CHAPTER -1 INTRODUCTION

CHAPTER -1
INTRODUCTION
An overview of two-wheeler industry
India, is the second largest producer of two-wheelers in the world. In the last few years, the Indian two-wheeler industry has seen spectacular growth. The country stands next to China and Japan in terms of production and sales respectively. Majority of Indians, especially the youngsters prefer motorbikes rather than cars. Capturing a large share in the two-wheeler industry, bikes andscooters cover a major segment. Bikes are considered to be the favorite among the youth generation, as they help in easy commutation. Large variety of two wheelers are available in the market, known for their latest technology and enhanced mileage. Indian bikes, scooters and mopeds represent style and class for both men and women in India.

Benefits of two wheelers

Two-wheelers are the most popular and highly sought out medium of transport in India. The trend of owning two-wheelers is due to itsEconomical price Safety Fuel-efficient

Comfort level Before the Foreign Motor Cycle Entrance in Market: There were three manufacturer in the motor cycle segment viz. Enfield, ideal Jawa and Escorts while Enfield bullet was a four stroke, Jawa and the Rajdoot were two stroke bikes. The motorcycle segments was initially dominated by Enfield 350CC bikes and Escorts 175CC bike. After the Foreign Motor Cycle Entrance in Market: The two-wheeler market was opened to foreign competitor in the mid 80s. And the then market leader Escort and Ensiled were caught unaware by the onslaught of the 100CC bikes of the four Indo-Japanese joint venture. With the availability of fuel-efficient low power bikes, demand swelled, resulting in Hero Honda, then the only producer of four stroke bikes (1oocc category), gaining a top/ The first Japanese motor cycle were introduced in the early eighties. TVS Suzuki and Bajaj brought in the first two-stroke and four stroke engine motorcycle respectively. There two player initially started with assembly of (KD kits, and later on progressed to indigenous manufacturing. In the 90s the major growth for motorcycle segment was brought in by Japanese motorcycles, which grew at a rate of nearly 25% (AGR in the last five years). The industry had a smooth ride in the 50s, 60s and 70s when the government prohibited new entrees and strictly controlled capacity expansion the industry saw a sudden growth in the 80s. Te

industry witnessed a steady growth of 14% leading to a peak volume of 1,9 mn vehicles in 1990. In 1990 the entire automobile industry saw a drastic fallen demand. This resulted in decline of 15% in 1991 and 8% in 1992 resulting in a production loss of 0.4 mn vehicles. Baring Hero Honda, all the major producers suffered from

recession in Fy. 93 and 94 Bajaj showed a marginal decline in 1992. The reasons for recession in the sector were the incessant rise in fuel prices, high input costs and reduced purchasing power due to significant rise in general price level and credit crunch in consumer financing factors like increased production in 1992, due to new entrants coupled with the recession in the industry resulted in companies either reporting losses or a fall profits. The domestic two wheeler sales of 3.778mn in Fy 2000 the motor cycle share represent 47.7% (41% in Fy 1999 (the motor cycle segment has gradually increased its presence from 27% in Fy 92 to 47.7% in Fy 2000. Mainly at the expense of the scooter and to some extent the moped segment. It is expected that Motor cycle segment will continue to grow at an average of 20% in Fy 01 this will increased demand for Motor cycle from 1.796 mn FY 2000 to 2.15 mn in FY 01 The supply of motor cycles as per the present trend will increase from 2.08mn in FY 2000 to 2.38 mn in FY 01. The segment will be witnessing several new entrants in FY 10, mainly in the four stroke sub segment this will lead to an over supply situation and increase the competition of the

Japanese segment. Motor cycle segment has witnessed tremendous of growth over the past few year, the reason can be change in the buying behavious of the consumer and the change in the trends. In the last six years, the domestic two-wheeler industry has seen structural changes. This can be seen from the change in composition of two-wheeler sales, where the motorcycles have consistently gained market share of 41% of total twowheeler sales. This trend is expected to continue in the next two years till the four stroke scooters make their presence felt in the segment. The table below gives in idea about the strides made by the motorcycle segment in the last eight years.

In (Percent) FY 93 FY 94 FY 95 FY 96 FY 97 FY 98 FY 99 FY 2000 2010

Motor Cycle 25.2 26.7 29.5 30.0 33.3 37.0 41.0 47.6 76.7

Source: SIAM

The Indian motorcycle industry can be broadly categorized in the Indian motorcycles and Indo-Japanese motorcycles. The Indo-Japanese motorcycle segment is dominated by Hero Group, Bajaj and Escorts in collaboration with Japanese vehicles manufactures Honda, Kawasaki and Yamaha respectively. The Indian motorcycles segment is dominated by Bajaj (M 80), Escorts and Royal Enfield. In motorcycles sales, western region leads with a marker share of 40% of the total motorcycle sales. South an north regions come second and third with a market share of 27.5% and 17.4% of total motor cycle sales respectively. Technologies and Usage of Motor Bikes: Two-wheeler is one of the rare industries, which is capital as well as labor intensive. The setting up of a green field venture and ancillary network require enormous capital investment. The assembly operation is highly labour intensive. The capital requirement for a venture varies from segment to segment based on amount of outsourcing. Two-wheeler Market in India Automobile, being the leader in product and process technologies of the manufacturing sector, has been recognized as one of the major drivers of economic growth. The Indian economy has been growing around 8% for the past few years. This growth has enabled an overall change in the social status of the Indian population. Additionally, every year, many rural areas and Tier-III cities

are progressing to a higher status, opening immense growth opportunities for the two- wheeler industry. The two-wheeler market has emerged as the most vibrant and transforming segment of the overall Indian automobile industry, witnessing an unprecedented growth. Rising rural demand and fuel efficiency are among the major factors boosting the growth in the market. Despite the economic slowdown, the Indian automobile industry has been performing consistently well, compared to other major markets of the world. The Indian two-wheeler market possesses a significant potential, and is anticipated to grow at a CAGR of around 11% during FY 2011- 2015 to reach 17.8 Million Units by FY 2015-end. Our report has studied the Indian two-wheeler market from various perspectives. It entails a detailed analysis of the market in terms of segments. Each section sufficiently explains the current and future market trends, and the ongoing developments in the Indian two-wheeler market. Our research also foresees immense opportunities for various international and domestic players in this segment. The report has also considered the preferences by gender, and income levels as part of macro-economic indicators to understand this market of India, which is one of the worlds leading two-wheeler exporters. Our report, Two Wheeler Market in India, has comprehensively analyzed the emerging trends, like reviving of scooter segment and shooting demand for

executive and premium segment bikes in two wheeler markets, which are expected to prevail in near future. Our proposition in this report is likely to facilitate clients in understanding the present and future outlook of the two wheeler market and developments in the country. Further, we have also evaluated various government regulations and initiatives that will provide the prerequisite boost to the two wheeler market in India, and facilitate cutting-edge market intelligence to intending clients while making investment decisions.

Five facts about India's growing two-wheeler market

Two-wheeler company Hero MotoCorp on Monday said its first bike without the technology of erstwhile partner Honda will hit the market by 2014. The bike could be developed in India or anywhere but it would be on a completely new platform, managing director and CEO Pawan Munjal said.

The company continues to use Honda technology for its products after the breakup of their joint venture, Hero Honda. It has a licence agreement with the Japanese firm till 2014. The joint venture ended in December 2010.

Here are five things to know about the Indian two-wheeler industry:

According to industry body, the Society of Indian Automobile Manufacturers, the Indian two-wheeler industry is expected to post an annual growth of 11-12 per cent, and the market is expected to double every four years till 2020. According to data from Nomura and Crisil, as

many as 10 million two-wheelers were sold in India 2011-12. Vehicles in the executive segment formed the bulk of sales at 6.5 million, followed by the economy segment (1.8 million) and premium segment (1.7 million).

The recent series of hikes in the price of petrol have played a significant role in the sale of two-wheelers, according to SIAM, as most first-time four-wheeler buyers in rural India and tier II and tier III cities have deferred their purchases. Two-wheelers account for a whopping 76 per cent of market share in the automobile sector in Asias third-largest economy. Passenger vehicles account for 16.25 per cent.

Barely 18 months after Indias most successful two-wheeler marriage ended, Honda made its ambitions clear by launching the 110cc Dream Yuga, its first low-cost motorcycle meant to target the budget market ruled by Hero and Bajaj. The Dream Yuga comes at an attractive Rs 44,642, and will compete with Heros Splendor, which costs Rs 42,950. The Splendor is Indias top-selling bike.

