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Yamaha keen on tapping rural markets in India for larger sales.

Japanese automaker Yamaha Motor has already announced that India will be its biggest market by 2016. This, after Indian two-wheeler market beat China in 2012 with an estimated demand for 14 million units. With a range of models designed and developed specifically for India and emerging markets, Yamaha is now concentrating on tapping rural markets for larger sales. Masaki Asano, MD Yamaha Motor India Sales, in a chat with Sharan Poovanna shared some of their plans for the Indian market.

How does Yamaha plan to take their plans in India forward?

We have devised an Area Market Approach where there will be specific focus on different geographies in India. The two wheeler industry in India registered a de-growth of -0.2% Jan-April 2013) while Yamaha registered a 22% growth rate. We have a market share of around 3% in motor cycles and 16% in scooters. With the new plant in Chennai to be completed by mid-2014,we would like to take our share up to 10% in the next 5-10 years for motorcycles. Scooter segments are doing really well and we are targeting to take this to rural areas for higher sales volumes. We launched Ray in September 2012 and already sold 70,000 units and have 16% market share.

Will the company shift its focus from motorbikes to scooters considering how well the segment has done for the company?

We have a larger presence in motorbikes and do not see any shift as of now. Scooters have been doing well for us and will help us tap rural markets. Currently our production is about 25,000-27,000 motorbikes and around 10,000 scooters per month.

Will the new R&D centre in India cater to other markets as well?

The first priority of the new centre will be to cater to Indian markets. Currently we have around a 100 people in the R&D centre here. We have also established Yamaha Motor India Sales Team to carry forward our plans.

How is the company fairing on exports?

The products manufactured at our Surajpur plant (Noida) and the new plant at Chennai will also take our exports to over 1 million next year and subsequently to 2 million by 2016. We currently export to Sri Lanka, Nepal, Argentina and other countries in South America.

When will Yamaha launch their Super Bikes in India?

We have no plans for that as of now. All our super bikes are being produced in Japan currently. In India there is a presence of our bigger bikes but they have to be imported from Japan through our dealers. Our focus remains clear to increase our volumes with more sales in both urban and rural population.

A mixed May for auto-makers

May was a month of mixed fortunes for automobile makers with some companies doing well, and others unable to match the sales numbers of May 2012 because of a sluggish economy and the continued negative sentiment among customers.

While majors such as Maruti Suzuki India (MSIL) and Tata Motors saw a decline in sales in passenger vehicles, others such as Honda Cars India and General Motors India reported good numbers thanks to new launches such as the Honda’s Amaze and GM’s Chevrolet Enjoy.

“We expanded our operating universe with the new Honda Amaze which continues to receive great response from the first time buyers and consumers looking for a family car,” Jnaneswar Sen, Senior Vice-President – Marketing & Sales, Honda Cars, said. The company sold 6,036 units of Amaze in May.

Market leader Maruti Suzuki’s exports also declined by 27 per cent to 6,856 units during the month compared with 9,406 units in the corresponding month last year (see table).

Hyundai Motor India’s sales picked up marginally in both domestic and export segments compared with the same month last year.

Tata Motors passenger car sales dropped 46 per cent year-on-year during the month, while Toyota Kirloskar Motor’s sales declined 35 per cent.

Renault India’s sales jumped multi-fold over May 2012 with the Duster SUV turning a big seller at 5,146 units.

In the two-wheeler segment, TVS Motor Company’s sales fell 8 per cent on year-on-year basis.

While India Yamaha Motor saw a jump in sales, Honda Motorcycle and Scooter had a marginal growth. The market growth is expected to continue, with the launch of the new ‘Ray Z’ specifically targeting men, which will help Yamaha increase sales, the company said.

In the commercial vehicles’ segment, Eicher Motors and Mahindra and Mahindra had marginal growth.

However, Tata Motors’ sales were also down compared to May 2012. Ashok Leyland’s CV sales fell 16 per cent to 7,267 units.

Eicher Motors rides on Enfield

Eicher Motors rides on EnfieldMotorcycle arm profit nearly doubles; market share up for Volvo-Eicher JV

At a time when manufacturers in the domestic motorcycle industry are struggling with slower sales, leisure bike maker Royal Enfield managed to post growth of 45.3 per cent to sell 34,736 units in the first quarter of this calendar year. The company follows a January-December financial year.

