By Michael Gonsalves In business, as in life, it is often a question of timing. Bajaj Auto, once famous for its iconic Chetak scooters in the country, did not find value in the scooter segment and one fine day, about five years ago, decided to become a specialist motorcycle maker instead. And hey presto, that became the signal for a metamorphosis. Indian consumers suddenly developed an appetite for the gearless scooter like never before. So much that in the intervening half-a-decade since Bajaj Auto quit the scene, scooter sales have grown much faster than that of motorcycles. Such is their impact that scooters have far outsold popular motorcycles for the seventh straight year in the financial year 2013-14. “Increasing working female force in all sectors, new launches that are comfortable to drive, the changing trend of having more than one two wheeler per family in metro cities and middle-aged males preferring gearless scooters over motorcycles are fuelling rapid growth of scooters in the country,” Mitul Shah, senior auto analyst at Karvy Stock Broking, told Financial Chronicle. Not surprisingly, popular Honda Activa, selling on an average more than 100,000 units a month last year, had displaced Hero Passion motorcycle as the second largest selling two-wheeler in India, which is the sixth biggest automobile market in the world. Put plainly, the second-biggest two-wheeler model in India last financial year was not a motorcycle, but a scooter. The popular Honda Activa, the model credited with reviving the dying scooter market after the exit of Bajaj Auto, outpaced many of the famed motorcycle brands to emerge as the second-largest selling two-wheeler brand, behind only Hero Splendor. The figures tell a story. Honda Activa, which was fourth among the top 10 two-wheelers having sold 1,205,506 units in financial year 2012-13, moved rapidly to the second position after displacing Hero Passion (1,447,887 units) when it sold a whopping 1,674,178 units in financial year 2013-14. Honda Activa was ahead of the other top 10 motorcycles such as Hero HF Deluxe (1,033,332 units), Bajaj Discover (985,659), Honda CB Shine (728,766), Bajaj Pulsar (600,689), Honda Dream (565,149), Bajaj Platina (459,795), and Hero Glamour (449,538). According to Society of Indian Automobile Manufacturers (Siam), the industry lobby, Honda Activa continued to hold pole position in FY2012-13 and FY13-14 among the top 10 scooter models sold in the country. Last year’s other top scooter models were Hero Maestro (397,609 units), Hero Pleasure (292,470), Suzuki Access (244,253), TVS Wego (160,222), TVS Pep+ (149,109), Yamaha Ray (147,724), Honda Aviator (120,867), Honda Dio (107,814) and TVS Jupiter (98,937). Quite a trajectory, that. After being relegated to near-oblivion a few years ago, scooters have now caught the imagination of the growing urban population to stage a smart recovery, capturing nearly a quarter of the domestic two-wheeler market. In other words, for the first time in India’s two-wheeler industry, every fourth unit sold is an automatic scooter, which is no mean achievement. The seeds of this revival go back to the last few years when Honda Motorcycle & Scooter India (HMSI) introduced modern and contemporary models and put their money and faith in the dying segment at a time when Bajaj Auto, India’s biggest scooter brand, was moving out of the category to focus on motorcycles. According to Siam, scooter sales zoomed to 25 per cent of the total two-wheeler sales at the end of financial year 2013-14, up from 14 per cent in 2007-08. Scooter sales notched up the 36 lakh units mark in 2013-14, registering a 23 per cent growth, while motorcycle sales, though hugely higher in volumes, climbed up a measly 4 per cent. Motorcycles still account for almost 75 per cent of the two-wheeler market and India is home to the world’s largest two-wheeler maker, Hero MotoCorp. By all indications, the graph is looking up. In April-July 2014, scooters grew 31 per cent and going by the rapid pickup in sales, analysts predict it would easily cross 40 lakh units in financial year 2014-15. Today leading the successful pack is HMSI with a 54 per cent market share, followed by Hero MotoCorp at 17 per cent, TVS Motor Company at 15 per cent, Suzuki Motorcycle India at 7 per cent and India Yamaha Motor at 6 per cent. Other players in the fray are home-grown Mahindra Two Wheelers and Italian Piaggio vehicles. Till the mid 1980s, geared scooters were the staple for Indian consumers. Scooters had metal bodies but personified lower cost of ownership compared with bikes, higher mileage and lower maintenance costs. And undoubtedly, as the largest scooter maker, Bajaj Auto was the king. However, by mid-90s, Japanese technology began to show its hand: fuel efficient, four-stroke motorcycles had Indians making a beeline for them, leaving the good old scooter behind. Lower mileage was a reason why people preferred motorcycles to scooters. But scooter manufacturers closed that gap through technological advancements. From 35-40 km a litre, scooters now run as much as 60 km on a litre of petrol. For a burgeoning young middle class, looks and shape