Other two-wheeler companies such as Yamaha and Suzuki, too, are steadily focusing on the mass-market segment in an attempt to dislodge the two giantsHero and Bajaj. Yamaha last month announced a new $280 million factory in India to nearly triple its capacity to 2.8 million motorcycles by 2018, while Suzuki Motor, which is expected to launch a mass-market

offering soon, is building a new factory to take its India capacity to close to one million motorcycles by 2014.

Hero has a market share of around 56 per cent in the overall domestic twowheeler market. At 25.5 per cent, Bajaj comes a distant second, but maintains a healthy lead over Honda and TVS, which have 7.5 per cent and 6.2 per cent market share, respectively. In terms of volume growth over the previous fiscal year, Hero leads with 16.5 per cent, followed by Honda (13.6 per cent), Bajaj (7.4 per cent) and TVS Motors (minus 0.3 per cent). Top brands from each stable are as follows: Hero Passion, Splendor and Pleasure (scooter); Bajaj Pulsar and Discover; Honda Unicorn, Twister and Activa (scooter); TVS Flame, Apache and Scooty (scooter).

A little more than two decades after it began to open its economy in 1991, India still counts as an emerging market. There's still plenty of room for growth in product categories from alcohol to mobile phones, as a consumer revolution takes hold among a middle class that is expanding rapidly. Take two-wheelers, for instance. Data from the Society of Indian Automobile Manufacturers show that sales of two-wheelers in India rose an astonishing 85 percent between 2007-2008 and 2011-2012, to 13.4 million units a year. The two-wheeler market was one of the drivers of India's consistent double-digit growth, reflecting exploding demand for fuel-efficient transport in rural areas --

where public transport is often poor or nonexistent -- and from specific segments of the urban population such as students, office workers and working women. (Much of the advertising for scooters is directed at the last category, such as a commercial featuring the Bollywood film-star Priyanka Chopra with the tagline, "Why should boys have all the fun?") The market for two-wheelers in India, though, may have peaked earlier than most others. Demand rose just 2.9 percent in the last financial year, even though a host of multinational companies, including the Japanese brands Honda, Suzuki and Yamaha, have recently entered the Indian market to compete with the big domestic brands owned by the market leaders, Hero MotoCorp Ltd. and Bajaj Auto Ltd. (as well as other significant players such as TVS Motorsand Mahindra Two Wheelers) . The phase of exceptionally high growth is probably over, with the two-wheeler market having come close to its maximum penetration level in a slowing economy. But that might not be not such a bad thing. After surviving years of ferocious competition domestically, and swiftly leading an undeveloped market into a state of maturity, Indian two-wheeler manufacturers have begun to take a more global view. As demand at home cools, the Splendors, Boxers, Passions and Scootys are increasingly turning up on other continents. The next phase of expansion for Indian two-wheeler companies will probably be built on exports to other emerging markets in Asia, Africa and Latin America.

This week, in the business newspaper Mint, Shally Seth Mohile took stock of these trends in a report titled "Two-wheeler firms eye Africa, Latin America": Indian two-wheeler makers, finding the going tough in a domestic market that is close to saturation point, are breaking new ground in markets such as Africa and Latin America. Rising labour costs in China, which is the biggest exporter of twowheelers to these markets, are helping the Indian cause. ... In India, an economic downturn, high borrowing costs and increasing fuel prices have slowed sales growth. Combined two-wheeler sales in India remained flat at 57,51,267 units in the five months from April to August, compared with 57,10,176 units in the same period a year ago, according to the Society of Indian Automobile Manufacturers, or SIAM. After expanding at a brisk pace for several years, sales rose by a mere 3% in fiscal 2013. The story of Hero MotoCorp might be seen as a sign of the increased willingness of the Indian automobile industry to think globally, a stark contrast to the protectionism habitually sought by Indian industry in the decades after independence. In December 2010, the company pulled the plug on Hero Honda, its 26-year-old joint venture with Honda Motor Co., buying out the Japanese auto giant in India, a transaction valued at close to $2 billion. Part of its reason for doing so was that it was limited by the terms of the joint venture to exporting two-wheelers only to those markets where Honda wasn't already present.

Three years later, Hero remains the leading player in India's two-wheeler market (even as its former partner, Honda, has set up its own operations in India and risen quickly to beat out Bajaj Auto for second position). But it has a lot of catching up to do overseas. In the years that Hero Honda had remained restricted to South Asia, Bajaj had made significant progress in reaching out to emerging markets elsewhere. It is now the market leader inNigeria, has a significant presence in many markets in Latin America, and exports make up almost 35 percent of its revenue from motorcycle sales (it also makes three-wheelers). Eventually, the company expects sales from exports to surpass domestic revenue. Earlier this year, Hero announced ambitious plans to expand the company's presence to more than 50 countries by the end of the decade and keep pace around the world with Bajaj. The company, which currently exports about 200,000 twowheelers annually (Bajaj, by comparison, sells more than 1 million) said that it would soon be selling two-wheelers in Kenya, Burkina Faso, Ivory Coast, Ecuador and Peru, and that it planned to set up a manufacturing unit in Colombia. In a 2011 profile of the company's chief executive officer, Pawan Munjal, Samar Srivastava wrote of the company's plans to make up for lost time in the global market: Tapping into Africa, Latin America and South East Asia, the three markets the company plans to get into, will be a tough challenge. First off, the company has decided that it will not play the price game there, which would bring it in direct

competition with Chinese brands. So it is more likely that it will end up competing with homegrown Bajaj and erstwhile partner Honda in these markets. The belief inside Hero is that if Bajaj can export a million motorcycles, then there is no reason why they cannot, in time, notch up similar numbers. Mahindra Two Wheelers announced last month that it was going to make three models available in Latin America with the aim of doubling exports to 20 percent of overall sales. Cumulatively, these developments signal a global ambition on the part of one of the few manufacturing sectors in India that can hope to hold its own against Chinese goods. Two-wheeler sales in India are spread across three main product categories: motorcycles, scooters, and mopeds. While in the previous decade, scooters were the largest selling product category, in the current one, consumer preferences appear to have shifted decisively in favour of motorcycles, which now account for over 80 percent of total two-wheeler sales in India. The rural market, a key demand driver for the two-wheeler industry as a whole, has been a significant contributor to the shift in preference towards motorcycles. With their longer wheel base and better mileage, motorcycles enjoy preference over scooters, especially in country-sides, as they ride well over long distances and uneven roads, besides being perceived to have a superior style quotient. However, given the practicality of scooters, especially in urban areas, their demand is likely to be sustained. As a product category, scooters have also undergone an image makeover, having

metamorphosed into vehicles with cleaner technology, gearless options, and features targeted at female commuters

Higher segment motorcycles in gain prominence although entrylevel bikes remain volume leaders
Motorcycle models with a sticker price of up to Rs. 40,000 comprise the entryprice segment, which largely consists of 100cc bikes. This segment is currently dominated by the CD Deluxe model of Hero Honda Motor Limited (HHML) and Platina of Bajaj Auto Limited (BAL). The two wheelers being a relatively small ticket item, has customers usually belonging to the most vulnerable and economical section, within the universe of motorcycle buyers. The segments profitability for two-wheeler manufacturers declined in 2007-08, with volumes falling and price competition getting more intense. The Rs. 40-50,000 mid-price segment is largely concentrated around 100-135cc models of various players and account for bulk in volumes, which is approximately 63 percent in motorcycles. HHML remains a strong market leader in the mid-price segment with its highly successful Passion and Splendor models. BAL has Discover and Pulsar 135 in this range. The premium price segment (Rs. 55,000 and above) is currently dominated by BAL with its Pulsar range of motorcycles.

RURAL MARKETING INITIATIVES Honda tapped into the interiors of the country, with an aim to penetrate a larger market with their two wheelers, especially in the rural areas. The company uses IT for the co- ordination with the channel partners and updation of the sales details of two wheelers in the rural areas. This helps the company in demand forecasting of the two wheelers in the region. They initiated programs like Har Gaon, Har Aangan and Service Har Jagan, in the rural areas of few states in India. There is a network of over 2000 rural sales channel partners set up by Hero Honda, who constantly extend these programs on the state and the national level. As a part of the Ride Safe Programs, the company has appointed rural sales executives, who conduct free check-ups, bike camps, loan melas, test ride camps, awareness camps on programs like Genuine Spare Parts, GoodLife Program, Hero Honda Advantage and educate people on safety riding, maintenance etc. Hero Honda also conducted these camps in association with Monsanto, Godrej Aadhar, IIFCO etc all across the country. Through these programs, Hero Honda aims to escalate the volume growth of their two wheelers. Additionally, the company has set up many kiosks and displays in the DCM Hariyali Kisaan Bazaar Centres in the rural areas in the Indian states of Uttar Pradesh, Madhya Pradesh, Haryana, Punjab and Uttaranchal, as a part of its branding activities.

