/100 km; 35 mpg-imp) reported by a Honda VTR1000F rider,

to 107 mpg-US (2.20 L/100 km; 129 mpg-imp) reported for the Verucci Nitro 50 cc Scooter.

A specially designed Matzu Matsuzawa Honda XL125 achieved 470 mpg-US

(0.50 L/100 km; 560 mpg-imp) "on real highways - in real conditions." Due to lower engine

displacements (100 cc–200 cc), motorcycles in developing countries offer good fuel

economy.

In the Indian market, the second best selling company, Bajaj, offers two models with

superior fuel economy: XCD 125 and Platina. Both are 125 cc motorbikes with a

company-claimed fuel economy of 256 mpg-US (0.919 L/100 km; 307 mpg-imp) and

261 mpg-US (0.901 L/100 km; 313 mpg-imp), respectively.

Electric motorcycles

Very high fuel economy equivalents can be derived by electric motorcycles. Electric

motorcycles are nearly silent, zero-emission electric motor-driven vehicles. Operating

range and top speed suffer because of limitations of battery technology. Fuel cells and

petroleum-electric hybrids are also under development to extend the range and improve

performance of the electric motors.

Motorcycle dynamics

Different types of motorcycles have different dynamics and these play a role in how a

motorcycle performs in given conditions. For example, one with a longer wheelbase

provides the feeling of more stability by responding less to disturbances. Motorcycle tyres

have a large influence over handling.

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Motorcycles must be leaned in order to make turns. This lean is induced by the method

known as countersteering, in which the rider steers the handlebars in the direction opposite

of the desired turn. Because it is counter-intuitive this practice is often very confusing to

novices—and even to many experienced motorcyclists.

Short wheelbase motorcycles, such as sport bikes, can generate enough torque at the rear

wheel, and enough stopping force at the front wheel, to lift the opposite wheel off the

road. These actions, if performed on purpose, are known as wheelies and stoppies

respectively. If carried past the point of recovery the resulting upset is known as an "endo"

(short for "end-over-end"), or "looping" the vehicle.

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1.3. Indian Two Wheeler Industry

The four stroke engine of the motorcycles is fuel efficient and is the main reason for the

growth of motorcycle segment in India. The motorcycle market share is about 18.50% of

the total two wheeler market in India. Three – fourths of the total exports in the two

wheeler automobile industry are made in the motorcycle segment. Exports are made

mainly to South East Asian and SAARC nations.

In India, the automobile industry is one of the largest segments of economic activity. It not

only provides the services but also employment to a very large amount of the employable

population. There is growing realization about potential contribution of automobile

industries both in developed and developing countries. It is rightly considered to be the

backbone of any developed economy. The developing economies like India, China,

Pakistan, Sri Lanka, Malaysia and many other South Asian countries have considered

automobile industry as an important sector of their economy. In the present era, it is

realized that automobile industry contributes to industrial development of a country in

several ways. It is assembling and harnessing the various inputs, bearing the risks,

innovative and imitating techniques of production to reduce the cost and increase its

quality and quantity, expanding the horizons of the market and co-ordination and

managing the manufacturing units at various levels. Automobile industry has grown in the

country in terms of production, exports quality and is now gearing to accept the new

challenges. It has already acquired a large production capacity and aims at achieving the

target of 50% of the total exports from the country.

When the economic reforms were initiated in 1991, there was a tremendous amount of

uncertainty as to its impact on economy and industry. Industrialization is the central

dynamic force for most countries. It has been a key growth objective of India’s planned

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economy, with heavy investments being made in this sector. Labor productivity is the

highest in manufacturing industries. This has assisted in raising national income at a

faster pace. The importance of industrialization in economic development is crucial for a

growing economy with a large population like India therefore prosperity through

industrialization has been a long term strategy for the Indian government. Due to large

population, it has made India impoverished and hence industrialization is a synonym for

economic development as a means to conquer poverty and provide employment.

Industrialization enables India to utilize its resources optimally, diversify the economic

base, raise the living standard of people and attain balanced between regional

developments. Automobile industry plays an important role in the Indian economy. As

they are labour intensive and create job opportunities. These industries offer a

productivity of capital, as they have low investment per worker. They help in dispersal of

job, rural development and the decentralization of economic power. All this is required to

increase and disperse economic growth. Automobile companies also support

entrepreneurial talent and skills, help in developing innovative and appropriate indigenous

technology, providing dynamism and contributing to competition. Therefore these

industries are supported by the government and have been actively encouraged. Textile,

Engineering, paper, sugar, leather and chemicals have scattered throughout the country.

Heavy industries like iron and steel contributes nearly 70% of the toxic wastes released

but only 20% of industrial output.

In India Automobile industry witnessed tremendous change in the 1980’s after nearly two

decades of stagnation. These changes affected all sector of the auto industry like impact

on the passenger car sector, two wheeler and LCV sector. A number of collaboration

agreements for production of two wheelers are taking place in the auto industry in the

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80’s. Hero Honda, Ind -Suzuki, Piaggio AP Scooters (Vespa PL 170), Lohia, Piaggio,

Kinetic Honda, Bajaj Kawasaki, Kelvinator Garelli, Chamundi Motors Peugot are some of

the collaborations in the two wheeler sector for manufacture of scooters, motor cycles and

mopeds. It is estimated that nearly 50% component manufactures have signed agreements

with Japanese firms for the manufacture of automobile components. The changes taking

place in the automobile industry beginning with collaborations in the year after 1981 due

to the liberal policy of the government in allowing foreign collaborations and the

reductions in customs duties.

The two-wheeler industry in India has grown rapidly in the country since the

announcement of the process of liberalization in 1991 by the then finance minister Dr.

Manmohan Singh, now Prime Minister of India.

Previously, there were only a handful of two-wheeler models available in the country.

Currently, India is the second largest producer of two-wheelers in the world. It stands next

only to China and Japan in terms of the number of two-wheelers produced and the sales of

two-wheelers respectively. In the year 2005-2006, the annual production of two-wheelers

in India stood at around 7600801 units.

