Definition of Industry

As per Section 2(j) of Industrial Disputes Act,1947 “Industry” means any systematic activity carried on by co-operation between an employer and his workmen(whether such workmen are employed by such employer directly or by or through any agency, including a contractor) for the production ,supply or distribution of goods or services with a view to satisfy human wants or wishes (not being wants or wishes which are merely spiritual or religious in nature), whether or not,-

(i) any capital has been invested for the purpose of carrying on such activity; or
(ii) such activity is carried on with a motive to make any gain or profit, and includes-
(a) any activity of the Dock Labour Board established under section 5-A of the Dock Workers ( Regulation of Employment)Act,1948( 9 of 1948);
(b) any activity relating to the promotion of sales or business or both carried on by an establishment,


Two Wheelers in India
The feeling of freedom and being one with the Nature comes only from riding a two-wheeler. Indians prefer the two wheelers because of their small manageable size, low maintenance, and pricing and easy loan repayments. Indian streets are full of people of all age groups riding a two-wheeler. Motorized two wheelers are seen as a symbol of status by the populace. Thus, in India, we would see swanky four wheels jostling with our ever reliable and sturdy steed: the two-wheeler.
Two-Wheeler Industry in India: An IntroductionThe Indian two-wheeler industry has been in the limelight recently because of its impressive performance. Hero Honda has been the largest manufacturer of motorcycles in the world for quite some time. Its motorcycle model Splendor has also been the largest selling model in the world. The last few years have also seen a large quantity of two-wheelers being exported. In neighbouring countries like Bangladesh and Sri Lanka, the Indian two-wheeler manufacturers have captured the market. Even in Africa and South America Indian motorcycles have been well received. Some of the Indian manufacturers like TVS Motors and Bajaj Auto are in the process of setting up assembly and manufacturing plants. The number of models being introduced by Indian two-wheeler manufacturers every year is also high. At this crucial juncture when the Indian two-wheeler industry is making its mark in the global market, this book ?Two-Wheeler Industry in India ? An Introduction? will make interesting reading. The book has been divided into three sections. The first section traces the evolution of the industry, its growth and the reasons for the industry being competitive. The second section delves into the issues facing the industry and future of the industry. It also throws light on the exports of two-wheelers, Government policies affecting the growth of the industry and electric scooters and motorcycles. The third section discusses the major players, Hero Honda, TVS Motors, Bajaj Auto and Electro herm India.
Indian automobile industry witnessed a growth of 23.37% in 2-wheeler segment. India is the second-largest 2-wheeler manufacturers in the world and also the largest motorcycle manufacturer in the World. Indian 2-wheeler segment includes a range of vehicles such as scooters- geared and ungeared, motorcycles and mopeds. In India there are 7 scooter manufacturers, 9 motorcycle manufacturers, 3 moped manufacturers. Bajaj Auto, Hero Honda, TVS, etc are the leading manufacturers. They have also dominated the global arena after Piaggio. Production in Indian automobile industry During cfinancial year 2005-06, Indian 2-wheeler production showed a growth of 16.40% over the
preceding year. 2-wheeler segment have been showing an upward production trend. At present, there are more than 7.6 million 2-wheeler, manufactured in Indian automobile sector.







History
The Britannica Encyclopedia describes a motorcycle as a bicycle or tricycle propelled by an internal-combustion engine (or, less often, by an electric engine).The motors on minibikes, scooters, and mopeds, or motorized velocipedes, are usually air-cooled and range from 25 to 250 cubic cm (1.5 to 15 cubic inches) in displacement; the multiple-cylinder motorcycles have displacements of more than 1,300 cubic cm. The automobile was the reply to the 19th-century dream of self-propelling the horse-drawn carriage. Similarly, the invention of the motorcycle created the self-propelled bicycle. The first commercial design was a three-wheeler built by Edward Butler in Great Britain in 1884. This employed a horizontal single-cylinder gasoline engine mounted between two steer able front wheels and connected by a drive chain to the rear wheel.The 1900s saw the conversion of many bicycles, or pedal cycles by adding small, centrally mounted spark ignition engines. There was then felt the need for reliable constructions. This led to road trial tests and competition between manufacturers. Tourist Trophy (TT) races were held on the Isle of Man in 1907 as reliability or endurance races. Such were the proving ground for many new ideas from early two-stroke-cycle designs to supercharged, multivalent engines mounted on aerodynamic, carbon-fibre reinforced bodywork.