Chapter-2

Indian Two-Wheeler Industry: A Perspective

Indian Two-Wheeler Industry: A Perspective

Automobile is one of the largest industries in global market. Being the leader in product and process technologies in the manufacturing sector, it has been recognised as one of the drivers of economic growth. During the last decade, well-directed efforts have been made to provide a new look to the automobile policy for realising the sector's full potential for the economy. Steps like abolition of licensing, removal of quantitative restrictions and initiatives to bring the policy framework in consonance with WTO requirements have set the industry in a progressive track. Removal of the restrictive environment has helped restructuring, and enabled industry to absorb new technologies, aligning itself with the global development and also to realise its potential in the country. The liberalisation policies have led to continuous increase in competition which has ultimately resulted in modernisation in line with the global standards as well as in substantial cut in prices. Aggressive marketing by the auto finance companies have also played a significant role in boosting automobile demand, especially from the population in the middle income group. Evolution of Two-wheeler Industry in India Two-wheeler segment is one of the most important components of the automobile sector that has undergone significant changes due to shift in policy environment. The two-wheeler industry has been in existence in the country since 1955. It

consists of three segments viz. scooters, motorcycles and mopeds. According to the figures published by SIAM, the share of two-wheelers in automobile sector in terms of units sold was about 80 per cent during 2003-04. This high figure itself is suggestive of the importance of the sector. In the initial years, entry of firms, capacity expansion, choice of products including capacity mix and technology, all critical areas of functioning of an industry, were effectively controlled by the State machinery. The lapses in the system had invited fresh policy options that came into being in late sixties. Amongst these policies, Monopolies and Restrictive Trade Practices (MRTP) and Foreign Exchange Regulation Act (FERA) were aimed at regulating monopoly and foreign investment respectively. This controlling mechanism over the industry resulted in: (a) several firms operating below minimum scale of efficiency; (b) under-utilisation of capacity; and (c) usage of outdated technology. Recognition of the damaging effects of licensing and fettering policies led to initiation of reforms, which ultimately took a more prominent shape with the introduction of the New Economic Policy (NEP) in 1985.

However, the major set of reforms was launched in the year 1991 in response to the major macroeconomic crisis faced by the economy. The industrial policies shifted from a regime of regulation and tight control to a more liberalised and competitive era. Two major results of policy changes during these years in two-

wheeler industry were that the, weaker players died out giving way to the new entrants and superior products and a sizeable increase in number of brands entered the market that compelled the firms to compete on the basis of product attributes. Finally, the two-wheeler industry in the country has been able to witness a proliferation of brands with introduction of new technology as well as increase in number of players. However, with various policy measures undertaken in order to increase the competition, though the degree of concentration has been lessened over time, deregulation of the industry has not really resulted in higher level of competition.

A Growth Perspective
The composition of the two-wheeler industry has witnessed sea changes in the post-reform period. In 1991, the share of scooters was about 50 per cent of the total 2-wheeler demand in the Indian market. Motorcycle and moped had been experiencing almost equal level of shares in the total number of two-wheelers. In 2003-04, the share of motorcycles increased to 78 per cent of the total twowheelers while the shares of scooters and mopeds declined to the level of 16 and 6 per cent respectively. A clear picture of the motorcycle segment's gaining importance during this period is exhibited by the Figures 1, 2 and 3 depicting total sales, share and annual growth during the period 1993-94 through 2003-04.

National Council of Applied Economic Research (NCAER) had forecast twowheeler demand during the period 2002-03 through 2011-12. The forecasts had

been made using econometric technique along with inputs obtained from a primary survey conducted at 14 prime cities in the country. Estimations were based on Panel Regression, which takes into account both time series and cross section variation in data. A panel data of 16 major states over a period of 5 years ending 1999 was used for the estimation of parameters. The models considered a large number of macro-economic, demographic and socio-economic variables to arrive at the best estimations for different two-wheeler segments. The projections have been made at all India and regional levels. Different scenarios have been presented based on different assumptions regarding the demand drivers of the twowheeler industry. The most likely scenario assumed annual growth rate of Gross Domestic Product (GDP) to be 5.5 per cent during 2002-03 and was anticipated to increase gradually to 6.5 per cent during 2011-12. The all-India and regionwise projected growth trends for the motorcycles and scooters are presented in Table 1. The demand for mopeds is not presented in this analysis due to its already shrinking status compared to' motorcycles and scooters. It is important to remember that the above-mentioned forecast presents a longterm growth for a period of 10 years. The high growth rate in motorcycle segment at present will stabilise after a certain point beyond which a condition of equilibrium will set the growth path. Another important thing to keep in mind while interpreting these growth rates is that the forecast could consider the trend till 1999 and the model could not capture the recent developments that have taken

place in last few years. However, this will not alter the regional distribution to a significant extent.

Table 1 suggests two important dimensions for the two-wheeler industry. The region-wise numbers of motorcycle and scooter suggest the future market for these segments. At the all India level, the demand for motorcycles will be almost 10 times of that of the scooters. The same in the western region will be almost 20 times. It is also evident from the table that motorcycle will find its major market in the western region of the country, which will account for more than 40 per cent of its total demand. The south and the north-central region will follow this. The demand for scooters will be the maximum in the northern region, which will account for more than 50 per cent of the demand for scooters in 2011-12.

Table 1: Demand Forecast for Motorcycles and Scooters for 2011-12 2-Wheeler Segment South Motorcycle Scooter West 2835 4327 (12.9) (16.8) 2624 (12.5) Regions North-Central East & North-East 883 (11.1) All India 10669 (14.0)

203 219 602 99 1124 (2.6) (3.5) (2.8) (2.0) (2.08) Note: Compound Annual Rate of Growth during 2002-03 and 2011-12 is presented in parenthesis Source: Indian Automobile Industry: Optimism in the Air, Industry Insight, NCAER

The present economic situation of the country makes the scenario brighter for short-term demand. Real GDP growth was at a high level of 7.4 per cent during the first quarter of 2004. Both industry and the service sectors have shown high growth during this period at the rates of 8.0 and 9.5 per cent respectively. However, poor rainfall last year will pull down the GDP growth to some extent. Taking into account all these factors along with other leading indicators including government spending, foreign investment, inflation and export growth, NCAER has projected an average growth of GDP at 6.7 per cent during the tenth five-year plan. Its mid-term forecast suggests an expected growth of 7.4 per cent in GDP during 2004-05 to 2008-09. Very recently, IMF has portrayed a sustained global recovery in World Economic Outlook. A significant shift has also been observed in Indian households from the lower income group to the middle income group in recent years. The finance companies are also more aggressive in their marketing compared to previous years. Combining all these factors, one may visualise a higher growth rate in two-wheeler demand than presented in Table 1, particularly for the motorcycle segment. There is a large untapped market in semi-urban and rural areas of the country. Any strategic planning for the two-wheeler industry needs to identify these markets with the help of available statistical techniques. Potential markets can be identified as well as prioritised using these techniques with the help of secondary data on socio-economic parameters. For the two-wheeler industry, it is also important to

identify the target groups for various categories of motorcycles and scooters. With the formal introduction of secondhand car market by the reputed car manufacturers and easy loan availability for new as well as used cars, the twowheeler industry needs to upgrade its market information system to capture the new market and to maintain its already existing markets. Availability of easy credit for two-wheelers in rural and smaller urban areas also requires more focussed attention. It is also imperative to initiate measures to make the presence of Indian two-wheeler industry felt in the global market. Adequate incentives for promoting exports and setting up of institutional mechanism such as Automobile Export Promotion Council would be of great help for further surge in demand for the Indian two-wheeler industry.