The trend of owning two-wheelers is due to a variety of facts peculiar to India. One of the

chief factors is poor public transport in many parts of India. Additionally, two-wheelers

offer a great deal of convenience and mobility for the Indian family.

Bajaj auto began trading in imported Vespa Scooters in 1948. Meanwhile Automobile

Products of India (API) commenced production of scooters in the country in the early 50's.

Until 1958, API and Enfield were the only producers of two-wheelers in India. However,

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Bajaj signed a technical collaboration in 1960 with Piaggio of Italy to produce Bajaj

Scooters. This deal expired in 1971.

The condition of motorcycle manufacturers was no different. Until the mid 80's, there

were only three major motorcycle manufacturers in India namely Rajdoot, Escorts, and

Enfield. The two-wheeler market was opened to foreign manufacturers in the mid 80's.

The industry, which had seen a smooth ride before, faced fierce foreign competition.

Motorcycle companies like the Yamaha, Honda, and Kawasaki, set up shop in India in

collaboration with various Indian two-wheeler companies. Companies like Escorts,

Rajdoot and Jawa faced immense competition from smaller 100 cc Japanese technology

motorbikes. Bikes manufactured by Hero Honda, the only company manufacturing four-

stroke bikes at that time, gained massive popularity.

In the mid 80's, Kinetic introduced a variomatic gearless scooter in collaboration with

Honda. This scooter became instantly popular with the younger generation, especially

people who found it difficult to use geared scooters. The introduction of scooterettes

created another segment for people such as women and teenagers who could not get used

to driving either motorcycles or gearless scooters. Many companies such as Kinetc, TVS,

and Hero also started manufacturing mopeds that proved immensely popular with people

who wanted a simple riding machine.

The change in the government's policy owning to pollution control norms and the Kyoto

agreement saw the phasing out of two stroke two-wheelers from production. Currently

there are around 10 two-wheeler manufacturers in the country, they being Bajaj, Hero,

Hero Honda, Honda, Indus, Kinetic, Royal Enfield, Suzuki, TVS, and Yamaha.

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The latest trend in the two-wheeler market is the introduction of electrically operated

vehicles from a range of manufacturers such as Indus and Hero. These can be recharged

from convenient household electrical points. The only disadvantage is speed, which is

restricted to around 25 miles per hour.

Currently, the motorcycle market is witnessing a demand for higher volume engines.

Previously, the 100 cc bikes were very popular owning to the high fuel efficiency offered.

However, the market is maturing fast. Sensing this movement, Bajaj has introduced the

Bajaj Pulsar, with 150, 180 and 200 cc engines with Dual Twin Spark Ignition (DTSi)

technology.

In today`s highly competitive environment, companies need an extra edge, and many have

found that high quality customer service can make the difference in winning and retaining

customers or losing them. Research shows that organizations, which employ customer

satisfaction, research that goes beyond customer satisfaction, loyalty and retention

measurements to identifying and measuring perceived customer value can deliver much

more return for their research investment. By determining which factors produce the

highest perceived value by customers, research can provide the knowledge to both correct

deficiencies in today`s customer service and assist in building high value strategic,

customer service offerings for the future. It is applicable in auto sector also. So on this

background, it is necessary to study that how the dealers, authorized agents, financers and

service center owners of automobile sector acquire new customers with the retention of

old customers. The study shows how to handle the customers and make them satisfied,

how the marketing of two wheeler is getting increasingly aggressive and customer

oriented. Pune is a new upcoming city in Maharashtra. It was known as ‘City of bicycles’

around 20-25 years back. Now it has turned into a ‘Commercial City’, due to extensive

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industrial development, establishment of companies, corporate offices, Banks etc in recent

times. It is called ‘Educational Hub’ due to the establishment of various educational

institutes and I. T. Parks. Therefore, Pune city is selected for study.

The Indian automotive industry consists of five segments: commercial vehicles; multi-

utility vehicles & passenger cars; two-wheelers; three-wheelers; and tractors. With

5,822,963 units sold in the domestic market and 453,591 units exported during the first

nine months of FY2005 (9MFY2005), the industry (excluding tractors) marked a growth

of 17% over the corresponding previous. The two-wheeler sales have witnessed a

spectacular and surprising growth trend since the mid nineties which is worth noticeable.

Contd…

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1.4. Two Wheelers: Market size and growth

In terms of volume, 4,613,436 units of two-wheelers were sold in the country in

9MFY2005 with 256,765 units exported. The total two-wheeler sales of the Indian

industry accounted for around 77.5% of the total vehicles sold in the period mentioned.

Graph No.1

Segmental Growth of the Indian Two Wheeler Industry

(FY1995-2004)

(Source:- "Two Wheelers: Sales". Automobileindia.com. http://www.automobileindia.com/two-

wheelers/statistics/sales.html)

After facing its worst recession during the early 1990s, the industry bounced back with a

25% increase in volume sales in FY1995. However, the momentum could not be sustained

and sales growth dipped to 20% in FY1996 and further down to 12% in FY1997. The

economic slowdown in FY1998 took a heavy toll of two-wheeler sales, with the year-on-

year sales (volume) growth rate declining to 3% that year. However, sales picked up

thereafter mainly on the strength of an increase in the disposable income of middle-

income salaried people (following the implementation of the Fifth Pay Commission's

recommendations), higher access to relatively inexpensive financing, and increasing

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availability of fuel efficient two-wheeler models. Nevertheless, this phenomenon proved

short-lived and the two-wheeler sales declined marginally in FY2001. This was followed

by a revival in sales growth for the industry in FY2002. Although, the overall two-wheeler

sales increased in FY2002, the scooter and moped segments faced de-growth. FY2003

also witnessed a healthy growth in overall two-wheeler sales led by higher growth in

motorcycles even as the sales of scooters and mopeds continued to decline. Healthy

growth in two-wheeler sales during FY2004 was led by growth in motorcycles even as the

scooters segment posted healthy growth while the mopeds continued to decline. Figure 1

presents the variations across various product sub-segments of the two-wheeler industry

between FY1995 and FY2004.