Invention of Two Wheelers
The invention of the first two-wheeler is a much-debated issue. "Who invented the first motorcycle?" may seem like a simple question, but the answer is quite complicated. Two-wheelers owe their descent to the "safety" bicycle, i.e., bicycles with front and rear wheels of the same size, with a pedal crank mechanism to drive the rear wheel. Those bicycles, in turn descended from high-wheel bicycles. The high-wheelers descended from an early type of pushbike, without pedals, propelled by the rider's feet pushing against the ground. These appeared around 1800, used iron-banded wagon wheels, and were called "bone-crushers," both for their jarring ride, and their tendency to toss their riders. Gottlieb Daimler (who later teamed up with Karl Benz to form the Daimler-Benz Corporation) is credited with building the first motorcycle in 1885, one wheel in the front and one in the back, although it had a smaller spring-loaded outrigger wheel on each side. It was constructed mostly of wood, the wheels were of the iron-banded wooden-spoked wagon-type, it definitely had a "bone-crusher" chassis! This two-wheeler was powered by a single-cylinder Otto-cycle engine, and may have had a spray-type carburetor. (Wilhelm Maybach

, Daimler's assistant, was working on the invention of the spray carburetor at the time). If two wheels with steam propulsion can be called a motorcycle, then the first one may have been American. One such machine was demonstrated at fairs and circuses in the eastern US in 1867. This was built by one Sylvester Howard Roper of Roxbury, Massachusetts. There is an existing example of a Roper machine, dated 1869. A charcoal-fired two-cylinder engine, whose connecting rods directly drive a crank on the rear wheel, powers it. This machine predates the invention of the safety bicycle by many years, so its chassis is also based on the "bone-crusher" bike.



Origin of Motor-Scooters
Edward Butler, an Englishman, built the first motor tricycle in 1884. The first gasoline-engine motorcycle to appear publicly was built by Gottlieb Daimler, of Bad Cannstatt, Germany, in 1885. The French and Belgians, followed by British, German, Italian, and American makers, designed the first practical engines and motorcycles.The popularity of the vehicle grew, especially after 1910. During World War I all branches of the armed forces in Europe, principally for dispatching, used the motorcycle. After the war it enjoyed a sport vogue until the Great Depression began in 1929. After World War II a revival of interest in motorcycles lasted into the late 20th century, with the vehicle being used for high-speed touring and sport competitions.The practice of attaching auxiliary engines to bicycles in western Europe and parts of the United States led to the development during the 1950s of a new type of light motorcycle, the moped. Originating in Germany as a 50-cubic-centimetre machine with simple controls and low initial cost, it was largely free of licensing and insurance regulations except in Great Britain.The more sophisticated motor scooter originated in Italy soon after World War II, led by manufacture of a 125-cubic-centimetre model. Despite strong competition from West Germany, France, Austria, and Britain, the Italian scooters maintained the lead in the diminishing market. The scooter has small wheels from 20 to 36 cm (8 to 14 inches) in diameter, and the rider sits inside the frame. Power units are placed low and close to the rear wheel, which is driven by bevel gearing or chain. Capacities vary from 50 to 225 cubic cm, and four-speed gearing is common.