This came on a low base of 23,899 units sold in the corresponding period last year. Given the niche segment it operates in, the strong demand pull has given Eicher Motors, which owns Enfield, the impetus for a plan to attain global leadership in the mid-size segment over the next few years.

Siddharth Lal, managing director and chief executive officer of Eicher Motors, says, “We want to be a global player in the mid-size category and will do whatever it takes to attain that. We want to have a significant share in each country in the world where there is a potential market for mid-sized motor-cycles.”

To power its global ambitions, Enfield has commenced work on new platforms to develop products for markets beyond its traditional stronghold of Europe and America.

Exports presently constitute just three per cent of its overall sales, which as of last year was 113,000 units. With the commissioning of a new factory at Oragadam, near Chennai, the company hopes to take export share to at least 10 per cent. Built for Rs 150 crore, the new plant has an initial installed capacity to produce 150,000 units annually, being enhanced to roll out 250,000 units yearly by 2014. The company hopes for an annual production of 500,000 units in the next few years, with additional capacity at its older facility.

Sales estimate revised
For the current year, Enfield has revised upwards its sales estimate to 175,000 units as against 150,000 projected earlier, due to strong demand for its products in the domestic market. By the end of next year, the company hopes to achieve sales of 250,000 units.

The strong demand has translated into healthy financials for the motorcycle vertical. This arm recorded a rise of 98 per cent in earnings before interest and tax at Rs 53.1 crore, as compared to Rs 26.8 crore in the 2012 quarter. With initiatives in place to contain costs, Enfield posted a record quarterly margin of 15.9 per cent.

VE Commercial Vehicles, the 50-50 joint venture between Eicher and Volvo, managed to improve its market share to 13.9 per cent during the quarter from 11.1 per cent a year earlier. Said Lal, “Given the overall market conditions, with sales sharply dropping in the industry, VECV has done extremely well in gaining market share across every single segment we operate in, as well as a very maintaining a very healthy operating margin in these type of circumstances.”

The margins for VECV dropped to 6.4 per cent during the quarter as compared to 9.1 per cent in 2012, largely due to pressure on volumes and and discounts.

Overall, the company registered sales of 12,529 units between January and March, a decline of 12.3 per cent over the 14,289 units sold last year.

VECV, however, increased its market share in the 5-14 tonne range to 30.8 per cent (from 29.8 per cent), and in the 16-tonne and above heavy truck segment to 12.3 per cent (from 9.3 per cent) in the period under review.

Vinod Aggarwal, chief executive officer of VECV, said, “We have been integrating the best practices of Volvo with our expertise in frugal engineering. We are upgrading our entire product range in collaboration with Volvo. These vehicles will be introduced by the end of this year and would be exported to markets in South Africa and Southeast Asia.” With the new product range in place, VECV has a target of 100,000 unit sales of trucks and buses by 2015.

The ratio of exports in VECV’s total sales is also expected to go up to 12-15 per cent over the next two to three years because of the new product interventions. Exports currently constitute four per cent of overall sales for the company.

VECV has invested Rs 1,300 crore in India since the JV’s formation in 2008. The plan is to infuse another Rs 1,200 crore till 2015 to meet the requirement of ongoing projects, in setting up an engine manufacturing unit, a bus body building facility, in developing new products and in expanding capacity expansion by 45 per cent to 8,000 units a month by 2015.

Mahindra two wheelers to rev up executive bike segment

Mahindra Two Wheelers Ltd plans to focus on rural markets to tap the potential for executive motorcycles.

With 100-110 cc bikes accounting for about 60 per cent of the motorcycle market estimated to be about 8.5-9 lakh per month, the company, a relatively late entrant, sees this as a big opportunity in rural areas.

The diversified Mahindra & Mahindra Group will leverage its big presence in the rural market with its farm equipment division including tractors, to tap into the rural market where executive bikes continue to be popular.