Demand Drivers:-

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 5 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 needs.

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While the demand drivers listed here operate at the broad level, segmental demand is

influenced by segment-specific factors.

Market Characteristics:-

Demand

Segmental Classification and Characteristics:-

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. Examples include 125cc

motorcycles, 100-125 cc gearless scooters, etc. The characteristics of each of the three

broad segments are discussed in Table 2.

Table - 2

Two-Wheelers: Comparative Characteristics

Scooter Motorcycle Moped

Price*(Rs. as in January 2005) > 22,000 > 30,000 > 12,000

Stroke 2-stroke, 4-stroke Mainly 4-stroke 2-stroke

Engine Capacity (cc) 90-150 100, 125, > 125 50, 60

Ignition Kick/Electronic Kick/Electronic Kick/Electronic

Engine Power (bhp) 6.5-9 7-8 and above 2-3

Weight (kg) 90-100 > 100 60-70

Fuel Efficiency (kms per litre) 50-75 50-80+ 70-80

Load Carrying High Highest Low

*Ex-showroom Pune . Compiled by INGRES

****

28

1.5. Segmental Market Share

The Indian two-wheeler industry has undergone a significant change over the past 10

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.

Graph - 2

Trends in Segmental Share in Industry Sales (FY1996-9MFY2005)

(Source:- "Two Wheelers: Sales". Automobileindia.com. http://www.automobileindia.com/two-

wheelers/statistics/sales.html)

29

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

demographical profile and technological advancement.

Over the past 10-15 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 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 emphasised 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

30

towards gearless scooters (that are popular among women) within the scooters segment.

Motorcycles, offer higher fuel efficiency, greater acceleration and more environment-

friendliness. Given the declining difference in prices of scooters and motorcycles in the

past few years, the preference has shifted towards motorcycles. Besides 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.

Supply

Manufacturers

As the following graph indicates, the Indian two-wheeler industry is highly concentrated,

with three players-Hero Honda Motors Ltd (HHML), Bajaj Auto Ltd (Bajaj Auto) and

TVS Motor Company Ltd (TVS) - accounting for over 80% of the industry sales as in

9MFY2005. The other key players in the two-wheeler industry are Kinetic Motor

Company Ltd (KMCL), Kinetic Engineering Ltd (KEL), LML Ltd (LML), Yamaha

Motors India Ltd (Yamaha), Majestic Auto Ltd (Majestic Auto), Royal Enfield Ltd (REL)

and Honda Motorcycle & Scooter India (P) Ltd (HMSI).

Contd…

31

Graph - 3

Shares of Two-Wheeler Manufacturers in Industry Sales (FY2000-9MFY2005)

(Source:- "Two Wheelers: Sales". Automobileindia.com. http://www.automobileindia.com/two-

wheelers/statistics/sales.html)

Although the three players have dominated the market for a relative long period of time,

their individual market shares have undergone a major change. Bajaj Auto was the

undisputed market leader till FY2000, accounting for 32% of the two-wheeler industry

volumes in the country that year. Bajaj Auto dominance arose from its complete hold over

the scooter market. However, as the demand started shifting towards motorcycles, the

company witnessed a gradual erosion of its market share. HHML, which had concentrated

on the motorcycle segment, was the main beneficiary, and almost doubled its market share

from 20% in FY2000 to 40% in 9MFY2005 to emerge as the market leader. TVS, on the

other hand, witnessed an overall decline in market share from 22% in FY2000 to 18% in

9MFY2005. The share of TVS in industry sales fluctuated on a year on year basis till

FY2003 as it changed its product mix but has declined since then.

32

Technology

Hitherto, technology transfer to the Indian two-wheeler industry took place mainly

through: licensing and technical collaboration (as in the case of Bajaj Auto and LML); and

joint ventures (HHML).

A third form - that is, the 100% owned subsidiary route - found favour in the early 2000s.

A case in point is HMSI, a 100% subsidiary of Honda, Japan. Table 2 details the alliances

of some major two-wheeler manufacturers in India.

Besides the below mentioned technology alliances, Suzuki Motor Corporation has also

followed the strategy of joint ventures (SMC reportedly acquired equity stake in Integra

Overseas Limited for manufacturing and marketing Suzuki motorcycles in India).

Table - 3

Technological tie-ups of Select Players

Company Nature of Alliance Company Product

Bajaj Auto

Technological tie-up Kawasaki Heavy Industries

Ltd, Japan

Motorcycles

Technological tie-up Tokya R&D Co Ltd, Japan Two-wheelers

Technological tie-up Kubota Corp, Japan Diesel

Engines

HHML Joint Venture Honda Motor Co, Japan Motorcycles

KEL Technological tie-up Hyosung Motors & Machinery

Inc

Motorcycles

KEL

Tie up for

manufacturing

and distribution

Italjet, Italy Scooters

LML Technological tie-up Daelim Motor Co Ltd Motorcycles

Hero

Motors

Technological tie-up Aprilia of Italy Scooters

Compiled by INGRES

33

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 realised the need to upgrade their technical capabilities. These relate to three main

areas: fuel economy, environmental compliance, and performance. In India, because of

the cost-sensitive nature of the market, fuel efficiency had been an interest area for

manufacturers.

It is not only that the OEMs are increasing their focus on in-house R&D, they also

provide support to the vendors to upgrade the technology and also assist them striking

technological alliances.

*****

34

1.6. TRENDS IN THE TWO WHEELERS INDUSTRY IN INDIA

Companies raising capacity to meet the growing demand

All the major two-wheeler manufacturers, viz. Bajaj Auto, HHML, TYS, HMSI and

others, have increased their manufacturing capacities in the recent past. The total capacity

of these players stood at 7.8 million units per annum (FY2003) as against total market

sales of 3.8 million units in FY2002. Most of the players have either expanded capacity,

or converted their existing capacities for scooters and mopeds into those for

manufacturing motorcycles. The move has been prompted by the rapid growth reported

by the motorcycles segment since the Financial Year 1995.

