The Indian two-wheeler market comprises about 12 million units per annum, of which over 75 per cent is constituted by motorcycles. So why is India Yamaha Motor revving up to enter the scooter market in India?
Point to note, Yamaha is not the only one. Two-wheeler market leader Honda Motorcycle and Scooter India (HMSI) is also firming up plans to launch a new product in the category this fiscal.
So what gives?
Simply put, strong double-digit growth. While scooters, at present, account for about 18 per cent of the sales in the overall two-wheeler market in India, the segment has posted strong growth numbers with sales increasing by around 41.79 per cent last fiscal to log 2.07 million units. Many contend rising petrol prices were the beginning of the Indian scooter surge. Whatever the reason — nostalgia or sheer prudence — this sudden growth has prompted new players to look for opportunities in the category. So there is India Yamaha Motor which is gearing up to foray into the segment with an all-new product that parent Yamaha Motor Corporation is developing specifically for the country.
As things stand, the top four two-wheeler makers — Hero Honda, Bajaj Auto, TVS and HMSI — together account for around 93.5 per cent of the sales in the domestic market leaving five-odd players — Suzuki Motorcycle, India Yamaha Motor, LML, Mahindra Two Wheelers and Royal Enfield — to battle out the remaining 6.5 per cent. Technically speaking Yamaha today is the sixth largest two-wheeler maker in India. The company has a marginal share of 2.35 per cent in the domestic market.
HMSI, which has three scooter brands — Activa, Dio and Aviator priced between Rs 39,820 and Rs 50,020 — is the largest maker of two-wheelers accounting for 43 per cent share in the domestic market. HMSI sold 893,335 scooters last fiscal.
On its part, India Yamaha Motor is looking to invest $10 million by 2012 in capacity expansion as well as in new products, revving up its market share to about 10 per cent from the current 2 per cent. Roy Kurian, national business head, India Yamaha Motor, says, “We were studying the Indian market intensively over the last two years to gauge the requirements of customers here. We decided we needed a new product. The product is in development at our R&D centre in Japan, which would be introduced in the country shortly.” Kurian, however, declined to specify a definite timeline and technical specifications of the scooter.
Yamaha has scooters such as the Neo, Fino, and Spark in its global portfolio which it sells mostly in South East Asian countries. Kurian explains, “Unlike in the 1970-80s, over 60 per cent of scooter users today are women. The riding conditions here and the very profile of the target group necessitated that we develop a product specifically for the Indian market.” Industry sources say it is likely to be a gearless scooter and will contend with best sellers such as Honda Activa and Hero Honda Pleasure.
But it won’t hit Indian roads before the end of next year. The company is conducting post product development studies to evaluate strategies to enter the new category and the positioning of the product. Yamaha would focus on selling scooters in the southern and western markets of India where per capita income is comparatively higher. “The four states in the south, as well as Gujarat and Maharashtra are good markets. This has a direct co-relation to education and awareness levels in these places. A lot more women are working (outside the home) in these places. Delhi too has a lot of potential,” Kurian says.
Yamaha is looking to sell 500,000 motorcycles (domestic sales and exports) this financial year, an increase of over 31.6 per cent over the 380,000 units sold in 2010-11. The company has 400 dealer outlets across the country. Over the next three to four years, Yamaha hopes to cross over to double digit share figures with new products and improved distribution. Kurian says, “We want to consolidate our position in India. This year, we expect to grow by at least a third and then on double the growth rates recorded by the overall two-wheeler industry.”
In Vietnam, Thailand and Indonesia, Yamaha has 20 per cent market share. In Indonesia, it sold 3.5 million motorcycles last year, compared to 0.35 million units it expects to sell in the Indian market this year. “The potential to grow is huge”, adds Kurian.
Yamaha, which prides itself on the technology its products offer, has adopted a top down approach for boosting sales in the Indian market. “Our products are known for their technology. And we will continue to introduce top-end products in India. We want to reach out first to the educated urban buyer who is aware of what we stand for. Once we succeed in establishing our brand firmly in urban markets, sales would automatically filter in from rural areas. The rural buyer wants a proven brand.”
THE MOTORCYCLE MAJORS
Market share for sales in domestic
TVS Motor Company
Honda Motorcycle and
Suzuki Motorcycle India
India Yamaha Motor
Mahindra Two Wheelers
Besides foraying into scooters Yamaha is also looking to rev up its motorcycle portfolio. The company is looking at introducing two new motorbikes every year, including upgrades. Also on cards is an electric scooter. “We have electric scooters. We will examine how the market for such products develops in India. If there is demand, we can come out with a product.”
Industry experts, however, raise concern over Yamaha’s weak presence in the 100-110 cc mass commuter segment that contributes as much as 60 per cent to overall motorcycle sales in the country. Yamaha has two products — YBR110 and Crux — in the 100-110 cc segment but sales are significantly lower than those of Hero Honda Splendor which sells over two million units annually.
Kurian says, “It is not that we are ignoring the mass commuter segment: we do have products in the 100-110 cc category. But the 150-cc segment is a growing market. Now we are seeing demand for 150 cc bikes coming from even B and C category towns.” India Yamaha Motor today has 15 models in its portfolio, with as many as six positioned in the 150 cc segment. The FZ series is Yamaha’s largest selling brand in the country with sales amounting to around 20,000 units per month. The company had 14 per cent share in the category last month and is expecting to capture a fifth of sales in the segment by the end of the current fiscal.
The 10 per cent share Yamaha is eyeing in the Indian market calls for fresh investment in creating additional capacity. Last year, as many as 11.8 million two-wheelers were sold in the country. The market is expected to grow at 12-14 per cent this financial year. Even at the current sales numbers, Yamaha would have to sell over a million units to gain a market share of 10 per cent in the two-wheeler industry.
To this effect, India Yamaha Motor is planning to set up a third facility in the country. Kurian confirms, “We are serious about our targets and would have to look at fresh capacity to achieve them.” The company declined to share details of the capacity it is targeting and the investment Yamaha proposes to make to that end, but indicated that that the company will begin the search for a new location to set up the new plant soon.
The two other facilities that India Yamaha Motor has today are both located in the national capital region — one in Surajpur in Greater Noida and the other at Faridabad. The Surajpur plant can roll out 600,000 motorcycles a year, and can be expanded to one million units. The Faridabad facility can manufacture 700,000 engines, besides other components.
Last year, the company had said it would focus more on the Indian market with more investments and better products. Its scooter foray may well be a sign of things to come.