Piaggio's top-down strategy

Source : Business Standard

While Vespa, the most expensive scooter in India, will remain a niche player, the Italian firm wants the iconic brand to create a buzz about its less expensive scooters that would follow soon

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Harley-Davidson Anoop PrakashAll geared up

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ET

Rather than dealerships and factories of Hero MotoCorp, its CEO & MD Pawan Kant Munjal is probably a more familiar sight on the Daytona race track fussing over his 1190 RS Erik Buell Racing (EBR) bike in the American Motorsports Association's (AMA) Superbike championship. Hero has recently forged an alliance with EBR for high-end bikes and sponsors the EBR team in America's premier motorcycle racing circuit. The 58-year-old big daddy of the world's largest two-wheeler company by volume is gearing up to go global at a time when doubting Thomases point at dipping domestic sales, predicting an uncertain future for the two-wheeler company. The CEO of a rival company says: "Hero is in a place where Bajaj was many years ago -without a technology partner. The way things are moving in the motorcycles market, it's soon going to be a two-horse race between Honda and Bajaj. Honda on its own is a far more dangerous player than Hero Honda."




Munjal's new Hero is a W.I.P. Since the Honda JV break up in 2010, he and his A-team have put in a lot of hard work adding teeth to the organization. Over a planning exercise in Delhi's Grand Hotel after the split, Munjal showed his men The King's Speech, where King Edward VI corrects a stammering problem with the right inputs. "The moral of The King's Speech is that nothing really is impossible - if you get after something and have the conviction, you will definitely achieve your goals," he says.


In April-October 2012, Hero MotoCorpBSE 0.28 % sold 3.4 million units and registered a negative growth of 1.83% over the same period the previous year. Bajaj AutoBSE -1.13 % too shrank by 4.5% in the same period, while Honda Motorcycles and Scooters ( HMSI) grew by 47%, albeit on a much lower base of 1.5 million units. In the fast growing scooter segment, Hero has a 17% market share, while Honda with 49.3% market share is by far the leader. The contest is rather close between Hero and TVS for the number two position.


What's going on? "When Honda came out with a 100% subsidiary in India (HMSI in 1999), they manufactured only scooters for the first 5 years of their operation since that was the deal with us," says Munjal, echoing how he fended off Honda's challenge in motorbikes long enough for Hero Honda to consolidate and add teeth to volumes. But the hiatus proved a boon for Honda to develop a market for scooters at a time when the segment was sliding. For Hero, it will now indeed be difficult to unseat its established erstwhile partner in a rapidly growing segment.


Another significant shift can be noticed in the traction across the 125cc segment, a sort of aspirational uptrading by customers. Traditionally, Hero has championed the 100cc segment and rules the roost with twothirds of the market with winners, such as the Splendor and Passion. "In a full year, Splendor sells about a third of our volumes," claims Dua. But over the years, Bajaj has built up capabilities in the 125cc space while Hero battles on with three offerings. "Hero's relative advantage will get whittled away as the competition already has credible products in the 125cc space," says a recent report from CitiGroup. Even in the premium segment, Hero's heroics come unstuck. Its market share was down to 7% in August from 24% five quarters ago. Blame it on the slowdown for now, but as the segment continues to grow, Hero may have to bite the bullet from Bajaj (40% market share) and Honda (17%).


Nevertheless, it's worth noting that with approximately 70% share in the most popular 100cc segment of the two-wheeler industry, Hero has penetrated deep into the hinterland with almost 5,400 touch points encompassing dealerships, service and spare parts outlets and authorized reps of dealers, while nearest competitor Bajaj stands a distant second with 3,500 touch points. "We will be adding another 400 touch points to our network by the end of this year (taking the total to 5800)," says Anil Dua, Senior Vice President-Sales & Marketing, Hero MotoCorp, when grilled on the Honda challenge.


With the success of the Hero Honda venture behind him, Dua revs up for a repeat performance. "I'm not very concerned about market shares going up and down," he says matter-of-factly, pointing to a newfound vigor post the split with Honda. "I'm looking ahead." In a volume-driven market like India where competition is hotting up, despite being market leaders, Hero has stepped up its efforts to go overseas. "We've created an international business division with 16 people as of now and want to grow our international business five times in five years," says Dua. Earlier, Hero Honda had just two people in its overseas division and exported to four countries-Nepal, Sri Lanka, Bangladesh and Colombia-accounting for a mere 3% of its annual turnover. Today, the thinking has changed even though the turning of the tide can take longer.