HHML increased the capacity of its plants from 1.8 million units in FY2003 to 2.25

million in FY2004 and has been able to achieve 92% capacity utilisation. In light of the

increase in demand for motorcycles, the company plans to set up a new plant. Since its

entry in the Indian market during FY2002, HMSI has aggressively expanded its capacity.

A significant trend witnessed over the past five years is the inclination of consumers

towards products with superior features and styling. Better awareness about international

models has raised expectations of consumers on some key attributes, especially quality,

styling, and performance. High competitive intensity has prompted players to launch

vehicles with improved attributes at a price less than the competitive models.

35

In an effort to satisfy the distinct needs of consumers, producers are identifying emerging

consumer preferences and developing new models. For instance, in the motorcycles

segment, motorcycles with engine capacity over 150cc, is a segment that has witnessed

significant new product launches and hence, become more competitive. The indigenously

launched Pulsar 150 had met with success on its launch and thereafter, a host of models

have been launched in this segment by various players. While Bajaj Auto launched the

Pulsars (150 and 180 cc) with digital twin spark technology (DTSi) that offers a powerful

engine and fuel efficiency of 125 cc models, model launches by other players include

LML's Graptor/Beamer, HMSI's Unicorn besides the HHML's CBZ (improved version

launched in 2003-04) and TVS' Fiero F2. Moreover, in the recent past, the motorcycle

segment has witnessed launch of vehicles with higher engine capacity (higher than

150cc) and power (higher than 15bhp). These include models such as Bajaj Auto

Eliminator and Royal Enfield's Thunderbird followed by HHML's Karisma. Besides

these, KEL has launched premium segment motorcycles GF 170 and GF Laser besides

launching products from the portfolio of its technology partner (Hyosung's Aquila and

Comet 250). The products in this segment cater for style conscious consumers. Quite a

few players are developing models combining features such as higher engine capacity"

optimum mix of power and performance, and superior styling. However, the extent of

shift to these products would depend on the positioning of such products in terms of

price.

In the scooters segment, the market for plastic-bodied variomatic scooters continues to

witness growth in the scenario of overall decline in scooter volumes. Higher volumes and

growth are especially true for certain scooter models, such as Honda Activa, that brought

in new technology (besides variomatic transmission) to further differentiate themselves.

Thus, the need to differentiate and create a niche has led to companies strengthening their

36

research and development (R&D) capabilities and reducing the development time for

new models.

Increasing Focus on exports:-

For the first nine months of FY2005, two-wheeler exports increased by 37% over the

corresponding previous, led mainly by motorcycles even as exports of other two-wheelers

were healthy. While motorcycle exports increased by 40%, scooter and moped Exports

increased by 29% and 27% respectively.

Motorcycle exports by Bajaj Auto, HHML and TVS have reported a robust growth in

FY2005 and are expected to increase further in the medium term.

Table - 4

Two-Wheeler Exports from India (in numbers)

Segment FY2000 FY2001 FY2002 FY2003 FY2004 CAGR

(FY2000-04)

9MFY2005

Scooters 20,188 25,625 28332 30116 53148 27.4 44832

Motorcycles 35,295 41,339 56,880 126122 187287 51.4 188807

Mopeds 27,754 44,174 18,971 23330 24234 -3.3 22739

Total 83,237 111,138 104183 179568 264669 33.5 256378

Source: SIAM

Although the Indian two-wheeler manufacturers have forayed on their own in their target

export markets, there have been instances of tie-ups with the technology partners. Bajaj

Auto's tie-up with Kawasaki to jointly market Bajaj products in Philippines is a case in

point. Under the tie-up, M/s Kawasaki Motors Philippines Corporation has been appointed

37

as exclusive distributors to market select Bajaj two-wheelers that include Byk, Caliber 115

and Wind 125. These vehicles are being sent to Philippines in the completely built unit

(CBU) form. Other strategy of expanding international presence considered by few

players is that of setting up assembly lines in select South East Asian countries either on

their own or in partnership with local players. Besides, plans of select overseas technology

partners to source from their Indian partners and plans of global majors to develop their

Indian manufacturing unit as a sourcing hub may also lead to increase in two – wheeler

exports from India.

Companywise two-wheeler exports since FY2000 are presented in the following Table 4

Table - 5

Company-wise two-wheeler exports (FY2000-9MFY2005)

Company FY2000 FY2001 FY2002 FY2003 FY2004 CAGR

(FY2000-04)

9MFY2005

Bajaj Auto 14924 16112 28527 53366 90210 56.8 87225

HHML 10061 10324 13023 21165 39254 40.5 43441

HMSI 0 0 1293 10916 31414 N.A 27734

TVS 7265 6621 7765 9636 28093 40.2 36666

Yamaha 15197 20446 20321 45546 32906 21.3 27539

Others 35790 57635 32752 39053 42792 4.6 33773

Total 83237 111138 103681 179682 264669 33.5 256378

Source: SIAM

Vehicle Emission Norms

Emission norms for all categories of petrol and diesel vehicles at the manufacturing stage

were introduced for the first time in India in 1990 and were made stricter in 1996. When the

38

1996 norms were introduced, it resulted in certain models being withdrawn from the market.

With Stage I India 2000 emission norms coming into place, the cost of developing suitable

technology has remained high.

The emission norms that are currently in force for two-wheelers and three-wheelers are more

stringent than the Euro II norms. The roadmap suggested for emission norms for two/three-

wheelers by the Expert Committee on Auto Fuel Policy is as follows:

For two / three wheelers, the emission norms are recommended to be the same in the entire

country:-

For new vehicles-

Bharat Stage II norms throughout the country from April 1, 2005.

Bharat Stage II norms to be applicable preferably from April 1, 2008 but not later than April

1, 2010.

For reducing pollution from in – use vehicles:

� New pollution under control (PUC) checking system for all categories of vehicles to

be put in place by April 1, 2005.

