Essay About Two-Wheeler Market And Foreign Companies

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The license raj that existed prior to economic liberalization (1940s-1980s) in India did not allow
foreign companies to enter the market, making it an ideal breeding ground for local players. Local
players were subject to a very stringent capacity licensing process, and imports were tightly controlled.
This regulatory maze created a sellers market, with customers often forced to wait 12 years just to buy
a scooter from companies such as Bajaj. In 1980 Bajaj had a waiting list that was equal to about thirteen
times its annual output, and by 1990 this list had doubled. Clearly, there was no incentive to implement
proactive strategies to woo the customer. In a 1980 interview with a local magazine, Mr. Rahul Bajaj,
the CEO of Bajaj Auto, observed, “My marketing department? I dont require it. I have a dispatch department.
I dont
have to go from house to house to sell.”
motorcycle
segment was no different;
with only
three
manufacturers–Royal
Enfield,
Ideal
Jawa,
and Escorts–there
was hardly
any significant competition
for the customer.
While
this segment was dominated by Enfields
350cc Bullet,
the only motorcycle
with a four-stroke
engine at the time, Jawa
and Escorts
also had a fair share of the middle and
lower
end of the market.
The winds of change began to take hold in the mid-80s when the Indian government started
permitting foreign companies to enter the Indian market through minority joint ventures. Under these
relaxed regulations, the two-wheeler market witnessed a veritable boom with four Indo-Japanese joint
ventures; namely, Hero Honda, TVS Suzuki, Bajaj Kawasaki, and Kinetic Honda all lining up to target
the Indian consumer market for motorcycles. The simultaneous entry of four players into this underserved
market helped boost motorcycle revenues to stratospheric heights. For the first time, the market dynam-
ics changed in favor of the Japanese players in both two-stroke and four-stroke vehicles, and the Indian
manufacturers who had held sway for such an extended period of time were suddenly cornered. The
entry of these new foreign companies transformed the very essence of competition from the supply side
to the demand side. Confronted with a larger array of choices, the consumers were regaining their
influence over the products that they bought. In keeping up with these higher customer expectations,
the industry accelerated the launch of new models, and every company was trying to outdo the other in
terms of styling, price, and fuel efficiency. The technological expertise that the foreign companies brought
to the marketplace helped increase the overall quality and reliability of the products quite significantly.
The old-guard companies soon found themselves under pressure to improve their offerings and bring
their products on par with their global counterparts.
Two-wheelers include all motorized vehicles using a two-wheel chassis (e.g., motorcycles, scooters, and
mopeds).
2 A09-03-0012
The Indian Consumer
Two-wheelers had become the standard mode of transportation in many of Indias large urban centers.
Increasing urbanization, saturation of cities, and the lack of adequate roads helped to propel demand
for two-wheelers. The two-wheeler was typically a prized possession in the average Indian household. It
was normally used to transport both people and goods, substituting for a car that was prohibitively
expensive. While a two-wheeler normally cost around Rs. 40,000 [1 U.S. $ = 49 Rupees (Rs.)], an
entry-level car was priced around Rs. 300,000. Two-wheelers had long road lives, and were often used
for even 15 years, passed down from one generation to the next. However, in global terms the market
was far from mature. Industry watchers reported that India had a penetration rate of 10% as of the late
1990s (107 two-wheelers for every 1000 adults), far below the penetration rates of other developing
countries. It was clear that the manufacturers had a lot of ground to cover.
There were indeed visible signs that the companies were gearing up to address this growing market.
While
the production
and sales of motorcycles
grew substantially (CAGR
of 22% between 1996
2001), the performance
of the other two segments of two-wheelers was poor.
Scooter production