For two-wheelers, it’s about alliances and clean air

The Indian two-wheeler industry continued to grow in 2017 even while it was up against its share of headwinds.

The aftermath of the demonetisation shocker continued while erratic rains in some parts of the country were another dampener for buying sentiment. Despite this, companies continued to step on the gas in their selling efforts even while overseas markets, especially Africa, remained volatile for exporters.

Things are in much better shape now with Hero MotoCorp and Honda Motorcycle & Scooter India in the lead followed by TVS Motor and Bajaj Auto. Royal Enfield is growing from strength to strength while Suzuki has been getting more aggressive lately. Yamaha has done better than 2016 but needs to more than make up in the following year if it has to stay comfortably ahead of Suzuki.

The year saw Honda inaugurate the fourth line of its Karnataka plant, which is now its largest two-wheeler facility across the world with a capacity of 2.4 million units. The company has been on a relentless expansion spree since the time it parted ways with the Hero group six years ago.

What was 1.6 million units from a single plant in Manesar, Haryana, is now over six million units spread across four facilities with the new additions being Gujarat, Karnataka and Rajasthan. Despite this, Honda has not been able to catch up with its former ally, which continues to stay ahead even while the gap has narrowed in recent times.

However, where Honda has more than asserted its supremacy is in scooters where the Activa has emerged the country’s largest selling two-wheeler brand. In the process, it has truly paved the way for scooterisation across the country where the Activa-led onslaught (with other models from TVS, Hero, Yamaha and Suzuki) has led to a rapid zeroing in on motorcycles in the 110 cc commuter space.

Scooters today account for a third of overall two-wheeler sales and this component is expected to grow further in the coming years as cities get even more crowded and traffic jams become the norm. In road conditions like these, scooters become the ideal mode of transport especially with more women entering the workforce. This is not just an urban phenomenon but true across Tier 2/3/4 regions where better road connectivity is helping the scooter market grow.

From Honda’s point of view, the priorities have changed beyond overtaking Hero to becoming the top notch technology player. Sure, the aggression is still intact but the company is now preparing itself for the greater challenge of Bharat Stage VI emission norms, which come into force from April 1, 2020.

This is when there will be substantial investments for fuel injection and the challenge is to strike the balance with costs that become critical in a price-sensitive market like India. It is here that Honda is more than confident of driving a point as the world leader in technology.

The top management told this writer during the Karnataka plant expansion that Honda was “very confident of doing better than competitors” under the BS VI regime. According to them, the total market in India is likely to decrease in 2020 (owing to higher two-wheeler prices) and this is where the company hopes to take the leading position. To that extent, the number-one perception/status could go beyond numbers to standing tall in technology post-BS VI.

On the subject of emissions, it also remains to be seen if Honda will deepen its ties with Yamaha globally to work on areas like electric mobility. The two former foes decided to join hands in end-2016 and jointly produce 50 cc scooters, which is a minuscule portion of two-wheeler sales in Japan.

Yet, say industry observers, it is unlikely if these two big brands will come together merely to focus on a small and insignificant business. In their view, this is the beginning of more things to come and the collaboration could extend to areas like e-mobility where pooling strengths makes more sense than going solo.

On the subject of Japanese companies, Suzuki believes it has finally found the right formula to click in a competitive arena like India. Since the time it parted ways with TVS over 15 years ago, the company has found the going here tough with the occasional successful product. Today, with India racing ahead of Indonesia as its largest two-wheeler market, Suzuki is keen on building on the momentum.

It has decided to focus on premium bikes and scooters instead of spreading itself thin by participating in a host of product categories. After all, it makes sense to focus on growth segments and it looks as if the strategy is paying off.

Once production reaches one million units at its Haryana plant in 2020, Suzuki will set up another unit, which will most likely be in the South and a toss-up between Andhra Pradesh and Tamil Nadu. The product strategy is similar to Yamaha’s, which is additionally looking at a larger role for India in servicing markets like Africa.

Bajaj Auto has been in the news for alliances in 2017 beginning with the decision to break away from Kawasaki from jointly retailing bikes in India, its ally of many decades. The two will, however, keep this arrangement intact for overseas markets, especially the ASEAN region, where Kawasaki is the bigger brand.

Bajaj, however, plans to strengthen ties with KTM where the journey began a decade ago through the acquisition of a 14 per cent stake in the Austrian company. This has since grown to 48 per cent but the more important aspect is the way the business model has worked perfectly with the Bajaj plant at Chakan near Pune now emerging a manufacturing powerhouse for KTM bikes globally.

Today, lower displacement Duke models in the 125 cc to 400 cc range are shipped out to a range of countries right from the US and Europe to Japan and Australia. ASEAN is the next big growth region and what is even more significant is the decision to produce the Husqvarna range at Chakan from 2019. KTM had bought out this Swedish brand from BMW Motorrad in 2013 and will now look at replicating the Duke success story from India.

The other big-ticket announcement from Bajaj was the alliance with Triumph of the UK, which will see production of mid-size motorcycles in the 300 cc to 650 cc range at Chakan. If everything goes according to plan, the first product will roll out in 2020 and it will be interesting to see a potential tug-of-war emerging both here and overseas with Royal Enfield.

While on the subject of alliances, TVS recently launched the Apache RR 310, which was jointly developed with BMW Motorrad. This could be beginning of more things to come from the partners in the coming years. TVS, meanwhile, is working on other products which include a new 110 cc commuter and a 125 cc scooter that will not be part of the Jupiter brand umbrella. An electric scooter is also part of the lineup.

In fact, 2018 could see e-mobility gaining ground in the two-wheeler space with the likes of Ather Energy keen on making their presence felt here. It is not as if petrol will become redundant but electric will gradually begin making its presence felt so long as there is supporting infrastructure to facilitate its use.

It will take at least a decade longer before e-mobility becomes the norm for two-wheelers. In the process, it could disrupt the entire supply chain with vendors needing to make fewer parts while the traditional form of retailing in showrooms could become irrelevant. Customers would rather pick their e-bikes online or at malls! All this is still some years away but manufacturers are preparing themselves for the new tomorrow.