REPORT ON TWO-WHEELER INDUSTRY IN INDIA

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INTRODUCTION TWO-WHEELER INDUSTRY IN INDIA: - India is the second largest manufacturer and producer of two-wheelers in the world. It stands next only to Japan and China in terms of the number of two-wheelers produced and domestic sales respectively. This distinction was achieved due to variety of reasons like restrictive policy followed by the Government of India towards the passenger car industry, rising demand for personal transport, inefficiency in the public transportation system etc. The Indian two-wheeler industry made a small beginning in the early 50s when Automobile Products of India (API) started manufacturing scooters in the country. Until 1958, API and Enfield were the sole producers. Under the regulated regime, foreign companies were not allowed to operate in India.

The motorcycles segment was no different, with only three manufacturers via Enfield, Ideal Jawa and Escorts. The two-wheeler market was opened to foreign competition in the mid-80s. And the then market leaders - Escorts and Enfield - were caught unaware by the onslaught of the 100cc bikes of the four Indo-Japanese joint ventures The industry had a smooth ride in the 50s, 60s and 70s when the Government prohibited new entries and strictly controlled capacity expansion. The industry saw a sudden growth in the 80s. The industry witnessed a steady growth of 14% leading to a peak volume of 1.9mn vehicles in 1990. In 1990, the entire automobile industry saw a drastic fall in demand. This resulted in a decline of 15% in 1991 and 8% in 1992, resulting in a production loss of 0.4mn vehicles. The total number of registered two-wheelers and three-wheelers on road in India, as on March 31, 1998 was 27.9mn and 1.7mn respectively. The two-wheeler population has almost doubled in 1996 from a base of 12.6mn in 1990. The last few years have seen a fundamental shift in preference from scooters and mopeds towards motorcycles. Motorcycle sales have grown at a CAGR of 27% for the last 6 years Vs Two Wheelers, which have grown at a CAGR of 11% over the same period. In 02-03, motorcycle sales have grown at 30% vs. 17% for two-wheelers. The faster growth rate of motorcycles has seen its share doubling from 38% in 97-98 to 76% in 02-03. Henceforth we do not expect motorcycles to grow at a rapid rate. However the growth rate for motorcycles in 03-04 is expected to be faster than overall 2-wheeler growth and we expect it to be around 12-15%. The chart shows the sale of motorcycle grow very fast with comparison to scooters and mopeds. Motorcycle share in two wheeler industries: - The chart shows that the share of motorcycle in two wheeler industries is increasing with very fast speed. In 1999 the share of scooter was more but from the mid of 1999 – 2000 the whole scenario is changed. INTRODUCTION OF HERO HONDA Hero Honda Motors Limited was established in January 19,1984. It started out, as a Joint Venture between Hero Group, the world's largest bicycle manufacturers and the Honda Motor Company of Japan, has today become the World's single largest two-wheeler Company. Hero Honda Motors Limited gave India nothing less than a revolution on two-wheels, made even more famous by the 'Fill it - Shut it - Forget it ' campaign. Driven by the trust of over 5 million customers,

the Hero Honda product range today commands a market share of 48% making it a veritable giant in the industry. Hero Honda is currently the worlds largest motorcycle manufacturer thanks to its fuel efficient, high quality products made in collaboration with Honda motorcycles, Japan. Hero, a name synonymous with two wheelers in India, began its journey around four decades ago. Starting as a manufacturer of bicycle components, Hero has today grown into a multi-unit, multi-product, geographically diversified group of companies. Like every success story, Hero's saga contains an element of spirit and enterprise of achievement through grit and determination, coupled with vision and meticulous planning. The Hero Group began with a simple philosophy: to provide excellent transportation to the common man, at a price he could easily afford. It is this spirit, which drives Hero even today; the dream of providing total satisfaction in all its spheres of activity. To consumers, in excellent products at an affordable price; to employees, in a fine quality of life and to business associates, in a total sense of belonging. A thorough understanding of fast-changing consumer behaviour, new market segments and product opportunities, and a marketing mix sensitive to changing customer needs, form the core of Hero's marketing strategy and philosophy. Keeping the wheels of progress turning are the individual companies of the Hero Group. Each an independent profit centre. Each a success story in its own right. The two wheeler division of the Hero Group has already networked more than 3,500 dealer outlets, each with its complement of trained mechanics and workers. INTRODUCTION OF BAJAJ AUTO LIMITED It is one of India's top ten companies in terms of market capitalization and among the top five in terms of annual turnover. Established in 1945, it was incorporated as a trading company. From 1948 till 1959, it imported scooters and three wheelers from Italy and sold them in India. Today, Bajaj Auto Ltd (BAL), the largest two and three wheeler manufacturer in the country,

