Indian Bike Market is at an Inflection Point

Last time the Indian two-wheeler market took a step towards maturity was when Hero Honda introduced the 150cc CBZ. That's when we graduated from being a commuter bike market to a sporty-commuter one.This was a bike which every college-going kid and his dad lusted after. The CBZ sparked the growth of a 150+cc segment and the rest, as they say, is history.

If there was anything that the 2012 Auto Expo showed us, it was that our two-wheeler market is taking another step towards maturity. And the global bike majors can't wait to get a piece of the action.

Global bike majors have come to realise that China, India and other South-East Asian markets have a huge population riding underpowered bikes. And even if a few of them decide to upgrade to higher-capacity bikes, it represents a massive swell of potential customers. They want to establish themselves early to be able to catch the rising tide.

Ducati already has a factory in Thailand (taking advantage of the India-ASEAN FTA), while Harley Davidson has set up their production facility here. Probably, the recent Thai floods prompted Triumph to choose India as their manufacturing base. Bajaj already assembles some KTM and Kawasaki bikes here while the other Japanese majors already have manufacturing facilities here for their smaller bikes. Most of these facilities are built with the intention of exporting the bikes to other Asian markets.

Bikes assembled here (and the ones imported from ASEAN) get to avoid our horrendous +100% CBU import duty. This means we get (relatively) cheaper high-powered bikes. Also, local manufacturing would mean cheaper and better availability of spares. By the end of 2012, we will have more than 5 bikes competing in the 600cc class alone! 

Also, don't be surprised when bike majors start announcing cheaper Asian-spec bikes in the 300-600cc range. KTM has already confirmed that they are working on one while Ducati and Triumph are rumoured to be doing the same.

The single thing that would lead to the creation of the high-powered bike segment is lust. To give you an example, a few years back whenever a college kid saw the newly launched CBZ on the road he promised himself that he would buy one with his first salary. The more CBZs on the road, the more people wanted it. Till finally it became a segment in itself. Similarly, the sights of Ducati Monsters, KTM Dukes and Triumph Speed Triples on our roads will simply entice the fence-sitters to save up and get them some day. 5-10 years from now we would definitely have a sizeable high-powered bike segment.

I would be lying if I said I'm not smacking my lips in anticipation.

PS: This could also lead to the birth of an aftermarket parts and accessories market, but that's for another article.

Toyota & Honda, Meet the Real Mr. Competition

Toyota and Honda have been selling cars in India for more than a decade. But in spite of their experience, I believe that we won’t see the Toyota Etios/Liva and the Honda Brio doing too well in about a year from now. And I just have two reasons for that.

The Competition

When Toyota and Honda entered the market, they only had to compete with each other. Then the Skoda Octavia came along. The terrific fuel economy of the Octavia diesel almost finished off the Japanese. Honda responded by bringing in the new City at a lower price point while Toyota managed to introduce a diesel engine much later than they would have liked. In the end, Toyota got busy with the Innova (and Corolla got the step-motherly treatment) while Honda was content with the City being a premium compact sedan with steadily declining sales.

In the Rs. 4-6L price segment, the biggest guys are Maruti and Hyundai. They probably account for two out of every three cars sold in India and they haven’t got there by being lucky. In fact, Toyota & Honda are facing these heavyweights for the very first time, and they do not even have the Home advantage. The Japanese would be competing against brands that are synonymous with frugality and low-maintenance. While the premium image of the Japanese translates to high maintenance costs and low fuel economy. Heck, almost everyone I know recommends nothing but a Maruti or Hyundai as a first car. Also, considering the sales and service network that Maruti and Hyundai have, Toyota and Honda might want to resort to black magic to succeed in this price segment.

The Buyer

Toyota and Honda have only interacted with buyers in the Rs. 10L (more or less) and above range. Typically, these are not first-time car buyers. They would have owned a car before and would be looking to trade up. And the premium Japanese brands made a lot of sense.

On the other hand, the Rs. 4-6L segment (where the Liva and Brio are coming) is a completely different ball game. These are mostly first-time car buyers. Their primary priorities generally are good fuel economy and low-maintenance. In this price segment, the premium image of the Japanese brands would imply high maintenance costs and low fuel economy. While I don’t deny that there will be buyers looking for a premium brand in this price segment; let’s face it, they would be too few to matter.

I believe the Japanese would not succeed for the same reason a Maruti or Hyundai does not do well above the Rs. 10L range – brand hierarchy. Indians typically form a hierarchy of brands in their mind and associate each brand with particular qualities. These perceptions are very hard and costly to modify. In order to change their perception, the Japanese would most likely have to sacrifice their high-end customers. Undoubtedly, a very tough choice to make.