� Inspection and Maintenance (I&M) system for all categories of vehicles to be put in

place by April 1, 2005.

� Performance Checking System of Catalytic Converters and Conversion Kits installed

in vehicles to be put in place by April 1, 2007.

Table 6 presents the emission norms for two-wheelers that were in place in the past, the

India 2000 emission norms, and the norms that have been implemented for April 2005 (Stage

II) and proposed for 2008 (Stage III).

39

Table - 6

Exhaust Emission Norms

Vehicle Pollutants

Old

Norms

1996 2000 2005* 2008/10**

Two-

wheelers

(gm/Km)

CO 12-30 4.5 2.0 1.5 1

HC+Nox 8-12 3.6 2.0 1.5 1

Three-

wheelers

(petrol)

CO 12-30 6.8 4.0 2.25 1.25

HC+Nox 8-12 5.4 1.5 2 1.25

Three-

wheelers

(Diesel)

CO

1 1.1

HC+Nox

0.85 1

PM 0.10 0.05

CO: Carbon Monoxide; HC: Hydrocarbon; Nox: Nitrogen Oxide,

PM: Particulate Matter, * Maximum Sulphur parts per million (ppm)

permissible of 150 and ** Maximum Sulphur ppm permissible of 50

Compiled by INGRES

To be able to meet the exhaust norms, the Auto Fuel Policy has suggested following

technologies:

40

Table - 7

Technologies for meeting the emission norms for Spark Ignited Vehicles

2/3 - wheelers

Level of Emission

Norms

2-Stroke Technology 4-Stroke Technology

Euro I/India 2000 Intake, exhaust, combustion

optimisation Catalytic

converter

4-Stroke engine

technology

Euro II/Bharat Stage II Secondary air injection

Caatalytic

Converter

Hot tube Secondary

air injection

Euro III/Bharat Stage

III

Fuel injection Catalytic

converter

Fuel injection

Carburetor + catalytic

converter

Euro IV/Bharat Stage

IV

To be developed Learn burn Fuel injection

+ catalytic converter

Source: National Auto Fuel Policy

The adoption of new technologies for compliance with stricter emission norms may affect

the prices of vehicles. Some two-wheeler manufacturers are testing electronic fuel injection

systems for motorcycles. To begin with, electronic systems are likely to be introduced in

premium segment motorcycles.

Fiscal Policy

The Union Budget for 2001-02 had lowered the excise duty on two-wheelers (with engine

41

capacity in excess of 75 cc) from 24% to 16%. The manufacturers responded to this by

passing on a relatively large part of the excise cut to customers. The Union Budget thereafter

have left the excise duty on two-wheelers unchanged. But the Union Budget 2004-05

provides for a weighted deduction of 150% for investments in R&D. This may facilitate

increasing R&D allocations and allow for improvement in the technical as well as product

development skills of the Indian Companies.

Indian Auto Policy 2002:-

The Government of India approved a comprehensive automotive policy in March 2002, the

main proposals of which are as under:

Foreign direct investment : Automatic approval is proposed to be granted to foreign equity

investment up to 100% for manufacture of automobiles and components.

Import tariff: Import tariffs are proposed to be fixed at a level such that they facilitate the

development of manufacturing capabilities as opposed to mere assembly.

Incentives for R&D: The weighted average tax deduction under the Income Tax Act, 1961

for automotive companies is proposed to be increased from current level of 125% (The

weighted average deduction for R&D was increased to 150% in the Union Budget 2004-05).

Further, the policy proposes to include vehicle manufacturers for a rebate on the applicable

excise duty for every 1% of the gross turnover of the company expended during the year on

R&D.

Environmental aspects: Adequate fiscal incentives are proposed to promote the use of low-

emission auto fuel technology (in line with the Auto Fuel Policy). The auto policy states the

42

Government's intent to align domestic policy with the international practice of imposing

higher road tax on old vehicles so as to discourage their use.

*****

43

1.7. Two Wheeler Industry in Pune

Around 20-25 years back, Pune city was known as `the city of bicycles` because bicycle

was only vehicle that was used by majority of the citizens. Using a bicycle was very

economical, maintenance cost was also very less. The city had limited geographical area,

which was easily accessible by cycle. The roads in the city were narrow. Considering all

these factors, bicycle was a very convenient, affordable and health maintaining vehicle.

Soon the city started expanding its boundaries. It turned into a `Commercial City` from

`An Educationally forward` city and the `City of pensioners`, students and other people

started coming to Pune for different reasons. The establishment of M.I.D.C., launching of

various new educational institutes, establishment of companies, corporate offices, Banks

etc. made a considerable addition of population to the city. Establishment of small and

medium industrial units, scattered residential locations and increasing number of students

made it difficult to work on bicycle.

To overcome this, the Pune municipal corporation started its own public transport service

i.e. the P.M.T. Initially it provided satisfactory services because the population and the

number of buses flying on various routes were coordinated effectively. Soon this

coordination got disturbed owing to more addition of the population. The PMT had its

own limitation and problems. It was unable to provide a good amount to frequency of

buses to different suburban; cost per passenger was very high, etc.

All these problems resulted into people’s going for their own two wheelers. Using one’s

own vehicle is very convenient, time saving and energy saving also. Two wheelers like

scooter, Moped, Motorcycle were used for carrying luggage as well as limited family

members also.

44

During 70-80s buying a new scooter used to be a very painful experience. Interested

buyers had to enroll their names with the company in the waiting list. It used to take 2-5

years to get a scooter or any other two-wheeler. Manufacturing companies were limited

like Bajaj Auto, Vespa, Yamaha, Royal Enfield etc. The practice of paying on money was

very common during this period. The person, to whom a scooter has been allotted, used to

sell the same to a needier buyer by charging some addition cost.