has a dominating 40% market share in scooters with 18.5% in unguarded scooters, 25.2% in motor cycles, 8.3% in mopeds and a leading 78% market share in three-wheelers in FY2001. Bajaj Auto has been viewed as a scooter major but with the change in the structure of demand for 2-wheelers the company has tried to make its presence felt in this key market by steadily ramping up motorcycle capacities, by introducing new models and variants and pushing up marketing and sales. However the company is well behind Hero Honda in the motorcycle segment and No.2 player in mopeds/ scooter segment after TVS Suzuki. The company has a wide array of models both in the two-stroke and four-stroke configurations. However, with the implementation of the latest emission norms, it is slowly moving away from two-stroke vehicles and converting them to four-stroke ones. The company is all set to increase its margins to double – digits through concerted cost cutting, value engineering, gains from ‘ Total Productive Maintenance ‘ (TPM) and VRS. In the last four to five years, the two-wheeler market has witnessed a marked shift towards motorcycles at the expense of scooters. In the rural areas, consumers have come to prefer sturdier bikes to withstand the bad road conditions. In the process the share of motorcycle segment has grown from 48% to 58%, the share of scooters declined Drastically from 33% to 25%, while that of mopeds declined by 2% from 19% to 17% during the year 2000-01.The Euro emission norms effective from April 2000 led to the existing players in the two- stroke segment to install catalytic converters. This has been replaced by 4-stroke motorcycles, which do not incur the additional cost of such converters and fierce competition led to a fall in price of certain models Bajaj Auto Ltd ( BAL ) has been viewed as a scooter major . Nevertheless, in the past five years the company recognized the important role of motorcycles in its portfolio. The scooter market is predominantly located in the Northern and Eastern India and the rationalization of sales taxes to a uniform rate of 12% pushed the price of scooters by 6-8% without offering any perceived value advantage to the customer. The company posted total 2-wheeler sales of Rs1.05 million in 2000-01 as against Rs1.24 million in 1999-00. The motorcycle sales contributed to almost 50% of the total sales volumes accompanied by the decline in geared scooter sales, which contributed, to only 33% of sales volumes. The company has been introducing models in the middle end Rs.36, 000 – Rs. 48,000 and high end segments viz; Rs. 48,000 and above but has found difficult to market such models in competition to Hero Honda models in the similar price category. However BAL is on its way to recapture the highly differentiated product market by becoming a flexible and market – driven supplier of various models of two and three wheelers at specific price – points. BAL has performed fairly in the current fiscal 2001-02 with the Net Sales going up by 3.06% to Rs19720 million HY ended September 2001 from Rs19133.3 mn in the corresponding period previous year.