Indian Two-Wheeler Industry: Rural India to be the next growth frontier

India is seeing the penetration of two-wheelers increasing at a rapid pace driven by the rise in the household incomes, reducing trend in excise duties and hitherto easy availability of two-wheeler finance. Though the two wheeler industry is presently passing through a rough patch, we project the long term outlook to be healthy with increase in penetration levels. This report on The Indian Two-Wheeler Industry gives valuable insight of the industry encompassing its evolution in India, its characteristics, demand drivers, Government regulations and trends in duties, commentary on industry players and competition and the trends in domestic sales and exports. The trends are analysed in depth for various vehicle segments, namely motorcycles, scooters, mopeds and electric two-wheelers, further sub-classified based on the engine capacity. Various segments and sub-segments are appropriately associated with the relevant products and companies for enhancing the understanding of the competitive scenario in the industry. The cost analysis presented in the report will help the reader identify the critical cost items and their trends. The company section in the report provides detailed profiles of the top three players in the industry, including their financial and operational data and product range. The report presents our forecasts of domestic as well as export sales for each of the next five years till FY 2014, separately for all the segments. We have

developed a robust model for forecasting domestic sales. It takes into account the cost of owning a two-wheeler, age demographics and income distribution of the populace. It also attempts to quantitatively adjust for qualitative factors like current economic scenario and outlook, consumer confidence level and persuasive sales techniques of dealers and vehicle financers. We have done a cross country analysis and penetration of two wheelers for the 20 big cities vis a vis the income levels in those cities, other urban areas and rural areas and quantified the opportunity in each of these markets. This analysis helps gauging the opportunity for two-wheeler manufacturers in different regions across India.

MARKET CHARACTERSTICS

DEMAND Segmental classification and Characteristics The three main product segments in the two-wheeler category are scooters, motorcycles and mopeds. However, in response to evolving demographics and various other factors, other sub-segment emerged, viz scooterettes, gearless scooters,and4-stroke scooters. While the first two emerged as response to response demographic changes, the introduction or 4- stroke scooters has followed the imposition of stringent pollution controls norms in the early 2000, Besides, these prominent sub- segments, product group within these sub- segments have gained importance in the recent years. Examples include 125cc motorcycles ,100-125 cc gearless scooters, etc. The characteristics of each of the three broad segments are discussed. Two-Wheeler: Comparative Characteristics Scooter Motorcycle Moped

Price* (Rs. as in January 2005) Stroke

>22,000

>30,000

>12,000

2-stroke,4- Stroke

Mainly 4-stroke

2-stroke

Engine Capacity(cc)

90-150

100,125, >125

50,60

Ignition

Kick/electronic

Kick/Electronic

Kick/Electronic

Engine Power(bph) Weight(Kg)

6.5-9

7-8 and above

2-3

90-100

>100

60-70

Fuel Efficiency (kms Per liter) Load carrying Lowest

50-75

50-80+

70-80

High

Highest

Low

Segmental Market Share

The Indian two-wheeler industry has undergone a significant change over the past 10 years with the preference changing from scooters and mopeds to motorcycles. The scooters segment was the largest till FY 1998, accounting for around 42% of the two-wheeler sales (motorcycles and mopeds accounted for 37%) and 21 % of the market respectively, that year). However, the motorcycles segment that had witnessed high growth (since FY1994) became larger than the scooter segment in terms of market share for the. first time in FY1999. Between FY1996 and 9MFY2005, the motorcycles segment more than doubled its share of the twowheeler industry to 79% even as the market shares of scooters and mopeds stood lower at 16%> and 5%, respectively.

Trends in Segmental Share in Industry Sales (FY1996-9MFY2005) While scooter sales declined sharply by 28% in FY2001, motorcycle sales reported a healthy growth of 20%), indicating a clear shift in consumer preference. This shift, which continues, has been prompted by two major factors: change in the country's demographic profile, and technological advancements.

Over the past 10-15 years the demographic profile of the typical two-wheeler customer has changed. The customer is likely to be salaried and in the first job. With a younger audience, the attributes that are sought of a two-wheeler have also changed. Following the opening up of the economy and the increasing exposure levels of this new target audience, power and styling are now as important as comfort and utility. The marketing pitch of scooters has typically emphasized reliability, price, comfort and utility across various applications. Motorcycles, on the other hand, have been traditionally positioned as vehicles of power and style, which are rugged and more durable. These features have now been complemented by the availability of new designs and technological innovations. Moreover, higher mileage offered by the executive and entry-level models has also attracted interest of two-wheeler customer. Given this market positioning of scooters and motorcycles, it is not surprising that the new set of customers has preferred motorcycles to scooters. With better ground clearance, larger wheels and better

suspension offered by motorcycles, they are well positioned to capture the rising demand in rural areas where these characteristics matter most. Scooters are perceived to be family vehicles, which offer more functional value such as broader seat, bigger storage space and easier ride. However, with the second-hand car market developing, a preference for used cars to new twowheelers among vehicle buyers cannot be ruled out. Nevertheless, the past few years have witnessed a shift in preference towards gearless scooters (that are popular among women) within the scooters segment. Motorcycles, offer higher fuel efficiency, greater acceleration and more environment-friendliness. Given the declining difference in prices of scooters and motorcycles in the past few years, the preference has shifted towards motorcycles. Besides a change in demographic profile, technology and reduction in the price difference between motorcycles and scooters, another factor that has weighed in favour of motorcycles is the high resale value they offer. Thus, the customer is willing to pay an up-front premium while purchasing a motorcycle in exchange for lower maintenance and a relatively higher resale value.

Supply Manufacturers

As the following graph indicates, the Indian two-wheeler industry is highly concentrated, with three players-Hero Honda Motors Ltd (HHML), Bajaj Auto Ltd (Bajaj Auto) and TVS Motor Company Ltd (TVS) - accounting for over 80% of the industry sales as in 9MFY2005. The other key players in the two-wheeler industry are Kinetic Motor Company Ltd (KMCL), Kinetic Engineering Ltd (KEL), LML Ltd (LML), Yamaha Motors India Ltd (Yamaha), Majestic Auto Ltd (Majestic Auto), Royal Enfield Ltd (REL) and Honda Motorcycle & Scooter India (P) Ltd (HMSI).

Although the three players have dominated the market for a relative long period of time, their individual market shares have undergone a major change. Bajaj Auto was the undisputed market leader till FY2000, accounting for 32% of the twowheeler industry volumes in the country that year. Bajaj Auto dominance arose from its complete hold over the scooter market. However, as the demand started shifting towards motorcycles, the company witnessed a gradual erosion of its market share. HHML, which had concentrated on the motorcycle segment, was the main beneficiary, and almost doubled its market share from 20% in FY2000 to

40% in 9MFY2005 to emerge as the market leader. TVS. On the other hand, witnessed an overall decline in market share from 22% in FY2000 to 18% in 9MFY2005. The share of TVS in industry sales fluctuated on a year on year basis till FY2003 as it changed its product mix but has declined since then.

Impact Analysis - Two wheelers

Robust demand to continue

After an 11.4 per cent growth in 2003-04, two-wheeler sales surged by over 17 per cent year-on-year (Y-o-Y) for the first 10 months of 2004-05. Sales growth, led by the sales of motorcycles, escalated consistently during the April to January period due to increasing household incomes, easy availability of finance, and the success of certain new models launched during the period. Two-wheeler demand is expected to grow at a healthy rate of 11-12 per cent from 2004-05 to 2005-06. Rising household incomes, frequent new model launches and the increasing penetration of finance and distribution will act as key growth drivers. The motorcycle segment witnessed stupendous growth in 2004-05 (20.3 per cent Y-o-Y) after a moderate performance (growth of 13.7 per cent Y-o-Y) in 2003-

04. The buoyant growth in this segment will be maintained on account of the entry of global players like Honda Motors and Suzuki (entry expected in 2005) and the domestic players' growing focus on motorcycles. The segment is expected to grow by 12-13 per cent in 2005-06. Led by the ungeared segment, scooter sales are likely to grow by 8 per cent, while moped

Sales are expected to stagnate or decline marginally in 2005-06.

Budget Impact

Neutral impact on the two-wheeler segment

A. The reduction in the import duty on used two-wheelers will not affect the

industry...

B. The hike in the excise duty on steel will not affect the industry, as cenvat credit

can be availed for the same.

C. The extension up to March 2007 of 150 per cent deduction on R&D

expenditure

will marginally benefit domestic two-wheeler players, such as TVS Motors, Bajaj Auto and Kinetic.

D. The reduction in personal tax rates will increase household disposable income,

which is a positive for two-wheeler demand.

Prices and Duties.