Initial Hits

Most of the development during this earliest of eras concentrated on three and four-wheeled designs, since it was complex enough to get the machines running without having to worry about them falling over. The next really notable two-wheeler was the Millet of 1892. It used a 5-cylinder engine built as the hub of its rear wheel. The cylinders rotated with the wheel, and its crankshaft constituted the rear axle.The first really successful production two-wheeler though, was the Hildebrand & Wolfmueller, patented in Munich in 1894. It had a step-through frame, with its fuel tank mounted on the downtube. The engine was a parallel twin, mounted low on the frame, with its cylinders going fore-and-aft. The connecting rods connected directly to a crank on the rear axle, and instead of using heavy flywheels for energy storage between cylinder-firing, it used a pair of stout elastic bands, one on each side outboard of the cylinders, to help out on the compression strokes. It was water-cooled, and had a water tank/radiator built into the top of the rear fender.In 1895, the French firm of DeDion-Buton built an engine that was to make the mass production and common use of motorcycles possible. It was a small, light, high revving four-stroke single, and used battery-and-coil ignition, doing away with the troublesome hot-tube. Bore and stroke figures of 50mm by 70mm gave a displacement of 138cc. A total loss lubrication system was employed to drip oil into the crankcase through a metering valve, which then sloshed around to lubricate and cool components before dumping it on the ground via a breather.DeDion-Buton used this 1/2 horsepower power plant in road going tikes, but the engine was copied and used by everybody, including Indian and Harley-Davidson in the U.S. Although a gentleman named Pennington built some machines around 1895 (it's uncertain whether any of them actually ran), the first US production motorcycle was the Orient-Aster, built by the Metz Company in Waltham, Massachusetts in 1898. It used an Aster engine that was a French-built copy of the DeDion-Buton, and predated Indian (1901) by three years, and Harley-Davidson (1902) by four.








Indian T Indian Two Wheeler Industry




Indian Two wheeler industry, Key players and Types of two-wheelers
India is the second largest producer and manufacturer of two-wheelers in the world. Indian two-wheeler industry has got spectacular growth in the last few years. Indian two-wheeler industry had a small beginning in the early 50's. The Automobile Products of India (API) started manufacturing scooters in the country.Bikes are a major segment of Indian two wheeler industry, the other two being scooters and mopeds. Indian companies are among the largest two-wheeler manufacturers in the world. Hero Honda and Bajaj Auto are two of the Indian companies that top the list of world companies manufacturing two-wheelers.The two-wheeler market was opened to foreign companies in the mid 1980s. The openness of Indian market to foreign companies lead to the arrival of new models of two-wheelers into India. Easy availability of loans from the banks, relatively low rate of interest and the discount of prices offered by the dealers and manufacturers lead to the increasing demand for two-wheeler vehicles in India. This lead to the strong growth of Indian automobile industry.Kinetic Honda was introduced in the Indian market during the mid 80s. The main feature of Kinetic Honda is its ease of use. This helped the youngsters and the women to buy scooters.


Key players in the Two-wheeler Industry :After facing its worst recession during the early 1990s, the two-wheeler industry bounced back with a 25% increase in volume sales in February 1995. The scooters are considered as family vehicles. There are many two-wheeler manufacturers in India. Major players in the 2-wheeler industry are Hero Honda Motors Ltd (HHML), Bajaj Auto Ltd (Bajaj Auto) and TVS Motor Company Ltd (TVS). 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).Types of Two-wheelers in India: There are mainly three types of two-wheelers available in India. They are Motorcycles, Scooters and Scooterettes/Mopeds.Motorcycles in India: Bikes comprise a major segment of Indian two wheeler industries.