During this period, manufacturer was the king of the market, imposing his terms and

conditions on the buyers, the vehicles were not much comfortable, no changes were made

in the models for years, fuel efficiency was not much affordable. This all was because of

no competition, Govt. control on license, under utilization of plant capacity, old

machinery and Government protection policy, heavy duty on import of vehicles, more

demand etc. This all resulted into limited models like:-

• Bajaj Auto Ltd :- Priya, Chetak

• Yamaha Escorts :- Rajdoot

• LML :- Vespa

• Royal Enfield :- Bullet

• Lambreta :- Vijay

During this period, the suggestions/ complaints of the buyers were not given much

attention, after sales service was not up to the mark, the buyers had no option but to bear

with all these thing helplessly. The companies need not spend much money on the

marketing of their product because the demand was already very high.

Soon this scenario changed, because of the globalization and liberalization policy adopted

by the Govt. during1990s, the permit (license) raj was abolished, and foreign companies

were invited to invest their funds in this industry

45

This was a drastic change and a powerful blow to the existing and established two wheeler

industries. Companies like Honda, Kawasaki, etc. entered the market with a strong desire

to attract different classes of customers by introducing different models by joint venture

arrangements with local manufacturers. These companies introduced different models of

two wheelers, suitable to the requirements of different class of buyers, like age wise, status

wise, sex wise etc.

Some examples of this attempt are as follows:-

• Youths :- Pulsar, Passion, CBZ and Splendor

• Executives :- Caliber, 4s champion, Wind, Classic SL, LML

Nova.

• Ladies :- Kinetic Honda, Nova and Scooty

• Students :- Spirit, Sunny etc

Owing to this change, the market of two-wheeler became customer oriented. More stress

was given on customers’ requirements to attract more number of buyers. This was done

by adapting many techniques like-

• Increase in advertisement

• Introduction of convenient financing schemes, especially for the middle class

buyers.

• Awarding gifts on each purchase.

• Offering free services for a specific period.

• Providing free insurance/ RTO registration.

• Exchange Schemes etc.

46

The profit margin was put at a minimum level. A study reveals that the first motorcycle

was introduce in India in 1902. In the first year 143 motorcycles were sold, in the year

1903, 373 motorcycles were sold. Presently there are six major two wheelers

manufacturing companies in India selling around 30,000 to 1, 00,000 motorcycles per

month.

Now two wheelers are available in different attractive colors, power ranges, these are fuel-

efficient also.

*****

47

1.8. Significance of the study

The two wheeler sector of the automobile industry has about 47 manufacturers producing

a variety of automobile which can be broadly classified into scooters, mopeds and motor

cycles. Out of 47 manufacturers only about 21 manufacturers were active. The leader in

this sector was Bajaj Auto Limited with an annual production of over 2 lakh vehicles in

1984. Kinetic Engineering Limited was the leader in the market in moped segment,

whereas in motorcycles, Escorts (India) Limited with their product Rajdoot was the

leader in 1982. But by 1986-87 with the advent of motorcycles based on Japanese

collaboration, the situation changed.

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. In 1990s, the near monopolistic market

structure, perhaps, lulled the company into being complacent and they gave way to the

competitors like Hero Honda and TVS.

Hero Honda and TVS Suzuki tied up with foreign majors to bring in the latest in terms of

aesthetics and technology, and Bajaj failed to gauge the changing tastes of consumers. In

1990s, there was a marked shift in customer preference from scooters to motorcycles.

Bajaj found itself at a loss here, as this was largely an unchartered territory.

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. Bajaj has

long left behind its annual turnover of Rs. 72 million (1968), to currently register an

impressive figure of Rs. 81.06 billion.

48

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.

Besides this, BAL is a market leader in two-wheeler exports and it consists a great chunk

of there overall revenues. Currently, BAL is selling over 1 lac motorcycles annually in Sri

Lanka, further, they are commanding 50% market share in Central America.

Profile Change in Indian Two-Wheeler Industry

The demand shift from scooters to motorcycles in the 1990s was without parallel in any

comparable product category in India. 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.

Buyers in automobile market have more choice to choose from and the increasing

competition is driving the bargaining power of customers uphill.

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.

49

Table No. - 8

Shift from Scooter to Motorcycle

(Source:- "Two Wheelers: Sales". Automobileindia.com. http://www.automobileindia.com/two-

wheelers/statistics/sales.html)

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.

The Industry Analysis - Five Forces Analysis

External Environment

Industry: Automobiles: Two Wheelers

Segments: Presence in all segments

50

Entry Barriers:

Entry barriers are high.

The market runs on high economies of scale and on high economies of scope.

The need for technical expertise 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.

Supplier Bargaining Power:

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.

Buyer's Bargaining Power:

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.

Industry Rivalry:

The industry rivalry is extremely high with any product being matched in a few months by

competitor. This instinct of the industry is primarily driven by the technical capabilities

acquired over years of gestation under the technical collaboration with international

players.

51

Substitutes:

There is no perfect substitute to this industry. Also, if there is any substitute to a two-

wheeler, Bajaj has presence in it. Cars, which again are a mode of transport, do never

directly compete or come in consideration while selecting a two-wheeler, cycles do never

even compete with the low entry level moped for even this choice comes at a

comparatively higher economic potential.

Summarizing the industry analysis, it can be said that the two-wheeler market is attractive

as it scores well on three out of five categories.

Key Earnings Drivers

Below are the key factors, which strongly affect the auto industry: -

Government policy impact on petrol prices:

Petrol prices determine the running cost of two/three wheelers expressed in Rupees per

kilometer.

Petrol prices are the highest in India as GOI subsidizes kerosene and diesel. But with the

recent change in GOI policy to reduce the subsidy, the prices of petrol will remain

constant at the current prices. This will have a positive effect on purchases of two/three

wheelers.

Improvement in disposable income: With the increase in salary levels, due to entry of

multinationals following liberalization process and fifth pay commission, the disposable

income has improved exponentially over the years. This will have multiplier effect on

demand for consumer durables including two-wheelers.

52

Changes in prices of second-hand cars:

The second hand car prices of small cars have come down sharply in the recent past. This

will shift the demand from higher-end two-wheelers to cars and affect the demand for

two-wheelers negatively. A further drop in second-hand car prices will lead to pressure on

the two-wheeler majors who plan to release higher-end scooters and motorcycles.

