Rural India Or Premium Motorcycles? What Strategy Works Better Today?

With the two wheeler household penetration level increasing from 11.7 per cent to 21 per cent from 2001 to 2011, according to a report by PINC Research, there has been a growth story for automobile manufacturers to capture on. While the last few years, saw tremendous growth in sales, evident from the increased penetration levels, there has been a slowdown in the last few months due to increased interest rates and fuel prices along with a weak monsoon. In the period of April to August 2012, two wheelers registered a growth of 6.80 per cent with mopeds, motorcycles and scooters growing by 3.20 per cent, 3.31 per cent and 22.96 per cent respectively.

Although, sales volume figures may indicate a slowdown in the short run, there definitely is a huge market out there that remains untapped. Moreover, differentiating between rural and urban data is clearly indicative of rural India being the growth driver; while from 2001 to 2011, urban penetration increased from 24.7 per cent to 35.2 per cent, rural penetration more than doubled to 14.3 per cent. To tap this trend, companies have been focussing on the commuter segment by launching products in the engine capacity range of 75 cc to 125 cc.

Hero enjoys a leadership in the segment with a market share of 76.4 per cent with a range of products like CD Dawn, CD Deluxe, Splendor Plus, Splendor NXG, Passion Pro and Splendor Pro. In this highly competitive and volume based segment which accounts for 71.7 per cent of the total motorcycles, the industry has seen a series of 110 cc launches that includes Honda’s Dream Yuga, Suzuki’s Hayate and Mahindra’s Stallio. TVS too has a robust low-end portfolio apart from being the market leader in mopeds with a market share of 100 per cent.

While some companies lay their bets on the commuter segment, some focus on the premium segment. Banking on the overall income growing, there seems to be an emerging trend, though in its nascent stage, of a shift in demand to higher engine capacities. Last year, while the sub 125 cc segment saw an overall sales growth of 10 per cent, the 125 cc to 150 cc segment grew by 16 per cent and the premium segment at 50 per cent. Bajaj’s Pulsar and Avenger have made the company a market leader in this segment.

At the same time as companies are focussing either on the lower segment or the upper, Honda plans to take an aggressive path and make a strong presence in every segment to aid its goal of becoming the market leader by 2020. While the company has already managed doing that in scooters, it has launched 5 bikes in the >250 cc category, engine capacities of these models ranging from 250 cc to 1300 cc. It has also gained considerable market share due to Twister, Stunner, Shine and Unicorn. It recently launched the Dream Yuga in the commuter segment and plans to launch more models here to successfully play the volume game.

Whether it’s the under-penetrated and fast growing rural market or the proliferating premium segment, the growth story for two-wheelers in India is far from over. While the outlook bleak in the short run, the long term has a humongous opportunity to offer for these players to make the most of. Playing aggressively across the board, Honda has been showing huge amounts of potential in achieving its target.