While unveiling the new brand identity in London's O2 Arena last year, Munjal outlined the vision of his company through the 'Power of 10'. Simply put, in five years, he's eyeing $10 billion in revenues with 10 million units, and at least 10% of the total volumes coming from the international business. Very carefully, the company has recalibrated the nomenclature from 'exports' to 'international business', since it harbours hopes of setting up manufacturing facilities in some of the newer geographies it is venturing into. "We've appointed distributors in Africa, Central America and Latin America and are first tapping those markets where we believe our products will deliver," claims Munjal in the backdrop of Bajaj Auto's successful foray in the overseas markets, which now forms one-third of its total business by volume.


If international business is the new hottie in Team Hero, so is its planned Rs 400 crore R&D centre in Kukas, Rajasthan. Since tech was a hand-me-down from Honda, the group honchos are passionate about innovation adding teeth to their capabilities. Today, the R&D team is 325-strong from 71 during the split and the plan really is to take it to 500 in the mid term.


Along with Erik Buell Racing of the USA, Hero has also tied up with AVL of Austria for engine technologies and Italian design firm Engines Engineering (EE) for end-toend two-wheeler design solutions -who are working together to develop the next-generation Hero twowheelers. Hero is reportedly working on several models ranging from low engine displacement to higherpowered motorcycles and scooters.


However, the first bike on a new platform to hit the market will be a 250cc motorcycle by the third or fourth quarter of FY2014-15. Ever since Hero separated from Honda, the company has launched only four products, which could all be termed as Honda's babies in terms of technology. The Honda effect may well continue with a couple of fresh launches in the next fiscal.


But does that augur well for the group when the competition has the firepower to deliver more? "In the first 15 years of this company (1985-2000), we launched only six models. From 2001 to 2005, the company launched 15 models. Each year now, companies launch on an average 8-10 models," says Ravi Sud, Senior VP & CFO, Hero MotoCorp. Clearly, Hero falls woefully short of market expectations in the near term.


But the new tie-ups will surely come into force after that and Munjal is upbeat. "The premium segment is currently on the drawing board, well beyond the design board, and we've seen mock-ups and clay models....in 2014, we would have a completely new portfolio." It is learnt that the first bike from Hero will be sport a 250cc engine. But skeptics demur as analysts question the effectiveness of the tie-ups, save AVL, a trusted name in engine technologies. "While EBR is a boutique, EE is not a name to reckon with in auto design," says an analyst requesting anonymity.


There is also hint of an apprehension of a complete tech overhaul from the existing Japanese platform to the western domain. Dua dispels that fear. "Instead of completely replacing what our erstwhile partner has done, we need to know about engines, we need inputs on designing and styling, we need to know about racing," he says adding that currently, Hero engineers are working with these partners to "co-develop" the company's future SKUs.


Clearly, the competitors and market watchers know Hero still has a strong franchise and the massive transformation exercise will build a strong platform. "Hero has seen 70 years of evolution under Brij Mohan Munjal. Their understanding of the market is very deep. The competition can have better technology but that's not sufficient to win the market. Therefore, dislodging the current lead of Hero will be difficult for the competitors," says Ramdeo Agarwal, Jt. MD, Motilal OswalBSE 1.97 %. "In this very sector, there have been past instances of promoters doing well, inspite of their JV partners walking out. So there is no reason why Hero can't repeat that," adds Ravi Sardana, EVP, Securities.


Market watchers say Munjal's chemistry with stakeholders may not be as strong as his father's, Chairman Brij Mohan Munjal, around whom legends of benevolence have been woven. A source even said that once when an employee needed blood, it was Sr. Munjal who came to his rescue by donating his own blood. And the same thread of deep relationships runs through the dealers and distributors as well. Just when CD was interviewing Hero executives Brij Mohan Munjal and his wife passed through the reception of the Hero MotoCorp HQ. A couple of dealers standing at the reception offered him belated Diwali gifts and touched his feet. He blessed them and asked how they were doing, whether they faced any hiccups-all in first name terms.


However, the larger question is whether Hero will remain a twowheeler company. "It's about mobility and if Hero MotoCorp is a twowheeler company today, it could be anything tomorrow," says Dua hinting at larger plays in auto. And he believes that unity of command allows room for such adventures. "It enables you to do visioning, missioning, give a strategic thrust, alignment and then a plan to go for it and execute that plan," he says. With a heat wave as severe as one is witnessing in the two-wheeler category, Hero has a tough battle at hand. The overseas thrust may be one way to battle the crisis but a category leap calls for another round of introspection.

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Expect to finalise a partnership with BMW this fiscal: TVS

Source : ET

Chennai-based TVS Motor Co today said it expects to finalise before the end of the ongoing fiscal a partnership with BMW for collaboration in two-wheelers.


