Sunday, April 16, 2017

India’s motorcycle makers burnish brand credentials

On the wall of a dimly lit room at a research park in the British Midlands, Mark Williams proudly summons to life a three-dimensional rendering of a lightweight Indian motorcycle, the TVS Apache. “They’ve got a genuine aspiration of being world-class, without a doubt,” says the former Jaguar Land Rover engineer, whose team at the Warwick Manufacturing Group uses this technology to hone product and component design for Chennai-based TVS Motor.  Its investments in product development have helped make TVS India’s fourth-placed maker of “two-wheelers” by sales, with a share price that has risen 1500 per cent since late 2013. At a time when the government is striving to burnish India’s credentials as a manufacturing centre, TVS and its peers provide encouraging examples. More than 16m motorcycles and scooters were sold in India during the 2016 financial year, far more than in any other country and nearly six times the number of passenger cars sold. Exports in that same period reached 2.5m, up from 1.5m five years before. The Apache can be found in showrooms from Bogotá to Jakarta, while TVS’s three-wheeled autorickshaws ply the streets of Cairo and Addis Ababa. “We’re hoping that within the next three years, exports should be 35 to 40 per cent of our sales,” says Venu Srinivasan, chairman of TVS, which currently generates about 20 per cent of its revenue abroad. In a nearby building at TVS’s plant at Hosur in southern India, a fleet of robots pirouette their way through the welding and sealing of motorcycle parts while human workers perform slower-paced testing and assembly.  On one production line, two visiting engineers from Germany inspect motorcycles made for BMW. The European company’s decision last year to entrust production for the global market to an Indian partner reflects an improved reputation for manufacturing quality in India, despite setbacks such as the 2013 revelations of safety failings by pharmaceutical group Ranbaxy. Japan’s Honda and Yamaha, meanwhile, have set up their own motorcycle factories in India and are ramping up production for foreign markets. Yamaha’s India head Hiroaki Fujita said last month that the company wants to export more than 220,000 two-wheelers from the country this year, up from 162,000 in 2016, and sell 1m units in India. Abhishek Jain, an analyst at HDFC Securities, says the Japanese companies have a clear lead in product innovation over their Indian peers, which “cannot compete in terms of technology” and branding. But the brand power of Indian motorcycle groups is growing as they move deeper into foreign markets, argues Siddartha Lal, chairman of Eicher Motors, owner of motorbike producer Royal Enfield. “Country brands take some time to develop — Korea and Taiwan were once substandard brands,” he says. “I don’t think there’s any place in the world now where we have negative connotations when we say our product is made in India.”  We’re still a very poor country. For a person in some rural areas, it’s a private two-wheeler versus no transportation at all Eric Vas, president of Bajaj Auto’s motorcycle business Mr Lal has overseen the opening of showrooms in London, Paris and Madrid, hoping to capitalise on the retro appeal of the world’s oldest surviving motorcycle brand. The first Royal Enfield motorcycle was made in the UK in 1901, and while production in the UK ceased in 1970 it continued at the company’s Indian joint venture. Royal Enfield’s international ambitions have been fuelled by surging sales at home of its relatively expensive bikes. The popular Classic 350 retails for about Rs130,000 ($2,000), compared with less than Rs50,000 for Hero Motocorp’s Splendor, the Indian market leader. Royal Enfield sold 60,113 motorcycles last month, compared with fewer than 52,000 in the whole of 2009. Mr Lal points to the emergence of a prosperous young demographic over the past decade. “By 2010, the IT and consumer goods companies in India were more mature, and starting salaries, which had been absolutely awful, started looking up. So now there were more single young men willing to spend a bit more on themselves,” he says. Cultural shifts also have been a boon for the sector, says Chirag Shah, an analyst at Edelweiss Securities. A weakening of traditional obligations to the extended family has enabled young salary earners to spend more on themselves, he says. He adds that the presence of more women in the labour force coupled with a relaxation of conservative norms around female behaviour has helped drive a boom in sales of scooters, popular with female drivers. Yet the sector was heavily affected by New Delhi’s abrupt decision in November to withdraw 86 per cent of the country’s currency by value. With purchases of two-wheelers still largely made using cash, nationwide sales — which rose 9 per cent year-on-year in October — slumped 22 per cent in December. “The demonetisation impact was extremely severe,” says Eric Vas, president of the motorcycle business for Bajaj Auto, the sector’s third-biggest company by sales. “People are a lot more cautious. Demonetisation has been a surprise and it's led people to wonder what's coming next.” Nevertheless, industry executives express little concern about any end to India’s love affair with the motorcycle. Demand for two-wheelers is still far greater than for passenger cars, even as carmakers bet on a preference for four wheels among India’s growing middle class. “You can’t wish away the reality of cost in India,” says Mr Vas. “We’re still a very poor country. For a person in some rural areas, it’s a private two-wheeler versus no transportation at all.”

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