Company : Bajaj Auto Ltd
Company : HERO HONDA
* Bajaj Avenger* Bajaj CT 100* Bajaj Platina* Bajaj Discover DTSi* Bajaj Pulsar DTSi* Bajaj Wave* Bajaj Wind 125* Sonic DTSi
* Hero Honda Achiever* Hero Honda CD Dawn* Hero Honda CD Deluxe* Hero Honda Glamour* Hero Honda Glamour-Fi* Hero Honda Karizma* Hero Honda Passion Plus* Hero Honda Pleasure* Hero Honda Super Splendor* Hero Honda Splendor NXG* Hero Honda CBZ X-Treme
Company : Kinetic Motor Company
Company : TVS MOTOR
Company : Yamaha Motor India
* Kinetic Aquila* Kinetic Boss* Kinetic Challenger* Kinetic Comet* Kinetic GF* Kinetic Stryker* Kinetic Velocity
* TVS Apache* TVS Centra* TVS Fiero* TVS Star* TVS Victor
* Yamaha CruxS* Yamaha G5* Yamaha Gladiator
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Scooters in India: The scooter and the scooterette share in the Indian two-wheeler market is 13.4%. The main models available in India are Bajaj Chetak, Honda Eterno, Kinetic Blaze, LML NV SPL and LML Select II.Scooterettes/Mopeds: TVS Motors launched India's first 50cc, 2-seater moped: TVS Moped 50. TVS also launched India's first indigenous scooterette: Scooty in 1994. This segment has about one-fourth share in the Indian two-wheeler industry. The major models available in India are Bajaj Wave, Bajaj Kristal DTSi, Bajaj Blade DTSi, Hero Honda Pleasure, Kinetic Kine, Kinetic 4S, Kinetic Nova, Kinetic Zoom, Kinetic V2 Range, Kinetic King 100, Kinetic Luna Super, Kinetic Luna TFR, Yo Smart, Honda Dio, Honda Activa, TVS Scooty and TVS XL.



INTRODUCTIONThe 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 growth trend since the mid nineties.Two-wheelers: Market Size & GrowthIn 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.
Figure 1Segmental Growth of the Indian Two Wheeler Industry (FY1995-2004)
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 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 DriversThe 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 urbanisation, 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 entrylevel 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.
While the demand drivers listed here operate at the broad level, segmental demand is influenced by segment-specific factors.MARKET CHARACTERISTICSDemandSegmental Classification and CharacteristicsThe 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 subsegments 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 1.
Table 1
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 MumbaiCompiled by INGRES
Segmental Market ShareThe 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.
Figure 2 Trends in Segmental Share in Industry Sales (FY1996-9MFY2005)
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 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 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.SupplyManufacturersAs 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).
Figure 3 Shares of Two-Wheeler Manufacturers in Industry Sales (FY2000-9MFY2005)
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.TechnologyHitherto, 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 2
Technological tie-ups of Select Players


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 manufacturingand 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
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.TRENDS IN THE TWO-WHEELER INDUSTRYCompanies raising capacity to meet the growing demandAll 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 FY1995.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.Niche markets also witnessing intense competitionA 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.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 research and development (R&D) capabilities and reducing the development time for new models.Increasing focus on exportsFor 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 tobust growth in FY2005 and are expected to increase further in the medium term.
Table 3
Two-Wheeler Exports from India (in numbers)


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 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 4
Company-wise two-wheeler exports (FY2000-9MFY2005)


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 NormsEmission 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 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, 2005Bharat Stage III 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 & maintenance (I&M) system for all categories of vehicles to be put place by April 1, 2010

▪
Performance checking system of catalytic converters and conversion kits installed in vehicles to be put in place by April 1, 2007.
Table 5 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).
Table 5
Exhaust Emission Norms

Vehicle
Pollutants
Old Norms
1996
2000
2005*
2008/10**
Tow-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:
Table 6
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, combustionoptimisation Catalytic converter
4-Stroke enginetechnology
Euro II/Bharat Stage II
Secondary air injection CaatalyticConverter
Hot tube Secondaryair injection
Euro III/Bharat Stage III
Fuel injection Catalytic converter
Fuel injectionCarburetor + 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 PolicyThe Union Budget for 2001-02 had lowered the excise duty on two-wheelers (with engine 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 2002The 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 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.