Two wheelers Tariffs

(Per cent )

Customs

Excise

2009-10

2010-11

2011-12

2012-13

Two wheelers

61.2

61.2

16.3

16.3

Steel items

5.1

5.1

12.2

16.3

Engines and engine parts

20.4

15.3

16.3

16.3

Other components

20.4

15.3

16.3

16.3

Secure: CRIS INFAC

Major Players Company name Impact Impact factors

Bajaj Auto Ltd. Honda Motors Ltd. TVS Motors Company Ltd. Hero Motorcorp

Neutral Neutral Neutral

A,B,C,D A,B,C,D A,B,C,D

Neutral

A,B,C,D

CHAPTER-3

ORGANIZATIONAL PROFILE OF THE COMPANY

History and Background of Honda Motorcycles

Honda Motorcycle and Scooter India, Private Limited (HMSI) is the wholly owned Indian subsidiary of Honda Motor Company, Limited, Japan. Founded in 1999, it was the fourth Honda automotive venture in India, after Hero

Honda, Kinetic Honda Motor Ltd and Honda Siel Cars India. The entry of Honda into the Indian market as HMSI began with the launch of the Honda Activa, a 100 cc scooter. A slightly modified trendier version of the Activa was soon launched, as the Honda Dio. Honda Eterno was launched thereafter to add to the portfolio of HMSI's scooters. The Honda Unicorn was the first motorcycle released by HMSI. The Honda Shine has since been released. The Honda story is the story of one man, Soichiro Honda, and his unparalleled achievement of bringing motor cycles to the masses. Soichiro Honda was a racer, a businessman, and a manufacturer. But most of all he was a dreamer. He dreamed of a better way of making piston rings, founded a small company, and began production. He dreamed of giving people everywhere an economical form of transportation, and began producing small motorcycles, including one built in 1949 called the D-Type Dream. He also loved racing too. So his company built bigger and faster machines, two, four, five and six-cylinder race bikes and won the Isle of Man.

Honda Motor Company is by far the world's biggest motorcycle maker. Honda's first motorcycle was born out of necessity in immediate post World War II Japan, where public transportation was desperately overcrowded and gasoline severely restricted.

Honda Motorcycle & Scooter India, Private Limited

Type Industry Founded

Private company Automotive 20 August 1999 in ManesarGurgaon, Haryana, India

Headquarters Haryana, India Key people Products Parent Website Keita Muramatsu, President and CEO[1] Motorcycles, scooters Honda Motor Company, Limited HMSI

Vehicles
Honda Aviator Honda launched this gearless scooter in Feb/March 2001.The slogan for this is "Live your style". The specifications are :

Type:4 Stroke, Cylinder: Single Cylinder Cooling mechanism: Air-cooled, OHC, Displacement :102cc Max Power: 7 bhp (5.2 kW) @7000 rpm Max Torque:0.8 kgm @5500 rpm Transmission: V-Matic

Honda Activa The Honda Activa is the first scooter model released by HMSI for the Indian market.[4] It was marketed as a family vehicle. It has Honda Activa with a 102 cc engine (recent models come with 110cc engine). The scooter is also known as a family two-wheeler for its higher load carrying capacity. The vehicle has the option of kick-start and self-start. The chassis is made the under bone type and the body panels are moulded steel sheet. Activa incorporates better rider comfort and includes the puncture-resistant "tuffup" tyre and tube combination. It has low riding height and low noise 4-stroke engine. It gives a mileage of about 45 km per litre on a long run.

Honda Dio The Honda Dio is a stylish version of the Honda Activa, having almost the same technical specifications. The engine is slightly more powerful. The Dio is targeted at young people. Honda calls it India's first "motoscooter".

Honda Eterno Advertised as the "Geared Surprise" prior to launch, the Honda Eterno is a 4stroke, 150 cc scooter. Honda claims that the Eterno gives the best mileage in its class.

Honda Unicorn The Honda Unicorn is HMSI's first motorcycle for the Indian market. It is powered by a newly developed 4-stroke, 149 cc engine. The Unicorn is the first bike in India to incorporate the mono suspension system. The bike is touted as the "Flying Machine" by Honda.

Honda Shine Marketed as the "Dream Machine", the Honda Shine has the newly developed 125 cc Optimax engine. The motorcycle is targeted at the mid-range motorcycle segment.

Honda CBF Stunner This bike is a 125 cc bike with a sporty fairing, producing approximately 11 bhp.

Honda CB Unicorn Dazzler This bike is a stylish commuter. It has the same 149.1 cc Unicorn's engine, but has high lift cams. It produces 14 bhp of power and around 12.8 NM of torque.

The factory
The HMSI factory is built on a plot of 52 acres (210,000 m 2)

at Manesar, Gurgaon district of Haryana. Construction of the factory was completed in January 2001. The initial production capacity was 100,000 scooters per year, which is currently 6,00,000 scooters. The motorcycle production capacity is 10,00,000 per annum. The initial investment was Rs. 215 crores and has now grown to 800 crores. ISO 14001

Current performers of major players in the market

Two Wheeler flash update The two-wheeler majors announced impressive volume numbers for October 2010. The motorcycle volumes of the top three players registered a 23.2% yoy and 15% mom growth during October 2010 to 463,649 units. This was in spite of shradh, which is considered an inauspicious period, during the first week of October. All the top three players registered healthy numbers, which is an encouraging sign for the coming festive season.

Honda Motors Ltd

Table: Motorcycle volumes

2010 April May June July August September October 196,024 212,177 200,922 205,654 191,635 217,507 245,475

2011 134,318 163,582 160,889 143,141 145,730 157,583 207,472

Growth (%) 45.9 29.7 24.9 43.7 31.5 38.0 18.3

Cumulative sales during April to September in FY05 increased by 32.1% yoy to 1,469,394 units. Exports during October 2010were up 65% yoy to 5,558 units.

Honda Motors Ltd. Table: Motorcycle sales volume 2010 April May June July August September October 90,532 87,663 97,595 103,260 106,745 126,420 143,491 2011 71,074 87,217 82,239 77,966 76,487 95,680 107,115 Growth (%) 27.4 0.5 18.7 32.4 39.6 32.1 34.0

Cumulative sales for motorcycles during April to October in FY05 grew by 26.4% yoy to 755,706 units. Honda Motors sales during October 2010 increased by 13.5% on a mom basis, largely due to sales of its Shine and Activa models that have been accepted well in the market. With this, it improved its market.

Total sales for Hero Honda Auto increased 12.6% yoy to 995,111 units during the April to October 2009 period as against 884,001 units between April to October 2010.

Activa volumes stood at 90,222 units while the Discover sold 19,632 units in October. The Shine models continued their leadership in the premium segment by selling 23,107 units.

Hero Motor Corp.

Hero Honda is a part of the Hero Group of companies. Hero Honda Motor Limited was established in 1984 in joint venture with Honda Motors of Japan to manufacture motorcycles. The Hero Group and Japans Honda Motor Company each owns 26 percent stake in Hero Honda. The remaining shareholding is in with financial institutions and public. Hero Honda is a leader in the two wheeler segment in the country, and even claims to be the worlds largest two wheeler company in its advertising. It produces motorcycles Ambition, Splendor, Passion, CD100 SS, CBZ, Karizma, and Dawn. During the year ended march 31, 2003; Hero Honda has recorded a 17.7 percent rise in sales at 1.67 million motorcycles with its turnover of Rs. 5,194.58 crore. Plant Location: HHML had two plants: One located at Dharuhera, Haryana near Delhi And other at Gurgaon, 30 kms away from the existing plant.

PRODUCTS OF HONDA
Honda Aviator Honda Activa Honda Dio Honda Eterno Honda Unicorn Honda Shine Honda CBF Stunner

TVS Suzuki
A leading producer of automotive components, the TVS group was formed as a transport company in 1911. Originally incorporator in 1982 as India motorcycles Pvt. Ltd. to produce motorcycles in collaboration with Suzuki, Japan, the company later went public under the banner Ind-Suzuki Motorcycles Limited, which was later renamed TVS Suzuki Limited. The perfect blend between the best design engineers and the latest technology made TVS-Suzuki one of the leading two-wheeler manufacturers in the country. Product range TVS Victor GL 109 cc. Victor GLX- 124cc, Centra- 99 cc , Fiero F2 , FX147 .5 cc, Scooty pep- 75 cc. Plant Location TVS first plant is located at hosur, in the state of Tamil Nadu. Second plant at Byathlli village near Mysory about 70 kms from Bangalore (Karnataka) for manufacture of scooter.

