Sheer affordability has changed the dynamics in the motorcycle industry, with the entry level and the commuter segment racing neck-and-neck to contribute a sizeable number to total industry sales. The commuter or middle segment, with fast movers like the Splendor and Passion constituting the largest chunk of motorcycle sales, have shown a decline as a percentage of total sales from 54per cent to 48per cent. Entry-level bikes, on the other hand, moved up to 45per cent from 34per cent and the premium segment has slightly moved down from 12per cent to 7per cent.
Premium-segment motorcycles are priced around Rs 50,000, while executive-segment bikes range between Rs 40,000 and Rs 45,000, and entry level bikes are priced around Rs 33,000. The motorcycle segment is broadly categorised into three segments: entry or economy, executive/commuter and premium/leisure. Till recently, most sales came from the executive segment, followed by the entry level and then the premium segment. The cruiser segment, consisting of high powered bikes, is still at its nascent stage in India.
Market sources indicate that sales of entry-level bikes have gone up substantially in recent months, as manufacturers are launching technologically superior and competitively priced models. This segment is largely driven by the sales of Bajaj CT 100, TVS Star and Hero Honda's recent launched Deluxe. Says a Mumbai based two-wheeler dealer, “The rush for entry level motorcycles stems from the fact that sales of the basic commuter segment has plateaued after almost three years of phenomenal growth.” Currently, of the monthly sales of 4.5 lakh motorcycles, entry-level bikes account for two lakh units and commuter bikes account for around 2.2 lakh units. Says R Chandramouli, VP, marketing of TVS, “A customer buying an entry level bike is getting more value at a lower price.”
According to analysts, even if monthly sales of premium-end motorcycles are low, and their percentage to total sales is falling, manufacturers are firming up plans to launch such models in the next few months. This is because margins enjoyed are higher in the premium-end segment compared to the executive and economy segments. Says S Sridhar, head marketing of two-wheelers at Bajaj Auto, “Although the growth in the commuter segment has more or less remained the same, it's the new variants of Splendor and Passion that have contributed to numbers in this segment.”
Hero Honda has a strong presence in the executive segment with its Splendor Plus, Passion Plus and Super Splendor enjoying the highest market share in this segment. However, with sales of both Passion and Splendor under pressure, the company has been offering incentives and discounts to push sales. Incidentally, even with sales of the executive segment under pressure, manufacturers such as Honda Motorcycle and Scooter, Suzuki are firming up plans to launch models in this segment.
The recent move, according to a few market watchers, is a clear departure from the strategy employed by most bike makers at the beginning of last year, when stripped-down models were in vogue. Margins are tight and manufacturers are now looking at how best to maximise returns while pushing demand. Prices have now bottomed out and manufacturers are now increasingly looking at other options such as 0per cent finance schemes, as in the car market, to push demand.
Meanwhile, on account of favourable monsoons and higher rural offtake, the two-wheeler segment expects a rebound in the second half of '05. Compared to a 30per cent volume growth in '04 within the motorcycle segment, the overall two-wheeler market is expected to grow 10per cent and the motorcycle segment BY 12per cent in '05. According to the estimates of the Society of Indian Automobile Manufacturers (SIAM) for April to July '05, bikes with engine capacity of 75cc to less than 125cc constituted the largest chunk, selling 14.3 lakh units. While bikes with capacity of 125cc to less than 250cc sold 2.7 lakh units, those with below 75cc capacity sold 870 units. Total motorcycles sales stood at 17.1 lakh units , up 15per cent.