Hero Honda: A SWOT analysis


Today if one talks about Indian two-wheeler industry, reference to Hero Honda Motors Limited is by default. It is not only the market leader in the two wheeler segment in India but also is the number one two wheeler company in the world by volumes. The company’s name is synonymous with fuel-efficient bikes and longevity. The company has a presence in all bike segments viz. economy (CD 100SS, CD Dawn) executive (Super Splendor, Splendor+) and premium (Karizma, CBZ). Splendor is the most successful product of the company and accounts for almost 50% of the company’s turnover.

Background
Hero Honda is a two-decade-old story. It came into existence as a joint venture agreement between the Munjal family’s Hero Group and Honda Motor Company (HMC) of Japan, each having 26% stake in the company. A ten year agreement was first entered in the year 1984, whereby HMC brought in technical expertise and Hero Honda brought in local talent to manage all other functions including marketing, finance, and human resources. The agreement was once again renewed in 2004 and has been extended till 2014.
Performance vis-à-vis Industry
The Indian two wheeler industry has seen a paradigm shift from being a regime of regulation and tight control in the 1980s to a more liberalised and a competitive present day era. After missing out on the initial boom in two wheeler segment during the period of 1993-1996, Hero Honda has emerged as a world leader. The gap between motorcycles sold by Hero Honda and its closest rival is approximately 1 m units (23% of industry size). One of the reasons for the tremendous performance of Hero Honda is the significant increase of share of motorcycles in the two-wheeler segment, from 42% in FY99 to 77% in FY04. No doubt, that the shift in preference of Indian populace from scooters and mopeds towards motorcycles has facilitated the growth of Hero Honda. However its performance vis-à-vis industry indicates that the performance of Hero Honda was better than the industry peers, barring two years. In the seven-year period ending FY04, it has achieved a CAGR of 30% in two-wheeler volumes against 11% of the industry.
Past 5 year performance…
As can be seen from the table below, the company the sales as well as the profits have increased enormously. The company net sales has shown a CAGR of 27% and net profits have shown a CAGR of 39% led by its motorcycle led dominance. The operating margin of the company has improved by 290 basis point to 16.8%.
(Rs m)
FY00
FY01
FY02
FY03
FY04
Motor Cycles sold (m)
0.76
1.03
1.43
1.68
2.07
Net sales
22,464
31,687
44,654
51,017
58,324
Other income
204
221
767
956
1,681
Total revenues
22,668
31,907
45,422
51,973
60,005
Operating profit
3,070
4,285
6,807
8,636
9,801
Depreciation
347
443
510
580
733
PBIT
2,724
3,843
6,297
8,056
9,068
Interest
47
25
15
17
17
PBT
2,880
4,038
7,049
8,995
10,732
Extraordinary Items
-34
-268
-105
(149)
(7)
Tax
925
1,301
2,315
3,038
3,441
Net Profit
1,921
2,469
4,629
5,808
7,283
Operating profit margin
13.7%
13.5%
15.2%
16.9%
16.8%
Net profit margin
8.6%
7.8%
10.4%
11.4%
12.5%
Number of shares (m)
39.9
199.7
199.7
199.7
199.7
Face Value (Rs)
10.0
2.0
2.0
2.0
2.0
DPS (Rs)
10.0
3.0
17.0
18.0
20.0
EPS (Rs)
48.1
12.4
23.2
29.1
36.5
Fully Diluted EPS (Rs)
9.6
12.4
23.2
29.1
36.5

Strong Fundamentals
As evident from the table company has a strong balance sheet. Further the company has a consistent record of paying dividend.
Ratios
FY00
FY01
FY02
FY03
FY04
RONW
20.0%
100.0%
100.0%
100.0%
100.0%
ROCE
37.8%
36.5%
58.5%
59.0%
55.5%
Debt Equity (x)
0.1
0.1
0.2
0.2
0.2
Interest coverage (x)
57.8
151.9
417.0
465.7
527.2
Dividend payout
0.9%
0.6%
0.4%
0.4%
0.3%
BVPS
111.1
30.5
33.8
42.5
57.0
The company has clarified about its intention of setting a third plant in addition to its existing two plants. The company has embarked upon a green field expansion plan and has earmarked Rs 2 bn for the same. It should be noted that the company has a strong cash flow position, it generated Rs 9 bn from operation in FY04 and is virtually a debt free company.