Yamaha (YML)
EYML was a joint venture between Escort Ltd. the flagship company of the Escorts Group, and the global giant, Yamaha Motors Co. Ltd. of Japan. Ever since dinging the first technical assistance agreement between the two companies in 1985, Yamaha Motor company Limited (YMC) and Escorts motorcycles. In November 1995, the tow companies established the joint venture company, Escorts Yamaha Motors Limited, based on a 50-50 capital investment. In June 2000, that investment ratio was changed to 74% for YMC and 26% for Escorts Limited, and YMC assumed managerial control of the company with the name being changed to Yamaha Motors Escort Limited (YMEL). It then undertook numerous measures to build the companys motorcycles manufacturing and marketing operations. In June 2001, an agreement was reached between YMC and Escort Ltd. under which YMC acquired the remaining 26% of the stock held by Escorts. The stated aims of this move to make YMEL a 100% YMC subsidiary were to increase the overall speed of managerial and business decision, to improve produce development capabilities and production efficiency, while also strengthening the marketing organization. Products: Crux -R 100 cc, Enticer/ Deluxe 124 cc, Fazer 123 cc , Libero LX 106 cc.

Feature Challenges for Honda Motors

Indian companies e.g. LML, Kinetic motors try to catch the market share of major players. In addition to domestic competition, another competitive threat took shape in the form of cheap Chinese imports when import restrictions were lifted in 2001. A relatively unknown company named Monto Motors in Alwar (Rajasthan) was the first to import Semi-Knocked- down (SKD) kits form one of the top motorcycle manufactures in Chine. A 72 cc motorbike form China cost the customer Rs. 27,000 on road, a 125 cc would cost Rs. 33,000, and a 250cc motorbike would cost Rs. 36,000. the Indian models seemed frightfully expensive in comparison. In early 2002, a moped cost around Rs. 22,000, a 100 cc motorbike cost around Rs. 45, 000, and a 125 cc motorcycle cost around Rs. 50,000. The domestic tow wheeler industry was bounds to feel the pinch, especially in the mid and lower price segments of the motorcycle, scooter, and moped segments. THE Indian automobile two-wheeler industry reported a strong double digit volume growth of 17 percent in Q1, 2011-12 (YoY); even as several other automobile segments showed signs of a cyclical dip in growth during this period. While the northward movement in macro-economic variables including inflation, fuel prices and interest rates has been the nemesis of the automobile industry at large, the two-wheeler industry has been relatively less impacted so far. ICRA believes that the resilience shown by the two-wheeler industry volumes is likely to persist, a large base not withstanding, with the industry looking on course to

record yet another year of double- digit growth. However, the situation may change in the event of higher than expected decline in Indias GDP growth or persistent inflationary pressures over a longer period. Overall, ICRA expects the two-wheeler industry to report a volume growth of ~13 percent in 2011-12 and a volume CAGR of 10-12 percent over the next five years to reach a size of 21-23 million units by 2015-16. Our growth outlook is built on the strength of the various structural growth drivers associated with the twowheeler industry comprising of favorable demographic profile, moderate twowheeler penetration levels (in relation to several other emerging markets), under developed public transport system, growing urbanization and expected strong replacement demand, besides moderate share of financed purchases. Segment-Wise Analysis The strong double-digit volume growth of 17.5 percent recorded by the motorcycles segment in Q1, 2011-12 was not consistent across segments Entry, Executive and Premium. The volume growth was a blend of: The flattish growth (~three percent) of the entry segment (bikes having price less than `40,000) which accounts for around 16percent of the total domestic motorcycles sales volumes. The steady growth (~17 percent) of the executive segment (bikes in the `40,00050,000 price range), which accounts for around 65 percent of the total domestic motorcycles sales volumes.

The fast growing (~30 percent) premium segment (bikes having price greater than `50,000) which accounts for around 19 percent of total domestic motorcycles sales volumes. The Indian automobile motorcycles segment continues to be dominated by Hero MotoCorp (erst while Hero Honda) which has been recording sequential gains in market share over the last three quarters. The top three players accounted for 88.2 percent of the industrys volumes in Q1, 2011-12 (92 percent in 2007-08), with Honda Motorcycles having overtaken TVS since Q1, 2010-11 as the third largest player, behind Hero MotoCorp and Bajaj Auto.

Chapter-4

CUSTOMER SATISFACTION TOWARDS TWO WHEELER

About customer satisfaction The two-wheeler market in India is the biggest contributor to the automobile industry, with a size of `100,000 million. Today's customers are becoming harder to please. They are smarter, more price conscious, more demanding, less forgiving, and collect information about many more competitors with equal or better offers. The interaction between consumer expectations and actual product performance produces either satisfaction or dissatisfaction. At the higher levels of satisfaction, customers are likely to re-purchase and even speak well of the company and its products. The study aimed to assess expectations, perceptions, and post purchase behaviour of Mahindra scooter customers, which will enable both the manufacturer and the distributors to know about the customers' expectations, perceptions, and post purchase behaviour, that in turn helps to reduce the post purchase dissonance and aids in enhancing customer satisfaction. Customer satisfaction occurs when the experience obtained from transaction match expectation. Customer may forget experience that match expectation although, customers will generally notice and also remember those experience that deviated from expectation. This stage is particularly known as dissatisfaction results in to a feeling of dissonance in case where an experience obtains from product/sendee falls short of expectations.

In opposite situation i.e. state of satisfaction it may result in to repurchase of product /service as case may be. One has to accept the fact that people i.e. employee in an organization play a crucial role in determining, and delivering of the level of service quality and ultimately consumers satisfaction. It has been observed that even manufacturing organization have gradually realized the fact that along with tangible offering, intangible customer service the only possible distinct way to cerate a point of differentiation and positioning in to the competitors. It is needless to state companies need to manage customer contact effectively where the desired outcome is a satisfied customer. Customer's satisfaction data customer data provides early warning sing of problems before they show up in revenue and down in profit. Customer satisfaction Customer satisfaction is the to success. Getting your customer to tell you Whats good about your products or services, and where you need improvement Helps you to ensure that your business measures up to their expectations. The Attached file contains a customer satisfaction survey form designed to help gather. This important information . it was designed to make it easy for customer to fill out and To make it easy for you to quickly customize to exactly match your company activities.

It also includes suggestion for distributing the form. Ensuring that customer that will Return the form, and following up on comments. Here are a few principles given by Steve smith. The goal is to exceed customer expectation. The more the employee satisfaction, the more the customer satisfaction. Customer satisfaction is necessary, but not sufficient how many times do satisfied customer switch brands? Answer, a lot. All initiative must be derived from defined problems. For instance , dissatisfied customers dont buy. Thats an example of a clear problem. Initiative must produce either measurable or conceptual benefits. Distinguish between the two benefits types. The plan must be clear and congruent. The plan must be resonate with the VP and at least a minority of managers who agree with the objective and initiative. The following items amplify customer satisfaction given by stevesmith Quality of a companys product and service. Quality of the relationship between the co agent the customer. Responsiveness Thoroughness Creativity

Customer satisfaction: Honda leaves other brands sniffing the dust

Honda ranks the highest in customer satisfaction with after-sales service in Thailand, according to the JD Power Asia Pacific 2013 Thailand Customer Service Index (CSI) Study. Among the 10 brands included in the study, Honda ranks highest in overall customer satisfaction for the first time since the study's inception in 2000, with an overall CSI score of 902. Honda performs particularly well in service initiation, service advisory and service facility, the study stated. The 2013 CSI Study, now in its 14th year, measures overall satisfaction among vehicle owners who visit an authorised dealer/service centre for maintenance or repairs during the first 12 to 24 months of ownership. The study is based on responses from 3,463 new-vehicle owners who purchased their vehicles between January 2011 and April 2012 and took their vehicles for service to an authorised dealer or service centre between July 2012 and April 2013. The study was fielded between January and April 2013. According to JD Power, the process of initiating the service experience and handing the vehicle over to service-centre staff has become the second most important area for overall customer satisfaction with after-sales service at authorised service centres. The study measures new vehicle owner satisfaction with the after-sales service process by examining dealership performance in five

factors: service initiation; service advisory; service facility; vehicle pick-up; and service quality. Dealership service performance is reported as an index score based on a 1,000-point scale. The contribution of the service initiation factor to the overall CSI index has increased to 26 per cent in 2013 from 12 per cent in 2012. Service quality, while remaining a factor with the most impact on overall satisfaction, decreases to 29 per cent from 42 per cent in 2012.

"As service quality improves and the traffic at service centres dramatically increases as a result of market growth, customers are concerned about long queues and have therefore become increasingly interested in the appointment process, a dealer's flexibility to accommodate their schedule and how prompt and thorough the handover process is," said Loic Pean, senior manager at JD Power Asia Pacific.

Overall customer satisfaction averages 889 in 2013, a 43-point improvement from 2012. Across the industry, satisfaction has increased year over year in all factors, particularly in service advisory (+48 points) and service quality (+47). Satisfaction scores for all nameplates have also improved, compared to 2012.