The total expenditure has gone up by 5.3% with the material cost accounting for the major increase. The company has posted a growth of 69% in PBT and the Net Profit has increased by 55% to Rs2644.7 mn from Rs1701.5 mn in the corresponding period last year. The Net Profit Margin has also improved by almost 50.7% from the half year ending FY2000-01. The employee cost has fallen but the company will be charging an equal expenditure of Rs 22.6 mn over the three quarters of the current fiscal amounting to Rs 67.8 mn as the VRS expenditure incurred in June 2001 COMPARISON BETWEEN HONDA AND BJAJ The fight to dominate the premium motorcycle segment has reached epic proportions between Pune based Bajaj Auto Limited and Delhi based Hero Honda Limited. With the motorcycle market expected to grow at around 20 per cent in 2003-2004 as compared to the growth of 16-17 percent, which the industry averaged during the past five years, manufacturers are pulling out all stops to address the top end segments of the industry. According to Brij Mohan Lal, chairman Hero Honda, “Talks are on with joint venture partner Honda Motors of Japan for the next generation engines and we are also planning some more powerful bikes and are investing Rs 100 crore in this project.” Bajaj Auto has discovered the goldmine in the executive segment, through the success of its executive category the Pulsar that within a short span of time, has achieved sales of around 15,000 units per month. According to Bajaj, “The 125cc ‘world bike’ is expected to give company to Caliber-115 in the executive segment and this will be further supplemented by another bike to be introduced in the last quarter of the current fiscal.” But with the first lap gone to Hero Honda, will Bajaj take pole position remains to be seen. Bajaj: Can it become a Hero (Honda)? Some time back Bajaj lost its crown as the largest selling two-wheeler company in India to Hero Honda. The loss was all the more appalling because while Bajaj is a multi product company manufacturing scooters (both geared & un geared), motorcycles and three wheelers, Hero Honda is only into motorcycles. The impact is also visible in the price performance of both Bajaj Auto & Hero Honda in last one year. It is clear from the chart below that Hero Honda outperformed Bajaj comprehensively. Relative Price Performance of Bajaj Auto v/s Hero Honda The undoing for Bajaj was that it could not read the market signals well. The most important being the shifting of the market to Motorcycles from scooters. Secondly even though the company had presence in Motorcycles it was no match to Hero Honda. Hero Honda with its fuel-efficient and maintenance free four stroke bikes just swept the market. Bajaj with its range of two stroke vehicles could not survive the onslaught from Hero Honda. With a loss of its pride, Bajaj started working on measures to get back the number one position. The strategy was to stem the decline in scooter sales and ramp up the bike sales. To boost bike Bajaj has planned to aggressively launch a number of products so that it has presence over the entire gamut of the motorcycle segment.

The major initiatives for motorcycles include Launching a stripped down version of Boxer, the Boxer – CT. The bike is priced below Rs35000 and is expected to help the scooter owner’s graduate to bike. The bike does not face any stiff competition and thus should help the company shore up volumes. Launch of Caliber Croma, an upgraded version of Caliber to take on the Hero Honda’s Splendor. The success of this model holds the key as Splendor accounts for around half the sales of Hero Honda. Launch of Eliminator a top end bike. The bike is priced upwards of Rs85000 and is not expected to generate huge volumes but the launch is significant, as it would remove Bajaj’s perception of being a laggard in technology and R&D backup. Launch of Acer, a 100 CC bike to take on the CD100 of Hero Honda. The company is shortly going to launch Pulsar a 100 CC indigenously developed vehicle. The bike is positioned against Passion, the recently launched bike from Hero Honda stable. Thus Bajaj will a presence right from the low end with Boxer CT to the luxury end with Eliminator. The results of these initiatives are visible in the sales figures of the first four months of the current fiscal. With a sales growth of 52% Bajaj has been able to outperform Hero Honda’s growth rate of 31%. Bike Sales April - July 01 April - July 00 Growth (%) Bajaj 170,737 111,794 52.7 Hero Honda 410,175 313,348 30.9 A part from these the company has also been successful in reversing the decline in scooter sales. This is on back of launches of stripped down version of Chetak & Super. The strategy was to encourage the scooter customers, who could not meet their aspiration of buying a new scooter. The markets have taken notice of this with the stock appreciating by around 13% in last two weeks. However the company still has long way to go before it can anywhere near Honda. In fact according to company’s own admission it will take them two years to reach the figure of 1,00,000 bikes a month. However considering the fact that pace of growth at Hero has slowed down Bajaj can definitely hope to narrow gap. Therefore in order to regain its crown its important that performance of scooters also looks up. While the company has been able to arrest the decline in scooters and in fact show growth at spurts, to be able to show continues growth looks difficult. In such a scenario regaining the top slot looks pretty difficult. Therefore it will be some time before it has a chance to become Hero. For the time being considering the various initiatives it has taken it has definitely become a side Hero. Market share of BAJAJ and HERO HONDA: - NEED FOR THE STUDY I have chosen the topic, Behavior of rural consumer regarding the purchase of Motorcycle – special reference to BAJAJ and HERO HONDA. Because the two-wheeler industry is the growing sector in India.