Indian automobile industry witnessed a growth of 23.37% in 2-wheeler segment. India is the second-largest 2-wheeler manufacturers in the world and also the largest motorcycle manufacturer in the World. Indian 2-wheeler segment includes a range of vehicles such as scooters- geared and ungeared, motorcycles and mopeds. In India there are 7 scooter manufacturers, 9 motorcycle manufacturers, 3 moped manufacturers. Bajaj Auto, Hero Honda, TVS, etc are the leading manufacturers. They have also dominated the global arena after Piaggio. Production in Indian automobile industry During cfinancial year 2005-06, Indian 2-wheeler production showed a growth of 16.40% over the
preceding year. 2-wheeler segment have been showing an upward production trend. At present, there are more than 7.6 million 2-wheeler, manufactured in Indian automobile sector.

Production trend of 2-wheelers in Indian automobile industry
Sales in Indian automobile industry- Domestic and ExportsDuring financial year 2005-06, 2-wheeler sales in Indian market showed a growth of 13.63%, with an increase in exports by more than 40%. In the same period, cumulative sales of 2-wheelers in Indian market amounted to 7.05 millions, with 0.5 million units exported by Indian manufacturers.Sales trend of 2-wheelers in Indian market

Export trend of 2-wheelers







Sales



Two- wheeler sales in the country have sky rocketed in the recent years, and the annual sales of motorcycles in India expected to cross the 10 million mark by 2010. The low penetration of two-wheelers in the country 31 two-wheelers per 1000 citizens (2004) leaves immense scope for the growth of the market. Overall the industry sales of two-wheelers have grown by 15% from 6.57 million in 2004/2005 to 7.57 million in 2005/2006. The buoyant Indian economy with a growth rate of around 8% per annum is further expected to fuel the growth of two wheelers in the country.




The share of motorcycles have increased over the years, while that of other two-wheelers like geared scooters, scooterettes and mopeds have shown a negative growth or remained stagnant. The two-wheelers have penetrated 7% of rural house hold and 24% of urban markets, thus it leaves an immense scope for the market to grow.Bajaj Auto one of the leading producers of automobiles in the country has been able to sell close to 2.3 million vehicles in 2005/2006, the sales of the company grew by almost 31%. The company registered a 32% growth in the sales of motorcycles much above the industry average of 19%. Bajaj Auto has emerged as a market leader in the entry level or price segment motorcycle with the Bajaj CT 100 accounting for nearly 40% of the market share. It also commands a 62% market share in the premium segment of motorcycles with products like the Bajaj Pulsar DTSI. TVS Motors which has lots of firsts to its credit in the two-wheeler sector in the country was able to sell 1.34 million units during the same period thus registering an overall growth of 15% from the previous year. In the motorcycle segment the company's growth in sales was in sync with the industry average. The introductions of motorcycles like the TVS Star range of motorcycles have helped the company in gaining a healthy market share in this segment. Where the company has emerged as a clear winner by holding onto its leadership position is in the moped segment.The company has posted a 10% growth in sales accounting for a market share of about 77%. The company also expects to arrest the decline of its one time best seller TVS Victor through its new variant Victor GLS. If this figures have daunted you the best is yet to come, the country leader in two-wheelers hero honda have crossed the three million mark during the year 2005/2006 which is a good few lakhs more than its nearest competitor Bajaj Auto. The company accounted for nearly 40% of then two-wheeler market. In the motorcycle segment the company has been able to attain a market share of about 50%. The segment in which hero honda has emerged as a clear winner is the Deluxe segment, which is the largest segment in the motorcycles category, with its flagship family of motorcycles splendor selling over 1.2 million units which is just a shade less than all the two wheelers sold by TVS during the same year. The motorcycle category is expected to see a further growth and according to industry experts it will drive all other category of two-wheelers to the periphery. The table below shows the over all trend of Industry Sales over a 5 year period. The figures are provided by the Society of automobile Manufactures Association (SIAM). Two-wheeler domestic sales trend Motorcycles
2001-02
2002-03
2003-04
2004-05
2005-06
2887194
3647493
4170445
4964753
5815417
Scooters
2001-02
2002-03
2003-04
2004-05
2005-06
908268
825648
886295
922428
908159
Mopeds
2001-02
2002-03
2003-04
2004-05
2005-06
408263
338985
307509
322584
332741