"Despite the growing number of customers, service centres have improved at attending to customers more promptly, putting them at ease and fully

understanding their service needs, ensuring a more efficient service," said Pean.

"On the other hand, cost estimates are provided less often in 2013, and insufficient seating space in the service centre waiting area during peak service hours has become an issue. Dealers may be able to avoid this situation and increase satisfaction among their customers by notifying them in advance and encouraging them to come during off-peak hours, particularly on weekdays or later in the morning."

The study also finds that among the reasons customers select their service centre is that vehicle owners are increasingly considering mechanics' skills, speedy service and the use of original equipment and parts, and also positive recommendations from acquaintances and their own past experience.

"Customers have alternative servicing options, and delivering a superior service experience is starting to pay off for dealerships," said Pean. "As overall satisfaction with after-sales service dramatically increases, we indeed observe that a much greater number of customers are not only likely to revisit their service centre for post-warranty service and recommend it to their friends and family, but are also willing to travel a longer distance to get there."

Against this backdrop, Honda has developed word-less service information (in the form of a pair of leaflets) for customers in emerging nations as well as picture-based training materials as part of an effort to value customer in these markets.

The leaflets, which comprise maintenance and repair editions, are designed so that they can be easily understood, even by customers who cannot read, so that they can enjoy their motorcycle with peace of mind over the long term. In fiscal 2013, Honda Manufacturing (Nigeria) distributed a hanging, laminated chart that could be displayed even where there were no walls. In addition to arranging for it to be hung at motorcycle taxi stations for viewing by motorcycle taxi drivers, a key customer group, the company sent the charts to repair shops. The picture-based training materials consist of a careful compilation of the minimum necessary work procedures so that instructors can offer training anywhere even electricity infrastructure is poor in the field.

Honda Manufacturing (Nigeria) includes a leaflet with each motorcycle sold. Working with associations of local repair shops, the company has also held 45 training tours during 2012, reaching a total of 1,830 mechanics so far. During 2013, it plans to continue the program, offering 30 tours for 1,200

mechanics. In addition to providing educational opportunities to the market in order to create an environment in which customers can receive maintenance and repair service whenever and wherever they need by going beyond dealer service, these activities help customers maintain the performance of their motorcycles and use them safely. They also help make ownership more economical by improving fuel economy, lowering CO2emissions, and lengthening the motorcycle service life. Going forward, Honda will strive to improve customer satisfaction by providing higher-quality service to offer peace of mind and trustworthiness to customers worldwide.

A roadside service business working on motorcycles, a common sight in emerging nations

Picture-based training

Checking training materials an actual motorcycle

A motorcycle taxi rider looks at a hanging chart

Chapter-5

RESEARCH METHODOLOGY

RESEARCH METHODOLOGY
The success of any market research or the study calls for the development of most efficient plan for gathering the needed information. Therefore, a properly defined research methodology is a pre-requisite for carrying out a successful research which in turn demands clear objective. The research methodology for the present study is outlined below A. Developing a research design Problem definition Type of research adopted. Method used in the research B. Sampling design Type of approach followed Sample size C. Data collection Basic method adopted Questionnaire design & construction D. Analysis & interpretation

Developing a research design.

RESEARCH METHODOLOGY

Universe Sampling unit Date Collection: Primary Data

Finite The sample unit consist the Consumer of Honda

Questionnaire Interview Secondary Data Journals Magazines Companies Reports and Companies Websites Internet Size of the sample Sample Technique Research Design Region 100 Probability Descriptive Aligarh

Objective of the study

The following were the objectives of the study; To study the customer perspective about Honda two wheeler. To generate a demographic profile of Honda owners. To know about the satisfaction level of Honda users. To explore the reasons for preferring Honda two wheeler. Data was collected from both sources relating to the objectives of study

NEED FOR THE STUDY

There exists a severe competition in the automobile industry, especially in two wheeler sector. All the companies are trying to get dominant market share and new models are introduced into the market with new features. The company wants to know the preference level of their customer and gauge the future expectation. The company wants to know the brand preference in themotorcycles with a special reference to Honda, to lead them in product design, the modification of product attributes and consequent benefits to the user, with reference to the models on offer as well as now models.

Scope of Project

This project deals with over all working of Honda Motors. The only thing Honda Motors needs to worry about is the goals it has to achieve. Honda Motors

primary goal is to achieve the overall satisfaction of the customers by introducing new & advantageous for customers so as to gain more & more profit for the company. The scope of Honda Motors wide & growing with a rapid rate. The basic scope of the project deals with study of market by offering Value Added Services and retention of the Customer.

Chapter-6

Analysis and Interpretation

Analysis and Interpretation

To collect primary data, a survey was conducted among Honda owners and also take feedback from market information was obtained through personal interview in Aligarh. Q.1- Do you own a 2-wheeler? No. of wheelers 100 Yes 100 No 0

All 100 respondent own 2 wheeler

Q-2 Gender /sex.. No of male 90 No. of female 10 90% two-wheeler users are male and only 10% users are female

10%

male female

90%

Fig .1-Showing Gender

Q.3- What kind of 2-wheeler do you own? Type of 2- Scooter/Scooty Motorcycle wheeler No. of 2- 66 34 100 Total

Wheeler

Scooter/Scooty

Motorcycle

20%

80%

Fig: 2 Showing % of kinds of two-wheelers

Q.4 - Please mentioned the Model Name of the brand Honda Activa Honda Dio Honda Unicorn Honda Shine Honda CBF Stunner Honda CB Unicorn Dazzler Total No. of Motorcycle 47 19 7 9 14 4 100 Percentage 47% 19% 7% 9% 14% 4% 100%

Honda Activa Honda Shine

Honda Dio Honda CBF Stunner

Honda Unicorn Honda CB Unicorn Dazzler

14% 9% 7%

4%

47%

19%

Fig.3- Showing % of Motorcycle brand

Q.5

What was the mode of purchase? Financed 20 Total 100

Cash down 80

Cash down

Financed

20%

80%

Fig. 5 Showing % of Mode of purchase

Q. 6- In case of (ii) who finance the purchase of two-wheeler? (For Honda Motorcycle) Family member 40 30 30 100 Bank Dealer Total

Family member

Bank

Dealer

30%

40%

30%

Fig.7- Showing % of Mode of Finance of Honda Users Around 40% financed by family member, 30% financed by bank and around 30% financed by dealer.

Q 8- please indicate your satisfaction using the following scale: Statement Total 100 users H.S. Overall performance After sale service Behaviourism of Dealer Behaviours of dealers Staff 20 14 15 20 S. 30 26 20 30 N.S.N.D 20 20 25 25 D. 20 30 30 15 S.D 10 20 10 10

35 30 30 26 25 20 20 15 10 5 0 H.S. S. N.S.N.D D. S.D 15 14 15 10 1010 20 20 2020 20 20 Overall performance After sale service Behaviourism of Dealer Behaviours of dealers Staff 2525 30 3030

Fig.12- Showing satisfaction levels among Honda owners

. Q-9 What is your primary occupation? (a) Businessman (b) Govt. Employee (d) Housewife (e) Student
Scooter/Scooty 0% 20

(c) Private Employee (f) Other (Please specify)

100%

Q-10 Will you suggest anybody to purchase Honda two wheeler? (a) Yes (b) No

Chart Title
Honda Unicorn 44%

Honda Shine 56%

Q-11 According to your opinion which companys two wheeler are better at present. (a) Honda (b) Bajaj (c) Yamaha (d) Hero (e) Others (Please specify)

Honda

Bajaj

Yamaha

Hero

5%

11%

21% 63%

Q-12 Do you want any changes in Honda two wheeler? (a) Yes (b) No

40

100%

Q-13 Why are you choose Honda two wheeler? (a) Good quality (b) Good features (c) Affordable Price (d) High brand name (e) Others

Good quality High brand name

Good features Others

Affordable Price

10% 10% 10% 30%

40%

Limitation
1. Mostly people who may be right responded were not interested because they had less time to show their feeling /experiences thus the responses may not be genuine. 2. Relatively medium sample size was chosen due to time constraints. 3. It is particularly impossible for a smaller segment of a population (100 respondents) to exactly represent the population. 4. There are no specific criteria for the selection of companies or brand except the availability of complete information from a variety of sources such as magazines journals and Internet etc. 5. As the project involves marketing research using questionnaire, views expressed by respondents are confined to the elements of questionnaire. 6. The data emerged from the study may not be the true picture as study was restricted only to certain parts of Aligarh. 7. Some respondents were not interested in the questionnaire so they filled the information with less interest. 8. Time and cost were two other important factors.