Implementation of mass transport system:

Many states have planned to implement mass transport systems in state capitals in the

future. This will have negative impact on demand for two-wheelers in the long run. But

taking into account the delays involved in implementation of such large infrastructure

projects the demand to be affected only five to seven years down the line.

Availability of credit for vehicle purchase:

The availability and cost of finance affects the demand for two- and three-wheelers as the

trend for increased credit purchases for consumer durables have increased over the years.

Therefore, any change with respect to any of these two parameters as a result of change in

RBI policy has to be closely watched to assess the demand for two- and three-wheelers.

Internal Factors - Strengths & Weaknesses

SWOT Analysis

The strengths, weaknesses, threats and opportunities of automobile companies are as

inder:-

53

Strengths of these companies:

→ Highly experienced management.

→ Product design and development capabilities.

→ Extensive R & D focus.

→ Widespread distribution network.

→ High performance products across all categories.

→ High export to domestic sales ratio.

→ Great financial support network (For financing the automobile)

→ High economies of scale.

→ High economies of scope.

Weaknesses:

→ These companies are not a global player in spite of huge volumes.

→ These companies do not have a globally recognizable brand (unlike the JV partner

Kawasaki)

Threats:

→ The competition catches-up any new innovation in no time.

→ Threat of cheap imported motorcycles from China.

→ Margins getting squeezed from both the directions

Opportunities:

→ Double-digit growth in two-wheeler market.

→ Untapped market above 180 cc in motorcycles.

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→ More maturity and movement towards higher-end motorcycles.

→ The growing gearless trendy scooters and scooterette market.

→ Growing world demand for entry-level motorcycles especially in emerging

markets.

The focus of BAL off late has been on providing the best of the class models at

competitive prices. Most of the Bajaj models come loaded with the latest features within

the price band acceptable by the market. BAL has been the pioneer in stretching

competition into providing latest features in the price segment by updating the low price

bikes with the latest features like disk-brakes, anti-skid technology and dual suspension,

etc.

The companies have adopted different marketing strategies for different models, few of

them are discussed below: -

Kawasaki 4S - First attempt by bajaj to make a mark in the motorcycle segment. The

target customer was the father in the family but the target audience of the commercial was

the son in the family. The time at which Kawasaki 4S was launched Hero Honda was the

market leader in fuel-efficient bikes and Yamaha in the performance bikes.

The commercial of Kawasaki 4S had the punch line "Kyun Hero" means "now what hero"

which reflected the aggressiveness in the marketing front by the company.

Boxer - It took the reins from where the Kawasaki 4S left. Target was the rural

population and the price sensitive customer. Boxer marketed as a value for money bike

with great mileage. Larger wheelbase, high ground clearance and high mileage were the

selling factors and it was in direct competition to Hero Honda Dawn and Suzuki MX100.

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Caliber - The focus for the Caliber 115 was youth. And though Bajaj made the bike look

bigger and feel more powerful than its predecessor (characteristics that will attract the

average, 25-plus, executive segment bike buyer), its approach towards advertising is even

more radically different this time around. Bajaj gave the mandate for the ad campaign to

Lowe, picking them from the clique of three agencies that do promos for the company (the

other two being Leo Burnett and O&M). Going by the initial market response, the

campaign was clearly a hit in the 5-10 years age bracket. So, the teaser campaign and the

emphasis on the Caliber 115 being a `Hoodibabaa' bike placed it as a trendy motorcycle

for the college-goers and the 25 plus executives both at the same time.

Pulsar - Pulsar was launched in direct competition to the Hero Honda's 'CBZ' model in

150 cc plus segment. The campaign beared innovative punch line of "Definitely Male"

positioning Pulsar to be a masculine-looking model with an appeal to the performance

sensitive customers. The Pulsar went one step ahead of Hero Honda's 'CBZ' and launched

a twin variant of Pulsar with the 180 cc model. The model was a great success and has

already crossed 1 million mark in sales.

Discover - The same DTSI technology of Pulsar extended to 125 cc Discover was a great

success. With this, Bajaj could realize its success riding on the back of technological

innovation rather than the joint venture way followed by competitors to gain market share.

The Future

Although the avalanche of motorcycles offered Indian consumers a wide variety of models

to choose from, it also resulted in increased pressure on the companies to concentrate on

cost-cuts, technology enhancements and up-gradations and styling. Their margins came

under pressure as marketing costs escalated.

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The companies were forced to reduce prices and offer discounts to survive the

competition. Moreover, analysts were skeptical about the segment's ability to maintain the

growth rate in the years to come. One of the major assumptions underlying the

motorcycles rush was that if the market was considerably large and was growing at a

constant pace, there was room for a profitable existence for all brands.

In 2001, there were over 30 motorcycle brands in the market. However, with the top five

brands accounting for more than 60% of the market, only 40% of the market was available

for all other new brands put together. Despite the launch of more vehicles, the survival

prospects of many of the individual brands were deemed to be rather bleak.

Further, the growth in the motorcycle segment was dependant on continuing favorable

market conditions. Analysts claimed that to sustain this growth rate, the segment would

have to completely cannibalize the market for scooters and a considerable part of the

market for scooterettes and mopeds.

Considering the fast growing scooterettes segment, with high demand from female

customers, followed by the moderately growing moped segment and the restructuring in

the scooter segment with major national and foreign players reinforcing their presence, it

was unlikely that the entire growth in the two-wheeler sector would be due to motorcycles.

Analysts also commented that as the two-wheeler industry had grown steadily for eight

years, stages in the product life cycle would apply to the field sooner, rather than later and

the decline stage would invariably come some day. There was little differentiation

between the brands being launched apart from styling as most companies had introduced

their four-stroke vehicles.

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With the failure of the joint ventures, the expected introduction of cheaper Chinese

brands, stringent emission norms and threat from major international players, the survival

of indigenous brands looked uncertain. Constrained with the ruling price levels in the

market place, limited infrastructure and lack of technological innovations when compared

to their foreign counterparts, whether the Indian companies would succeed in generating

the kind of volumes needed to sustain in the competitive motorcycle market, remains to be

seen.