Two-wheeler industry is growing with very fast speed. Everyday the new models of motorcycle are introducing in the market. BAJAJ and HERO HONDA are the major players of two wheeler industries. There is very hard competition between BAJAJ and HERO HONDA. So to know the position of the companies it is very necessary to know the behavior of consumer. So I choose this topic to know that which company has good position in the minds of consumer. And to know the factors which consumer consider at the time of purchase of motorcycle. By this study we can know the behavior of consumer regarding the two major companies of two wheeler industries

The research will be helpful for the both companies because by this study they can know what are there strengths and where they are lacking. REVIEW OF THE LITERATURE 1. Mr. Jatinder Chhabra hade done the research in 1999-2000 on the topic factors affecting the purchase behavior of Motorcycles and he conclude that the motorcycle market in India increasing and the Hero Honda had mainly being selling on the economy platform, till that time Hero Honda was introduced a number of models, with high fuel efficiency. The person who was looking for a light blend of power, style and economy the right brand was Bajaj. 2. Mr. Navdeep Singh had done the research in 2000-2001 on the topic changing trend of two wheeler industry in India. He concluded that Motorcycle has gaining market share at the expense of Scooter and Mopeds. 3. Mr. Sandeep Thamman had done the research in 202-2003 on the topic a study of consumer preference regarding Motorcycle. He concludes that the competition was increased in the two-wheeler industry. Every company introduced new brands in market to capture more market share consumer preference was regarding the bike that the bike should be stylish look, good features and good preference given by young more. 4. Mr Gurpreet Singh Gill hade done the research project on the topic in 2004-205 the topic was consumer behavior regarding the purchase of motorcycle and he concluded that India was the second largest market after China. The Motorcycle purchase decision is effected by the personality and the style of an individual as well as the product feature. The promotion scheme affects the consumer up to a little expert. 5. Mr. Randeep Singh had done the research project on 2004-2005 on the topic Supply policy and dealer satisfaction level of Hero Honda and he concluded that the supply policy of the company was good and dealers were satisfied from the company because maintained the regular contact with the consumer. OBJECTIVS OF THE STUDY Specific objectives: - For achieving the main objectives, we have some specific objectives that will help us for fulfillment of the project report. These objectives are the following: ?