Dharmendra Mishra, Vice President, Mahindra Two Wheelers Limited, said, “The company will provide a wider range of bikes f

or consumers to select from. The company R&D centre is playing a vital role in tapping into various segments.”

Launching the company’s new entry-level variant of Pantero, a 110 cc motorcycle in Hyderabad, he said within couple of months they expect to go pan-India.

The company will also launch Centuro in the second quarter of this financial year.

Referring to the general slowdown in the market, he said demand is likely to pick up during the festive season. The second half this year is expected to fare better than the first half.

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“We are working on several platforms and expect to roll out new models depending upon what the consumers want. This is just the beginning of a long journey. The company began with scooters. With entry into the motorcycle segment, the company will be able to address a much bigger market,” he said.

The Pantero is priced in the range of Rs 40,599 to Rs 44,599 for four models, all ex-showroom.

Honda opens third 2-wheeler plant in India

Honda Motorcycle and Scooter India (HMSI), India’s second-largest two-wheeler company, plans to expand its installed annual capacity 15 per cent to 4.6 million units by March 2014.

On Tuesday, the company inaugurated a plant at the industrial area here, 58 km from Bangalore, it’s third plant in the country, after those in Manesar in Haryana and Tapukara in Rajasthan.

The three plants have a combined capacity of four million units a year.

The Narasapura plant would initially produce 1.2 million units a year. By March 2014, additional capacity of 600,000 units would be added, through a third assembly line, said Keira Muramatsu, president & chief executive. The Narasapura plant would see a total investment of Rs 1,350 crore, including the funds for expansion.

The company has acquired 23 acres from the Karnataka government for creating additional facilities such as a safety riding track. By the end of this financial year, the plant, spread over 96 acres, would provide employment to 4,500 people, said Yadvinder Singh Guleria, vice-president (sales and marketing). The company would produce the Dream Yuga motorcycle at the plant from June. Two months later, it would start manufacturing Activa scooters on the second assembly line, he added.

Accordingly, the company would reduce the Activa’s waiting period from the current 15 days.

“At present, 100,000 customers are waiting for delivery of the Activa in cities such as Bangalore, Kochi, Trivandrum, Chennai, Hyderabad and Vizag,” he said.“Seeing the current trend of demand for scooters and motorcycles, we have decided to expand the capacity by 6,00,000 vehicles by the end of this financial year to raise the total capacity to 1.8 million units in Narasapura.

Are quadricycles a four-wheel ride to success ?

In Delhi, auto-rickshaws ferry over 20 lakh passengers every day, nearly as many as the city's swanky metro service does (around 2.2 million). Or about half the number of passengers that take the Delhi Transport Corporation buses every day (4.5 million). In smaller cities like Agra or Allahabad, say transport economists, nearly half of all the motorised trips are made on three-wheelers.

From these numbers, a large part of the burden of transporting people from one place to another seems to have fallen on the ubiquitous three-wheelers. Taxis are expensive and finding one is not easy. Buses are overcrowded and unpunctual and they are either racing to overtake their rivals or stopping frequently to take on as many passengers as possible. Autos, therefore, provide a relatively affordable option for travel.

However, last week, the government added a new alternative for commuters. It allowed quadricycles. an upgraded auto-rickshaw with four wheels and doors, for intra-city transportation, albeit with some riders. For now, quadricycles can be used only for commercial use within cities and cannot run on highways. Besides, they will have to meet stringent emission norms.

The idea, if it catches on, promises to fundamentally change the country's transport economy. The first quadricycle on the road is likely to be Bajaj Auto's RE60. The company has the product ready and had been fighting hard to get the vehicle approved by the government. It hopes to sell at least 5,000 quadricycles every month.

The new vehicle could provide commuters an option between the three-wheelers and the taxis. Experts say it will fill the requirement of those who want to upgrade to a taxi but are deterred by high fares. Taxi fares are generally double that of an auto. Besides, taxis are also in short supply in most cities. In Mumbai, for instance, the number of black-and-yellow taxis has dropped from 62,000 in 1997 to just 32,000 this year as new permits have been restricted. In comparison, there are around 100,000 autos in the city.

Rajiv Bajaj, managing director of Bajaj Auto, says the quadricycles will not cannibalise the three-wheelers. He believes the two could co-exist and expand the portfolio of affordable transportation.