Recommendations

Focus on High Margin Products: Around 50% of the two-wheeler consumers buy high

quality products (products of executive and premium segment motorcycles). Margins on

these products are higher.

Now with increasing competition in the economy segment and limited scope from cost

saving measures, it is believed this strategy of focusing on higher margin products would

enable the companies in retaining its operating margins.

Over the past two years significant changes have taken place in the two wheeler sector in

terms of variety of models available, design and fuel efficiency, competition and demand

pattern. In 1978, licensed capacity was received for 9 lakhs vehicles, 27 lakhs vehicles in

1984 and 45 lakh vehicles in 1985.

To a large extent the dramatic changes in this sector are due to the liberalized policies of

the government after 1991. With the liberalization of import of foreign technology and

licensing policy in the 1990’s a number of new models of two wheelers entered the

market. Many of these new models satisfied customer requirement. In 1987, sales of

mopeds and motor cycles declined. There were two possible arguments can be advanced

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to explain trends. Customer preferences have changed from mopeds to new varieties of

scooters and motorcycles which became available in the years 86 and 87 because the new

motorcycles and scooters are fuel efficient and perform better. Decline in growth and in

sales of mopeds and motorcycles may be reason similar to 1984.

The conclusions are as follows:

i. Cut- throat competition is a feature of the two wheeler sector in the 80’s.

ii. Entry and exit of manufactures as well as products is a common feature.

iii. Performance, fuel efficiency and price are key factors affecting sales.

iv. The above factors are crucial as far as the buying decision of the customer is

concerned. The customer changes his decision of shifting from one segment to

another according to the changes in the product.

Models with innovative features attract the attention of the prospective buyers and

eventually convert them into customers. Companies introducing such features in their

products and services, succeed to retain their customers even though there is change in

their likings or expectations.

In view of the above, the study is undertaken mainly due to following reasons:-

• To understand the change in the marketing policies of two wheelers i.e. from

seller oriented to customer oriented.

• To study the changes those have taken place in advertising policies.

• To study the factors those have affected the buying decisions.

• To study the various offers made by the manufacturer, dealer to attract the

prospective buyers.

• Impact of the offers mentioned above on the decision of buying of the customers.

• Impact of the increasing expectations of the customers on the manufacturers.

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1.9. Objectives of the Research Work

Following are the objectives of the study:-

� Study the historical background of two wheelers marketing.

� Study the marketing policies of the two wheeler industry during the period 2003-

2008

� Study the existing marketing network of two wheelers.

� Study different types of models of two wheelers.

� Study the efforts taken by the manufacturers to form customer oriented marketing

and advertising policies.

� Study the efforts taken by the manufacturers to enhance sales

� Study the techniques used by the manufacturers, dealers and authorized agents for

sales promotion.

� Study various marketing / advertising policies.

� Study the opinions of the customers about the existing offers.

� Analysis the schemes introduced by these companies for sales promotion

� Study the marketing network and changes thereon.

� Study the proposed marketing trends with reference to price, features, after sales

services, pollution norms etc.

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1.10. Scope of the Study

The study covers:

� The period from 2000 – 2005

� The marketing policies formed by the manufacturers and dealers of two wheelers

in Pune Municipal Corporation limits.

� The end users of the two wheelers (First User)

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1.11. Hypothesis

It refers to the process of selecting and using a sample statistic to draw inference about

population parameter based on a subset of it – the sample drawn from the population.

Statistical inference treats two different classes of problems:

• Testing of hypothesis

• Estimation

Here we are testing some hypothesis about the welfare schemes. But we have to take

review of theory related to statistical inference – testing of hypothesis.

Statistical inference is that branch of statistics, which is concerned with us by

probability concept to deal with uncertainty in decision making. The field of

statistical inference has had a fruitful development since the later half of the 19th

century.

It refers to the process of selecting and using a sample statistics to draw inference about a

population parameter based on a subset of it – the sample drawn from the population.

Statistical inference treats two different classes of problems:-

1. Hypothesis testing, i.e. to test some hypothesis about present population from

which the sample is drawn.

2. Estimation, i.e. to use statistics obtained from sample as estimate of the unknown

parameter of the population from which the sample is drawn.

In both the cases, the particular problem at hand is structured in such a way that

inferences about relevant population value can be made from sample data.

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Hypothesis testing:-

Hypothesis testing begins with an assumption, called a hypothesis that we make about a

population parameter. A hypothesis is a supposition made as a basis for reasoning.

According to Prof. Morris Hamburg, “A Hypothesis in statistics is simply a quantitative

statement about a population. Palmer O Johnson has described Hypothesis as “Islands in

the uncharted seas of thought to be used as bases for consolidation and co-operation as we

advance into the unknown”

Researchers Hypothesis:

‘The marketing policies of two-wheeler are getting increasingly aggressive and

customer oriented and there is scope for improvement in these policies in order to make

them more customers oriented.’

For analyzing the data, researcher has used graphical method and whenever required, it is

supported by CHI SQUARE TEST OF INDEPENDENCE.

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1.12. Statistical Methods

The data has been entered in MS Excel before it was transferred to SPSS for the further

data analysis.

The attributes related to satisfaction of respondents regarding various parameters such as

improvement in academic performance, increase in health status, increase in income, and

increase in standard of living etc were codes using Likert scale having 5 points staring

from strong satisfaction to the strong dissatisfaction. Later they were coded into two or

more appropriate categories for further analysis.

To assess the statistical significance of difference between the qualitative responses of

respondents we used Chi-square test for independence of attributes or Fisher’s exact test

(in case any of the cell frequency is less than or equal to 5) as appropriate.

The p-value less than 0.05 was considered statistically significant since the level of

significance was fixed at 5% level for testing all hypotheses.

The entire data was analyzed using Statistical Package for Social Sciences (SPSS) version

11.5 for MS Windows.

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