Thursday, April 25, 2013

How long will Hero rule the motorbike-land?

Homegrown business brainpower from the Munjals have ensured that Hero MotoCorp hangs on to the crown for more than eleven years. And during these years, the most unexpected of moves from Bajaj have failed to dismantle Hero’s machines

In the summer of 2001, Hero Honda’s (now Hero MotoCorp) 78 year-old boss Brij Mohan Lall Munjal got the opportunity of a lifetime. He had the chance to invite 3,000 Hero Honda motorcycle owners for a grand celebration. Reason – each month, between April and July that year, Hero Honda had outrun the long-standing no.1 seller of two-wheelers Bajaj Auto in sales (volumes). So August 2001 it was, a time for Hero Honda to declare that boom time was over in Bajaj land. That Munjal Sr. wanted the world to acknowledge his company’s ascension to the throne was proven by the manner in which he used the merrymaking opportunity to pull down Bajaj a peg or two. He organised a grand celebration in Pune – Bajaj’s hometown!

The 2001-02 season proved a watershed year for Hero Honda. The uncorking of the Hero champagne bottle in Bajaj territory also symbolised a shift in tectonic plates in the two-wheeler business. During that year, for the first time in 45 years since scooter was made commercially available in India, sales of the product fell. In FY2001-02, sales of this product dipped 2.6% y-o-y to 0.85 million. On the other hand, sales of motorcycles continued to rise (by 36.8% that year to 2.89 million). By the time that financial year ended, Hero Honda had been crowned the new #1, with a market share of 49.60% (as compared to 35.08% a year back), miles ahead of the new #2 Bajaj whose market share fell to 24.60% (from 36.26% a year back).

Eleven years later, Hero MotorCorp remains the #1 in the domestic circuit with a 45.17% market share, while Bajaj – despite retaining the silver – has become smaller with a 19.10% control of the Indian market. In fact, how dominant a force Hero has grown into () can be understood from the fact that the manufacturer is today the world’s largest two-wheeler manufacturer (in volumes).

Three big changes have occurred in the industry during the past decade. First, the sight of geared scooters across showrooms is history. [The last time Bajaj rolled out this product was in 2009.] Second, having parted ways with Honda, Hero MotoCorp is an ‘independent’ powerhouse that seems to be growing in stature each quarter – much like the Bajaj of the 1980s & 1990s. Third and most important, competition in the category has risen tremendously, especially with the arrival of players like Honda, M&M and TVS, that have both geared and non-geared products on offer.

The shift of demand from geared scooters to motorcycles stripped Bajaj of its glory. While the scion of the Bajaj dynasty, Rajiv, was not slow to judge fluctuating moods in the market, his effort to salvage some pride can be only termed “reactionary”. Going by numbers, Bajaj does not appear deserted or facing a storm – actually, the situation seems fine. Today, motorcycles account for 92.67% of its sales volume (FY2011-12), as compared to just 8% fifteen years back (remember the Boxer, the Champion and the KB100 & KB125 brands?). But its high-quality positioning strategy seems to have fallen weak before Hero’s price leadership and made-for-the-masses positioning. The current market share difference is proof (Bajaj’s 19.10% vis-a-vis Hero’s 45.17%). Despite 25 products launched in the motorcycle segment since 2000-01, not only is Hero (which has launched only 16 products in the segment) sitting more comfortably on top, Bajaj is finding hard to deal with the walking dead of the present decade – scooters!


Source : IIPM Editorial, 2013.
An Initiative of IIPM, Malay Chaudhuri
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