Market size
How big is this an opportunity for Bajaj Auto? Under the new policy, quadricyles cannot become an alternative to passenger cars. Also, that would require considerable jazzing up of the model and more safety tests. But many experts say it could happen over the next four to five years.

Says Dinesh Mohan, Volvo Chair Professor Emeritus in the Transportation Research and Injury Prevention Program at IIT Delhi: "In the near future we could have two kinds of car models, one like the RE 60 which cannot go over an average 50 kmph but are safe vehicles for daily use, and two, vehicles that speed beyond 50 kmph which you will use on highways or for longer distances".

Such a change would bring in new buyers who cannot afford a car at present. It could also encourage families which already own a car to buy another vehicle for the daily commute of other family members. In India, average occupancy of a car is just 1.7 to 1.8. Assuming that a family has at least four members, the occupancy level leaves enough room for another vehicle for the household. For quadricycles, this could be a huge market.

Of course, a lot would depend on the price of the upgraded RE60 in comparison to other ultra-small cars like the Nano. Bajaj has not revealed the price but the buzz is that it would cost between Rs 1.3 lakh and Rs 1.5 lakh. Compared to the Nano's Rs 1.53 lakh ex-showroom tag currently, RE60 may not have much of an advantage, considering its engine capacity is nearly one-third of the Nano's.

However, the RE60's key selling point will be its fuel efficiency. The vehicle claims to give 35 km to a litre compared to the Nano's 25.4 km to a litre. In other words, the RE60 will consume around 40 per cent less fuel for the same distance compared to the Nano. Experts say that the running cost of a small car like the Nano is Rs 3,000 to Rs 4,000 a month. For the RE60, this bill will be down by Rs 1,200 a month.

The quadricycle could also come in handy for moving goods within the city. Currently, the government has paid little thought in this direction, but goods transportation could open up new market for the vehicle. The opportunity here is massive: companies could use the vehicle to deliver goods to kirana stores, e-commerce sites to their customers, sellers of consumer goods such as TV sets and fridges could use it to ship their orders, and so on. As of now companies use an array of transport option-vans, tempos, cars, Matadors- to ferry goods. The RE60 could position itself as an attractive urban goods carrier with some modifications. Says Mohan: "The RE60 has to be customised and designed to meet the specific transportation needs for delivering TV sets, lifestyle products or pizzas. That would be the challenge. Of course, the government has to make clear rules and regulations on its usage". The vehicle could also function as a mini ambulance for cases where a patient does not need to be carried on a stretcher.

Safety issues
However, many have their reservations about the vehicle's safety and environment-friendliness. Tata Motors Managing Director Karl Slym, who is struggling to sell the Nano, says that allowing quadricycles is a regressive step. "The government and industry have been accelerating efforts in traffic safety and environment, now we consider a quadricycle. Why go backwards?" he had tweeted. However, he has not ruled out the possibility of entering the segment in the future.

Most of the concerns over the safety are based on a European Safety Council report which says that quadricycles have a fatality risk 10 to 14 times higher than other cars.

Bajaj Auto brushes aside these doubts. As for the RE60's green credentials, it claims the emissions from the RE60 at 60 grams of Co2 per km is substantially lower than pollution norms of most available cars in the market. The Nano emits 92.7 gram of Co2 per km, auto-rickshaws 85.6 grams and the Maruti Alto 103 gram.

Also, some say slower vehicles are less likely to be involved in road accidents. A study undertaken in six Indian cities by Mohan's team at IIT shows that three-wheelers are no less safe nor more accident-prone than cars. According to government data, the share of auto rickshaws in the total road accidents in India is only 7.3 per cent compared to 21. 8 per cent for cars and over 23 per cent for two wheelers. The quadricycle has a weight closer to that of an auto (autos weigh 350 kg, while RE60 has a weight of 400 kg).

There are other areas where quadricycles score over cars. For one, they require less space than a car on the road, and two, with a mass weight which is one-third that of an average car, there is less wear and tear of the road. With these advantages to boot, the quadricycle could create a substantial market for itself in the country's transportation system.