Wednesday, June 22, 2016

It’s a joy ride for MNCs in the Indian scooter market


If Hero MotoCorp and Bajaj Auto rule the Indian roads with their motorcycles, multinational corporations have found a sweet spot in the scooter market here.
The domestic scooter space, epitomised by ‘Hamara Bajaj’ in the 1980s, has now been overtaken by Japanese MNCs Honda, Yamaha and Suzuki, and Italy’s Piaggio. Together, they command two-thirds of the Indian scooter market, which saw sales of over 50 lakh units in FY16.
The rise of scooters has been rapid. They posted 11.8 per cent growth last fiscal even as motorcycle sales remained flat. Both Yamaha Motor India and Suzuki Motorcycle India now sell more scooters than bikes here.
Japanese giant Honda Motorcycle and Scooter India (HMSI), credited with the comeback of the scooter, has the lion’s share of the market at 55.6 per cent, followed by Indian players Hero (16.3 per cent) and TVS at 15.4 per cent (see table).
Hero and Honda, which ended their joint venture in 2010, are now market leaders in the motorcycle and scooter segments, respectively.
Scooters had almost been written off in the late 1990s, with their poor designs and lower mileage compared to bikes. While bikes back then ran 60 km in a litre of petrol, the figure was just 40 km for scooters. The stepney was a necessary eyesore, changing gears fatigued the hands while the space for storage gave scooters a bulky look.
Strong foothold

It was at this juncture that HMSI devised a strategy to get a strong foothold. When it entered the market in the late 1990s, it was more out of a compulsion to make scooters, since the company already had a motorcycle joint venture and non-compete clause with Hero Motocorp.

“It was a blessing in disguise,” said YS Guleria, Senior Vice-President, Sales and Marketing, at HMSI.
So, in 2000, it brought out Activa — India’s first gearless scooter with four stroke technology that brought the mileage of scooters at par with bikes. Storage space went under the seat and tyres came with a tuff up tube, which meant that enough air pressure would be maintained for the vehicle to reach the nearest repair shop in case of a puncture. And Japanese scooters arrived in India.
Even as the MNCs proved their technological superiority, the Indian players lessened their focus on the scooter segment.
Bajaj vacated the segment completely in FY10. LML shut down its plant in Kanpur in 2006, with its Vespa unable to face the heat from bikes.
“Bajaj exited scooters, thinking there isn’t a market for them. That helped other two-wheeler companies to gain a foothold,” said VG Ramakrishnan, MD of Avanteum Advisors LLP. “The scooter segment is evolving and there are sets and sub-sets emerging in various zones. We are trying to understand the changing customer needs and are proactively meeting them,” said Roy Kurian, Vice-President, Sales and Marketing, Yamaha Motor India Sales. Yamaha, which had a 6.3 per cent scooter market share in FY16, is gunning for 10 per cent this fiscal.
MNCs have now also started looking at the rural market, which has largely been the preserve of mighty motorcycles so far. Motorcycles were sturdy for use on dusty, uneven roads and travelling to nearby cities. But with improvement in rural infrastructure and expansion of cities, those limitations are blurring and the scooter seems a good option as well.
“The great walls of agrarian markets have started falling. The bike markets of UP, Bihar and Rajasthan are losing out to scooters. Earlier, the ratio was one scooter to nine motorcycles in rural India but now it is two to eight,” said Guleria.
“With the government focusing on rural infrastructure development, we are hopeful that the rural market will contribute greatly to sales,” said Yamaha’s Kurian. The company is planning to enhance its sales points to 3,000 by 2016, strengthening its network in tier II and III cities.
Women riders

Another factor working in favour of scooters has been women empowerment.

“There is a definite need for independent mobility in rural areas. With society becoming more acceptable to change, women are driving scooters even in rural areas, giving sales a fillip,” said HMSI’s Guleria.
In urban India, that translates into a vehicle that can be driven by multiple family members. “Customer preferences are shifting towards scooters due to the convenience of driving. They are fast catching up with motorcycles,” said Abdul Majeed, Partner at PwC India.
From 13 per cent of total two-wheelers sales a decade back, scooters now command 32 per cent of the market share. And Guleria believes it will go up to 40 per cent in five years. If that happens, Indian players will need to put in place mighty strong strategies to remain dominant in the two-wheeler space.

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