began to matter. Scooters now come in not just funky colours, good shape, storage capacity but also offer better mileage, which means lower cost of ownership compared with bikes. They also offer greater convenience and could be put to multiple uses for a family. Ultimately, the scooter’s versatility made the big difference. YS Guleria, vice-president, sales and marketing at HMSI, said, “Scooters entered the mileage of bikes with four-stroke technology comparable to motorcycles, without change of gears and offering more storage, and the entire family comprising the father, mother, sons and daughters were attracted to its versatility.” Motilal Oswal’s Jinesh Gandhi and Chirag Jain, in a note to clients, said scooter sales were up 23.2 per cent last financial year when motorcycle sales, in contrast, grew by just 3.9 per cent. The analysts also say that the decline in moped sales moderated to just 2 per cent in the last quarter of FY14 from 10.5 per cent decline in the first nine months of last financial year. Analysts said one of the reasons Bajaj Auto saw a consistent decline in market share and volume growth last financial year was its absence from scooters. But HMSI, the fastest growing two-wheeler company in India, made rapid gains in the scooter segment to push ahead. Today every second scooter sold in India comes from HMSI. TVS Motor Company also clocked an increase in scooter sales last financial year at 4.74 lakh units, up from 4.46 lakh units the previous year. Last month, its scooter sales jumped 84 per cent to 67,240 units from 36,478 units in the corresponding month last year. Sales at HMSI soared 46.6 per cent in August to 217,866 units from 147,600 units sold in the corresponding period last year. As a result, Honda Activa, Hero Pleasure, TVS Jupiter and trendy Piaggio’s Vespa scooters have all become a rage now. According to analysts and industry experts, scooters have been the preferred choice of women, and urban centres are the prime drivers of this growth with 65-70 per cent of sales coming from metros and tier-II cities. But the recent trend of male-centric scooters such as the Yamaha Ray Z, Hero Maestro and TVS Jive has also helped fuel growth. Experts say both males and females can use scooters like Activa and as a result of more versatility and more utility of scooters, customers were shifting to gearless scooters from bikes. “Every second scooter sold in the country is a Honda scooter and this high growth of scooters in India has primarily been led by our company,” points out Guleria. Adds Mitul Shah: “There is a huge growth potential for scooters from rural as well as urban India with the increase in travel of women and teenage girls on account of employment as well as increased enrolment for education.” He said scooters are expected to grow at 18-20 per cent CAGR over next five years, adding that at present, Honda Activa, Hero Maestro and Pleasure, TVS Jupiter and Wego were the fastest selling scooter models in the country. More than a decade ago, the Japanese company entered the lucrative Indian automatic scooter market with the introduction of Activa in 2001. “Over the last few years scooters have evolved and become more technologically advanced, fuel efficient and stylish,” Guleria said. Earlier, scooter riders were considered infra dig, but the Activa model has changed all that. Hero MotoCorp, predominantly a motorcycle company, had three of its bikes such as Splendour, Passion and HF Deluxe and two scooter models such as Maestro and Pleasure among the top 10 best selling bikes and scooters in the country in FY2013-14. The company had ignited the scooter segment with its best selling Pleasure and Maestro models. “The growth in the scooter market is on account of various factors, including the availability of technologically-advanced scooters offering better performance,” said Bharatendu Kabi, spokesman at Hero MotoCorp. He said customers today seek products that can offer greater convenience and multi-usage opportunity for both men and women users. “Scooters also offer a great blend of performance, style and ease — the gearless feature providing riding comfort even in high traffic conditions and a powerful engine offering improved fuel efficiency and contemporary looks. Moreover, there is rising acceptance of gearless scooters even among men,” Kabi explains. He said Hero MotoCorp is growing at a much faster pace than the industry average in the scooter segment. “We have been selling an average of over 60,000 units per month of our two existing scooter brands — the 100 cc Pleasure and the 110 cc Maestro,” Kabi said. He said the company had showcased its upcoming scooter range at the Auto Expo this year. “From the latest technology, highly innovative features, more powerful engines to global styling — once launched, these new products will generate a lot of excitement among our customers in India and in our global markets,” Kabi predicts. These include diesel scooter concept called the RNT, a new 125 cc scooter Dare and two variants of the 150cc scooter called ZIR. In fact, the scooter’s upward spiral has every company in its thrall. “We have seen a