INDUSTRY ANALYSIS
Post 2000, the Indian two-wheeler industry comprising of motorcycles, scooters and scooterettes opened up tremendously. With a 20% YoY growth, motorcycles captured almost 80% of the market primarily at the cost of the scooter segment. The scooter segment though has witnessed a revival with the launch of scooterettes aimed at young women and adolescents.
The two wheeler market can be segmented into three categories on the basis of price – Entry segment (50000).
Motorcycles are now sold as an “experience” rather than a product. New products are being introduced at a rapid pace and brands are gaining prominence. Thus there is an increased focus on the premium segment which has an increased scope for differentiation.
Buyer Power is relatively high with buyers becoming more discerning. Reliability and economy have become more of a hygiene factor. Buyers now demand two-wheelers that fit their personality thus increasing the scope for differentiation and branding. Provision of easy financing through EMI’s has reduced the price sensitivity to a great extent. This has resulted in higher growth in the 125-150cc segment. High level of branding has also helped revive niche players like Royal Enfield.
Supplier Power is low as most suppliers are exclusive and far more diffused than the industry itself. It is further reduced due to the threat of backward integration by the two-wheeler companies.
Barriers to entry has reduced with the introduction of Government policies such as reduction in excise duty from 24% to 16% and allowing for 100% FDI. However, the investment required for setting up large distribution channels and service stations can be a major entry barrier. Another significant entry barrier is the brand building required. Thus, initially foreign players set up Joint Ventures with indigenous companies. After establishing their brand they have launched their own line of products. eg. Honda with Hero Group and Yamaha with Escorts.
Threat from...