After Royal Enfield success, firms plan bigger, more powerful bikes
Following the success of Royal Enfield, Indian twowheeler makers are chasing higher margins by launching bigger and more powerful bikes.
According to a Mint analysis, over nine out of 10 new models launched during the year were above 150cc. Also, a greater number of scooter launches took away the limelight from sub-150cc commuter bikes.
The strategy of launching big bikes is in line with the Indian consumer’s preferences, which is evident in the two-wheeler sales figures for 2017.
The premium segment, comprising motorcycles with engine displacement between 150cc and 500cc, grew the quickest, posting sales of 2 million units, up 20.5% from a year earlier.
Within the premium segment, the pace of growth was fastest in 250cc-350cc bikes segment, popularised by Royal Enfield’s Classic 350 and Bullet 350, with sales jumping 29% to 6.80 lakh units.
The sub-segment, accounting for a third of the premium segment, did not see a slowdown during demonetisation, unlike the executive and broader premium segments.
Demographics and psychographics are expected to support robust growth in the 150cc and above category as disposable incomes grow, said a top executive at Hosur-based TVS Motor Co. The firm expects the segment to grow 15% over the next two
MUMBAI:
years and plans to expand the segment instead of competing for market share, according to Arun Siddharth, vice-president of marketing at TVS’s premium motorcycles division.
“The premium segment contributes 15% to our overall twowheeler sales. It is a focus area for us as the Apache brand’s good performance gives us the confidence to make greater inroads into this segment,” Siddharth said in a phone interview.
According to analysts, buyers will upgrade to higher engine displacement bikes in the coming years. Therefore, the focus on launching motorcycles with higher engine displacements indicates greater purchasing power on the consumers’ part as these bikes command a greater premium owing to novel technology and aesthetics, they said.
However, the change in strategy by bike makers, which involves more high-value products, will not necessarily translate into higher margins and profits for OEMs, analysts said.
“Margins always depend on volumes and pricing. Unless volumes grow enough to cover the costs of development, OEMs cannot expect to make better margins,” said Priyaranjan, vicepresident at Systematix Institutional Equities, a Mumbai-based brokerage house. Volume growth cannot be quantified at this point in time, he added.
For the September quarter, New Delhi-based Eicher Motors Ltd, the manufacturer of Royal Enfield motorcycles, posted the highest margin among OEMs of 31.5%, while Bajaj Auto Ltd followed with 20.8%.
Hero MotoCorp Ltd and TVS posted 17.4% and 8.6%, respectively.