significant shift from motorcycles to scooters as it is easy to ride to office, market, school or just anywhere,” said JS Srinivasan, vice-president, sales at TVS Motor Company. He said the company was selling on an average 60,000 units of a range of scooters every month out of its five models. “We are targeting to reach 75,000 units in the fourth quarter as we expect our newly-launched TVS Scooty Zest to sell an average of 15,000 units per month,” believes Srinivasan. He said total scooter sales in the county would cross 40 lakh units this financial year. There is increasing acceptance in the industry of the product’s ultimate utility. “Scooter as a mode of transport for the entire family has been well accepted. Its ease and comfort for both men and women and boys and girls is shaping up well,” said Atul Gupta, executive vice-president at Suzuki Motorcycle India. He said out of five lakh two-wheelers the company sold in India last year, 80 per cent were scooters. He said scooters would grow at CAGR of 18-24 per cent over the next five years. Gupta said Suzuki Motorcycle was planning to introduce more scooter models in India from its parents’ over 40 models. “The faster volume growth of scooters has primarily been driven by greater acceptability of gearless scooters, particularly by women, rising urbanisation and increasing proportion of working women coupled with expanding product offerings in the scooter segment and a comparatively lower base,” said Roy Kurian, VP for sales and marketing at Yamaha Motor India Sales. He said the share of scooters in the two-wheeler market would move up to 35 per cent over the next two-three years. While scooter sales alone grew 42 per cent at Yamaha in FY2013-14, in July it constituted almost 37 per cent of its total sales at 18,734 units. Its total sales for July were 50,286 units, a 36 per cent growth from July 2013. “Women obviously prefer scooters as they are gearless. Now many men who were using motorcycles are also shifting to scooters as they offer utility space and more so, all in the family can use a scooter as it is gearless,” said Ravi Chopra, chairman and managing director at Piaggio Vehicles. He said scooters are no longer considered fuddy-duddy. Piaggio, which does not operate in the mass-market scooter segment where consumers buy scooters for convenience and utility value, sells iconic brand Vespa range of models in the country. “With the Vespa we have created a premium space in the scooter category and our target is to own and grow this space,” Chopra. He said Vespa is a premium lifestyle brand and not really competing with other scooters for market share. The company is operating in select cities unlike large volume brands, he said. “We visualise the premium space in the scooter category to progressively enlarge, thereby meeting the aspiration of the youth. Our Vespa range will play a significant role in this mission,” Chopra points out. That appears to be the prevailing sentiment. “With a rise in scooter sales, we are expanding our product range with new launches over the next two years in the 100-110 cc engine scooter segment which accounts for over 80 per cent of the total scooter market,” said Viren Popli, chief of operations at Mahindra Two Wheelers. “We are a new entrant and since 2010, we have sold over 5 lakh units of scooters in the Indian market,” he added. Popli said as the emerging and developing economies in Asian and African countries improve their infrastructure, there would be a huge opportunity for exports for made in India scooters. By the looks of it, good times are expected to continue. But Bajaj Auto, which stopped manufacturing scooters five years ago with its Kristal automatic model, maintains it is not interested in scooters anymore and would continue to be specialists in making motorcycles. When asked the tantalising question whether exiting the scooter segment was the right decision, Rajiv Bajaj, managing director at Bajaj Auto said, “If you measure a business decision by its global sales, profits and market-cap, as you should, you would not ask this question.” He said in the last few days Bajaj Auto has been ranked as the fifth most valuable Indian brand, with a value of $3 billion, according to the first ever BrandZ™ Top 50 Most Valuable Indian Brands ranking. He said the company has also found a place in Forbes world’s top 100 most innovative companies of 2014. Bajaj Auto is the world’s only auto company on that stellar list. “In business, everything is determined by one thing — strategy. In a hyper-competitive world, the sole purpose of a business strategy is to differentiate the business from its competition. A sound strategy does this by creating new categories for its brands to dominate, rather than have them unimaginatively serve existing categories,” Bajaj said. “Our Pulsar, Discover and RE brands are a result of such a strategy at Bajaj, making us the world’s most profitable auto company, with almost half our sales coming from overseas markets,” he said. But he still does not say what it would have been like if Bajaj Auto had stayed the course. michaelgonsalves@mydigitalfc.com, Source: Article
