The next leg of the Indian two-wheeler market's 'scooterisation' will come from the rural and semi-urban pockets as scooters evolve as the preferred vehicle of commute for families there. As such, scooters have been outpacing the overall two-wheeler industry growth rate for some time, and now major players say that growth from the rural areas has picked up too.
The industry leader, Honda Motorcycle and Scooter India (HMSI), now sells three scooters for every seven motorcycles in rural and semi-urban pockets as against one scooter for every nine bikes around five years back.
In the first nine months of this financial year, scooter sales grew by 18.5 per cent, whereas, overall, two-wheeler sales grew 11.5 per cent. Data reveal that in traditional agrarian states, the growth of scooters has come at the cost of motorcycle sales (see chart). Scooters are increasingly eating into the share of entry-level commuter bikes (100-110 cc), be it in urban or rural areas — evident in the narrowing gap between the contributions each of these segments make to the overall two-wheeler industry. During April-December 2017, scooters contributed 33.7 per cent of overall two-wheeler sales, while 100-110 cc bikes contributed 36.5 per cent — a gap of a mere 2.8 per cent. Industry insiders say this gap was much bigger at around 28-30 per cent around six or seven years back.
HMSI (the market leader in scooters with a 57.2 per cent market share as on December 2017) was quick to spot the trend and thus the opportunity — in fact, it not only launched an affordable model based on the Activa for the rural market in mid-2017 (the Cliq) but took care that 70 per cent of the sub-dealer network in FY18 came up in rural and semi-urban markets. The rural markets are growing at 15 per cent for HMSI, up from single-digit growth rates about five years back. Urban markets, however, are still clipping a faster growth rate at 25 per cent.
The 110-cc Cliq (priced aggressively at around Rs 42,000) is believed to have sold over 12,000 models so far and the company has given it block pattern tyres with deep grooves to provide extra grip and better control over patchy roads, making it suitable for rural commuting needs.
HMSI Vice-President (sales and marketing) Y S Guleria explained, "The scooter addresses the mobility requirement for both the male and female within a household. With more women joining the workforce in the semi-urban and rural areas (teaching, nursing, etc), the need for mobility has gone up too. Many of these families cannot afford two vehicles for commute and the scooter, thus, emerges as a preferred choice."
Earlier, the price difference between an automatic scooter (Rs 48,000 and above) and a 100-110 cc bike (Rs 44,000 and above) was deterring this potential customer, Guleria added. HMSI spotted the need-gap and decided to launch the Cliq at Rs 42,300 in Rajasthan, where the company makes the scooter too, to address this need. The scooter costs around Rs 44,000 in Gujarat. "The Cliq is based on the popular Activa platform and we have economies of scale, hence we could be cost competitive. Now, coming in the same price bracket, the Cliq is at least a vehicle of consideration for the potential buyer," he reasoned.
Yamaha Motor India Senior Vice-President (sales and marketing) Roy Kurian seemed to agree. "The reason behind someone considering a scooter is usually always a female. With more women joining the workforce in Tier-III towns and rural areas, the scooter is poised for growth," he said.
Kurian further felt that the inflection point is likely to come after 2020 when the BS-VI emission norms would set in and would disrupt the 100-110 cc bikes market dynamics. "The scooter will stand to gain from this, it will be a more price competitive and more convenient (gearless) option. The 100 cc scooters will gain the most as they offer better mileage," he added.
Analysts feel that following HMSI's example, more scooter models targeted at the rural customer are likely to come in the coming years. "As the volumes go up, the pricing would get more competitive. As road network improves, the scooters stand in good stead," felt Subrata Ray, senior group vice-president of ICRA.
In its latest analysis of the two-wheeler market, ICRA has said that an increasing road network augurs well for the demand for personalised transportation in the absence of adequate public facilities. The rural road network comprised 61 per cent of the total road network in the country (in 2015) and, according to recent estimates, major district roads and rural road network stand at 4.91 million km as of FY17.
As such, scooters now make up a major share of sales for major two-wheeler players — 38 per cent for TVS Motor India and 84 per cent for Suzuki Motorcycle India. Both these companies have also seen a great spurt in scooter sales volumes this financial year — 56.5 per cent for Suzuki and 35 per cent for TVS.