Friday, October 28, 2016

Mahindra 2 wheelers to de-focus from mass market, eyes niche premium segment play

Having failed to make any inroads into the mass segment, the lossmaking two-wheeler division of Mahindra & Mahindra is shifting focus to the niche and premium end of the market. 

Its new target is the 300cc-plus segment, where sales are fewer but margins fatter. 

To boost the premium segment portfolio, the company last week acquired the rights over heritage brands like Jawa and BSA, under which it will produce classic or retro-looking motorcycles in the future. Several new iterations are planned also for the Mojo 300 bike. The Peugeot Scooters portfolio will come in the third leg of the new plans at Mahindra Two Wheelers. 

ET had in May reported on Mahindra’s endeavour to buy heritage brands and the shift in strategy towards premium vehicles. 

Executive Director Pawan Goenka admitted that the two-wheeler business did not go quite the way the company expected and that there was even consideration to close down the business. But Mahindra then decided to restructure and reorient the business. 

“The rationale we had of entering the two-wheeler business eight years ago still remains. We got into wrong segments on entry. If we had entered the premium segment, we would be far ahead now. The new strategy has complete support from the board and they have confidence that we will make it a success,” said Goenka. 

Mahindra & Mahindra has already seen the two-wheeler unit’s workforce halve over the last one year and has slashed marketing budget by 80%. The company plans to invest Rs 250 crore to Rs 300 crore in two-wheelers products, all of which will be in the premium segment. 

Mahindra is currently working on four different variants of the Mojo premium bike (tourer, adventure, street and cruiser) which will help it address wider audience and more affordable price points. In the next two years, the company will introduce the Jawa brand, which will be sold through a different outlet. 

In its new avatar, Goenka said, Mahindra is aiming to co-create the two-wheeler division into a true lifestyle company. 

“Given our experience in adventure, lifestyle and SUVs, we believe that is our DNA. We need to come back to that DNA and look at offering premium niche motorcycle, which has the same essence of lifestyle and adventure. This will be not only in terms of the products, but in the entire ownership experience,” added Goenka. 

Mahindra, which entered the two-wheeler space in 2010 with the acquisition of Kinetic, has remained a fringe player with a market share of less than 1%. The company could not break the strangle-hold of Hero MotoCorpBSE 0.99 % and Honda Motorcycle & Scooters. 

The two-wheeler unit posted yet another year of lower sales in fiscal 2016, with volumes falling 13% to 1.44 lakh units. Motorcycle sales halved to 60,291 units but those of scooters rose 81% to 84,064. 

The two-wheeler unit, which has accumulated losses of Rs 1,000 crore, had hoped to boost sales with a high-decibel Rs 75 crore advertisement campaign last fiscal year. 

Mahindra & Mahindra in 2015 bought 51% stake in PMTC or Peugeot Motorcycles — the balance 49% is still owned by France’s PSA Group. Last week, Mahindra bought the UK-based iconic two-wheeler brand BSA, through Classic Legends for Rs 28 crore crore. Classic Legends will continue to scout for Heritage brands like BSA, it said.  

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