HERO HONDA






The joint venture between India's Hero Group and Honda Motor Company, Japan has not only created the world's single largest two wheeler company but also one of the most successful joint ventures worldwide.
During the 80s, Hero Honda became the first company in India to prove that it was possible to drive a vehicle without polluting the roads. The company introduced new generation motorcycles that set industry benchmarks for fuel thrift and low emission. A legendary 'Fill it - Shut it - Forget it' campaign captured the imagination of commuters across India, and Hero Honda sold millions of bikes purely on the commitment of increased mileage.
Over 20 million Hero Honda two wheelers tread Indian roads today. These are almost as many as the number of people in Finland, Ireland and Sweden put together!
Hero Honda has consistently grown at double digits since inception; and today, every second motorcycle sold in the country is a Hero Honda. Every 30 seconds, someone in India buys Hero Honda's top -selling motorcycle – Splendor. This festive season, the company sold half a million two wheelers in a single month—a feat unparalleled in global automotive history.
Hero Honda bikes currently roll out from its three globally benchmarked manufacturing facilities. Two of these are based at Dharuhera and Gurgaon in Haryana and the third state of the art manufacturing facility was inaugurated at Haridwar, Uttrakhand in April this year. These plants together are capable of producing out 4.4 million units per year.
Hero Honda's extensive sales and service network now spans over 3000 customer touch points. These comprise a mix of dealerships, service and spare points, spare parts stockiest and authorized representatives of dealers located across different geographies.
Hero Honda values its relationship with customers. Its unique CRM initiative - Hero Honda Passport Program, one of the largest programs of this kind in the world, has over 3 million members on its roster. The program has not only helped Hero Honda understand its customers and deliver value at different price points, but has also created a loyal community of brand ambassadors.
Having reached an unassailable pole position in the Indian two wheeler market, Hero Honda is constantly working towards consolidating its position in the market place. The company believes that changing demographic profile of India, increasing urbanization and the empowerment of rural India will add millions of new families to the economic mainstream. This would provide the growth ballast that would sustain Hero Honda in the years to come. As Brijmohan Lall Munjal, the Chairman, Hero Honda Motors succinctly points out, "We pioneered India's motorcycle industry, and it's our responsibility now to take the industry to the next level. We'll do all it takes to reach there.''


HERO HONDA'S MISSION
Hero Honda’s mission is to strive for synergy between technology, systems and human resources, to produce products and services that meet the quality, performance and price aspirations of its customers. At the same time maintain the highest standards of ethics and social responsibilities. This mission is what drives Hero Honda to new heights in excellence and helps the organization forge a unique and mutually beneficial relationship with all its stake holders.

HERO HONDA'S MANDATE
Hero Honda is a world leader because of its excellent manpower, proven management, extensive dealer network, efficient supply chain and world-class products with cutting edge technology from Honda Motor Company, Japan. The teamwork and commitment are manifested in the highest level of customer satisfaction, and this goes a long way towards reinforcing its leadership status.