To know the factors which affect the consumer behavior regarding the two wheeler purchase ? To Know the Advertisement source which more attract the consumer ? To Know the Promotion Schemes which more attract the consumer ? To Know the future plans of the consumer RESEARCH METHODOLOGY DATA COLLECTION Whatever the data I have collected, it is primary data by using direct interview of the consumers of Bajaj and Hero Honda and also made questionnaire for collection of relevant data. a) Questionnaire: For the above purpose and to get a better insight I needed to conduct a consumer survey. I gave questionnaire to respondent so that they can fill it and return to me. I preferred questionnaire method because it does not pressurize the consumer and in this way he gives correct information about the questions, which are asked to him in the questionnaire. b) Direct Interview: I have also conducted direct interview in some areas with consumer of Bajaj and Hero Honda. Why I have done so because my questionnaire was open-ended, so respondents could not express their views thoroughly but in personnel interview we can do it much better than questionnaire. I have also collected the secondary data for research work, which I have taken from Bajaj and Hero Honda’s internal records, trade and business publications, and various sites related to Bajaj and Hero Honda SAMPLE DESIGN Sample can be either probability samples or non-probability samples. So here in this project I have taken the probability samples of the research works. SAMPLE FRAME It is also known as “Source of list” from which sample is to be drawn. The sample frame is as following: a) Rural areas in Sangrur District SAMPLE SIZE It refers to the number of items to be selected from the universe to constitute a sample. An optimum sample is one, which fulfill the requirement of efficiency, representative, reliability, and flexibility. So I have taken the sample size as given below: Customers of Bajaj 50 Customers of Hero Honda 50 SAMPLE PROCEDURE The sampling design, I have chosen to decide the sample for study is based on random sampling. Why I have used random sampling the reason is as given below: a) It gives each element in the population or universe an equal probability of getting into the sample and all choices are independent of one another. b) It gives each possible sample combination an equal probability of being chosen. In my project it is imperative to have a true representative of respondents. So for that purpose I have chosen respondents: a) Who came under the Sangrur District? b) I randomly selected respondents from these areas to answer the schedule I have formed for my research. FINDINGS • Fuel efficiency of the motorcycle more influences the consumer behavior. • Serviceman more considers the fuel efficiency of the motorcycle. • Students more consider the look and pick up of the motorcycle. • Agriculturist more considers the price of the motorcycle. • Consumer, who is below metric, they more consider the look and comfort of the motorcycle. • Consumer more prefers the T.V. add as the advertisement source. • Consumer, which is under 20 years, they more prefer T.V. advertisement. • Consumers, which are under 20 – 30 years, they more prefer the displays and discuss with there friends. • Serviceman more prefers to discuss with sales persons. • Students more prefer to T.V. ads and newspaper ads. • Consumer, who is below metric, they more prefer to discuss with others. • Consumers, who are under graduate, they more prefer to T.V. ads. • Special festival offers more attract the customer. • Serviceman more attract by 0 % finance schemes. • Consumers, whose income is 5000-10000, they more attract by special festival offers. • Consumers, who are under graduate, they more attract by special festival offers. • Consumers, who are postgraduate, they more attract by 0 % finance schemes. • HONDA more satisfies the customer with comparison to BAJAJ. • BAJAJ have not resale value. • Bajaj consumer is not satisfied from the mileage, pick up,

and look of the bike. • Honda consumers are not satisfied from the speed and security of the bike. • Consumer, which is under 20 years, they wants improvement in the pick up of Honda and look of BAJAJ. • Consumers, which are under 30 - 40 years, they want improvement in pick up of both BAJAJ and HONDA. • Serviceman wants to improvement in mileage of both BAJAJ and HONDA. • The students want to improvement in pick up of BAJAJ and speed and look of HONDA. • Agriculturist wants to improvement in pick up of both BAJAJ and HONDA. • Consumer, whose income is less than 5000, they want to improvement in mileage of both BAJAJ and HONDA. • Consumers, whose income is 5000-10000, they want to improvement in pick up of both BAJAJ and HONDA. • Consumers, whose income is 10000-15000, they want to improvement in speed of BAJAJ and security of HONDA. • Consumers, whose income is 15000-above, they want to improvement in look of both BAJAJ and HONDA. • Consumer, who is below metric, they want to improvement in pick up of the both BAJAJ and HONDA. • The consumers, who are under graduate, they want to improvement in mileage, look of BAJAJ and speed of HONDA. • Consumers, who are graduate, they want to improvement in mileage of both BAJAJ and HONDA. • Consumers, who are postgraduate, they want to improvement in security of both. CONCLUSION At the end we can say that India have very good position in two-wheeler industry.

In 1999 the sale of motorcycles increase. Bajaj and Hero Honda is the major player of two wheeler industries. But the Hero Honda’ volume is more from Bajaj. According to my research in rural areas the fuel efficiency of the motorcycle more influences the consumer behavior. The big reason of that the prices of patrol are increasing day by day. In rural areas the people don’t consider the factors like Resale Value and Spare part cost and Brand Image. T.V. add are more effective in rural areas. In rural areas consumer less concentrate on magazine and newspaper adds. Special festival offers more attract the customer. People mostly buy the luxuries at the time of festival. HONDA more satisfies the customer with comparison to BAJAJ. Because the Bajaj have not resale value. And its pick up is not good. At the end we can say that the consumer wants some modifications in both brands. There is lot of different – different factors (Age, Income, Occupation, Education qualification), which affect the behavior of the consumer.