Analysis
THE Indian automobile two-wheeler industry reported a strong double digit volume growth of 17 percent in Q1, 2011-12 (YoY); even as several other automobile segments showed signs of a cyclical dip in growth during this period. While the northward movement in macro-economic variables including inflation, fuel prices and interest rates has been the nemesis of the automobile industry at large, the two-wheeler industry has been relatively less impacted so far. ICRA believes that the resilience shown by the two-wheeler industry volumes is likely to persist, a large base not withstanding, with the industry looking on course to record yet another year of double- digit growth. However, the situation may change in the event of higher than expected decline in Indias GDP growth or persistent inflationary pressures over a longer period. Overall, ICRA expects the two-wheeler industry to report a volume growth of ~13 percent in 2011-12 and a volume CAGR of 10-12 percent over the next five years to reach a size of 21-23 million units by 2015-16. Our growth outlook is built on the strength of the various structural growth drivers associated with the twowheeler industry comprising of favorable demographic profile, moderate twowheeler penetration levels (in relation to several other emerging markets), under developed public transport system, growing urbanization and expected strong replacement demand, besides moderate share of financed purchases.

Segment-Wise Analysis The strong double-digit volume growth of 17.5 percent recorded by the motorcycles segment in Q1, 2011-12 was not consistent across segments Entry, Executive and Premium. The volume growth was a blend of: The flattish growth (~three percent) of the entry segment (bikes having price less than `40,000) which accounts for around 16percent of the total domestic motorcycles sales volumes. The steady growth (~17 percent) of the executive segment (bikes in the `40,00050,000 price range), which accounts for around 65 percent of the total domestic motorcycles sales volumes.

The fast growing (~30 percent) premium segment (bikes having price greater than `50,000) which accounts for around 19 percent of total domestic motorcycles sales volumes.

The Indian automobile motorcycles segment continues to be dominated by Hero MotoCorp (erst while Hero Honda) which has been recording sequential gains in market share over the last three quarters. The top three players accounted for 88.2 percent of the industrys volumes in Q1, 2011-12 (92 percent in 2007-08), with Honda Motorcycles having overtaken TVS since Q1, 2010-11 as the third largest player, behind Hero MotoCorp and Bajaj Auto.

Chapter-6 Conclusion and Suggestions

Recommendation:

After 2000 the market share of mopeds has been decreasing and preference for motorcycles and scooters/ scooty has been on the rise. Around 66% respondents were scooter owners.

After Honda, Bajaj is the second largest motorcycle company in Aligarh. Honda Shine is competitor of Bajaj pulsar DTSi in the primium segment. Bajaj, Yamaha, TVS are the main competitors of Honda. Fuel efficiency, looks, sitting comfort safety featured, pick up maintenance cost of two wheeler, engine technology, strength of material handling are very important features for Honda users.

Suggestions
Most of the Honda owners are satisfied with their vehicles over all performance and after sales service being offered by the company.. Most of the customers were found to be talking along with them, their father as well as friends during the final visit for purchase. Few customers are not satisfied with the behaviour of dealer / staff so company should brief / instruct than that how to behave with the customer. There should be training program for employees of the dealer where they should be taught the benefits of creating their customers well. We have to take some actions to create new changes for innovation Honda two wheeler.

Conclusion

Conclusion
The growth of the Indian middle class along with the growth of the economy over the past few years has attracted global auto majors to the Indian market. India provides trained manpower at competitive costs making India a favoured global manufacturing hub. There has been a steady economic revival in the market complimented by high disposable incomes. An amalgamation of increasing per capita incomes, growing working population and growth of Indian middle class has been the major growth drivers for the two wheeler industry. There has been an increasing demand for automobiles and auto components in the Indian and globally automobile segment. In India, there is a constant focus of research and development and product development. There has been a steady entry of global players in the automobile market introducing many products in various segments of automobiles namely, the two wheelers, three-wheelers, four-wheelers etc. The two wheeler industry per say has recorded a healthy volume growth in 201213, largely due to favourable demand and supply factors. The most important factor that the two wheeler industry should emphasise on is sustaining this growth over a longer period of time. Since, the industry landscape has been evolving, there will be many competitors entering the market by positioning and repositioning product portfolios, innovating products to serve new market segment and emphasising more on the rural and semi-urban markets.

Hero Honda Motors Ltd is one of the major players in the two wheeler segment. The company has been conferred the title of being the largest two wheeler manufacturing company in India and the Worlds No. 1 two wheeler company in terms of volume growth. The company claims that its motorcycles are one of the most preferred motorcycles in the country. Along with striving constantly to innovate and differentiate with respect to its competitors, the company has been committed to provide customer satisfaction, quality and cost effectiveness. Hero Honda, being the largest motorcycle manufacturer in India and the second largest across the globe, it is vital to maintain a good relationship with its suppliers and also its customers. With a view to meet the objective of improving information exchange, streamlining operations and effective business

relationships, the company has implemented powerful self-service features of mySAPTM Supplier Relationship Management (mySAP SRM) plus the ecommerce capabilities of mySAP Customer Relationship Management (mySAP CRM) Honda has been aggressive in respect to its innovation to introduce new two wheelers every year and caters to a wide variety of requirements across all the segments. It claims to be the technology pioneer in the two wheeler industry. Its growth is largely due to the capability of reaching a wide market, new geographies and growth markets. The company has been pumping considerable amount of finances in branding building and promotional activities. These activities mainly

emphasise product launches and new campaign launch opportunities. The company is a part of many innovative marketing campaigns that revolve around sports like cricket, hockey, golf etc along with sponsoring the recent Common Wealth Games 2010. Furthermore, the company has also been aggressively involved in the arena of entertainment with sponsorships of highly watched reality shows, television award events etc.

BIBLIOGRAPHY

BIBLIOGRAPHY

1. 2. 3. 4. 5.

www.wikipedia.com www.honda.com www.google.com www.hondanews.com www.honda2wheelersindia.com

QUESTIONNAIRE
Name:Age:Sex Address:

1) Do you own a Two wheeler?

Yes (

No (

2) What kind of Two-Wheeler do you own i) Scooter ii) Motorcycle 3) Please mention the Model 4) What was the mode of purchase ? i) Cash down ii) Financed 5) In case of (ii), who financed the purchase of two-wheeler ? i) Family member ii) Bank iii) Dealer iv) Any other (Specify)

6) Please indicate the degree of importance: S.N Features Very Important 1 2 3 4 Fuel Efficiency Looks Sitting comfort Safety feature (like disc brakes etc.) 5 6 Head light Pick up Important Somewhat Important Not Important

7 8 9 10 11 12 13 14 15

Top speed Colour Maintenance cost Cost of 2-Wheeler Engine Technology Strength of material Location of showroom Date of model launch Handling

7) Who accompanied you during the final purchase visit? i) Father ii) Mother iii) Brother/sister iv) Friend v) others (specify)

8) Please indicate your satisfaction using the following scale : (put a tick) HS: Highly satisfied Dissatisfied Statement Overall performance of two-wheeler After sales service Behaviour of dealer Behaviour of dealers staff S: Satisfied NSND: Neither satisfied nor dissatisfied D :

SD: Highly dissatisfied HS S NSND D SD

9) Gender / sex? ..

10.What is your primary occupation?

(a) Businessman (d) Housewife (b) Govt. Employee (c) Private Employee (e) Student (f) Other (Please specify)

11.Will you suggest anybody to purchase Honda two wheeler? (a) Yes (b) No

12.According to your opinion which companys two wheeler are better at present. (a) Honda (b) Bajaj (c) Yamaha (d) Hero

(e) Others (Please specify) 13. Do you want any changes in Honda two wheeler? (a) Yes (b) No

14.Why are you choose Honda two wheeler? (a) Good quality (d) High brand name (b) Good features (e) Others (c) Affordable Price

TABLE OF CONTENT
Faculty Certificate Declaration Students Certificate Acknowledgement

CHAPTER-1
Introduction

CHAPTER-2
Indian Two-Wheeler Industry: A Perspective

CHAPTER-3
Organizational Profile of the Company

CHAPTER-4
Customer satisfaction towards Honda two wheeler

CHAPTER-5

 Objectives of study Scope of Study

CHAPTER 5
Analysis and Interpretations Limitation Analysis

CHAPTER-6
Conclusion and Suggestions

Bibliography Appendix
Questionnaire