Flooding the Indian Motorcycle Market

 
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Case Details:

Case Code : BSTR026
Case Length : 10 Pages
Period : 1990s-2002
Organization : Hero Honda, TVS
Pub Date : 2002
Teaching Note : Available
Countries : India
Industry : Automobile & Automotive

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.



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Background Note

The two-wheeler segment was the fastest growing segment in the Indian automobile industry. India is the second largest user and third largest manufacturer of two-wheelers in the world.

The restrictive policy of the government towards the passenger car industry in the pre-liberalization era, the rising demand for personal transport and the inefficiency of the public transportation system were some factors responsible for the strong growth in the two-wheeler segment. The Indian two-wheeler market is broadly classified into three major segments - scooters, motorcycles and mopeds. Bajaj Auto laid the foundations of the Indian two-wheeler industry in 1948 by trading in imported Vespa scooters. In 1952, Enfield India Ltd. started manufacturing motorcycles, followed by Ideal Jawa and Escorts in the 1960s. The motorcycle segment registered a healthy growth during the 1960s and accounted for 36% of the total two-wheeler sector sales in 1971-72.

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For over two decades, the industry operated in a seller's market with Bajaj Auto and Automobile Products of India (API) being the only leading players. During this period, little attempt was made to control costs or offer new, innovative products, which restricted the choice of the consumer.

However the scenario changed with the de-licensing of the sector in the 1980s. The number of manufacturers increased drastically and the focus shifted to branding and product features. Scooters dominated the two-wheeler market until 1990, accounting for an estimated 60% of the market. Bajaj Auto was the undisputed leader in the scooter market, followed by LML and Kinetic. The healthy growth of the 1980s continued through to the 1990s, and the two-wheeler segment registered a growth of 14%. Till the 1980s, Enfield, Escorts and Ideal Jawa were the only major players in the motorcycle segment. From the mid 1980s, the segment gradually picked up momentum and its high growth potential forced all the major two-wheeler players to focus on the segment...

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