"Talks are on (with BMW) and we expect something to materialise before the end of the ongoing fiscal," TVS Motor Co President (Marketing) HS Goindi told reporters here.


He, however, declined to comment on the nature and details of the partnership for which the company is in talks with the German firm, which has also started selling high-end performance bikes since 2010 in India.


The development is seen as TVS' move to gain technology in its bid to step up portfolio in the high-end performance bikes segment.


Earlier in 2001, TVS Motor had parted ways with Japan's Suzuki Motor Corp from their erstwhile joint venture and since then the Chennai-based firm has been on a solo journey.


Goindi was speaking on the sidelines of the launch of the company's latest model, executive segment 125 cc bike, Phoenix 125 which is priced at Rs 49,990 for drum brake version and Rs 52,000 (ex-showroom Delhi) for the disc brake variant.


TVS Motor Co currently sells a range of motorcycles, starting from entry level TVS Sport in the 100 cc segment to the 180 cc model TVS Apache.


Commenting on the company's expectations from the newly launched Phoenix, Goindi said: "The overall executive motorcycle segment is about 4 lakh units a month in India now and we want to have a share of about 5-7 per cent."


Overall, the company is aiming to sell around 20,000 units of the Phoenix 125, he added.


The company will also start exporting the new model from February next year, Goindi said.


Phoenix 125 will compete with the likes of Hero MotoCorp's Glamour, Bajaj Auto's Discover and Honda Motorcycle and Scooter India's Shine.


"We had a gap in the segment, which is the fastest growing in the market and this will now be filled by the Phoenix," TVS Motor Co General Manager Marketing Arun Siddharth said.


TVS is targetting urban customers with its new model, which it claims to deliver a mileage of 67 kmpl.

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Launch of 100cc motorcycle to aid mkt share: Bajaj Auto

Source : Money Control

Rajiv Bajaj, Managing Director of Bajaj Auto told CNBC-TV18 that November sales have met expectations. He informed that Discover and Pulsar contributed 68% to the two-wheeler sales figure.


India's second largest two-wheeler manufacturer, Bajaj Auto reporte 1 percent decline in November sales due to sluggish demand for motorcycles and a fall in export numbers. The company's two-wheeler sales stood at 3.27 lakh units while its three-wheeler sales were recorded at 45,500 units.


Rajiv Bajaj, Managing Director of Bajaj Auto told CNBC-TV18 that November sales have met expectations. He informed that Discover and Pulsar contributed 68% to the two-wheeler sales figure. Bajaj further added that Hero MotoCorp 's market share has dropped to 48.5% from 54%.


Bajaj Auto is ready to launch its 100cc motorcycle in January and it is expected to aid its market share, opined the MD.


Here is the edited transcript of the interview on CNBC-TV18.


Q: How are things looking for this month and what have you aimed to do in terms of the year-end sales target?


A: November sales have met expectations. We have experienced good sales. Our sales have been about 327,000 motorcycles. So that is flat year-on-year (YoY) in terms of our billing to dealers. Three-wheeler sales are up about 7 percent to 45,500 vehicles. Total sales are about 372,000 vehicles.


Q: Can you just break that up between models as well with specific reference to what happened with Discover and Discover 125?


A: Yes, certainly. We have about 60,000 of the Boxer last month, we have about 44,000 of our Platina and those two account for about 100,000 units. Discover continues to do very well, 150,000 units of the Discover brand and the Pulsar along with the Avenger and KTM bring it up to about 75,000 vehicles. In terms of the mix also, it has been very good for us because the Discover and Pulsar together account for about 68 percent of our sales.


Q: Did you say 327,000 units in terms of motorcycles? That number does not look too high, is there any fear that post Diwali, the momentum might be flagging more than you expected?


A: Yes, I did say 327,000 motorcycles in the domestic and also the retail market. I think what we are seeing here is stock correction at the end of a festive season. For example, out of these 327,000 units, exports were 100,000 units, domestic motorcycle billing was 227,000 units but, domestic retail was exactly 300,000 units. There is a stock reduction of 73,000 motorcycles there. Otherwise, at the retail level, the sales have been very good.


Q: How exactly does market shares split up right now because we hear that Honda has been making a serious dent in the market including for your core competitor Hero Motocorp?


A: Yes. For market share, I would consider a slightly broader period. I would take the period of September over a November year-on-year (YoY) because last year, the festive season came a month earlier and that tends to skew manufacturer billing.


If you were to look at the September-October-November period, the domestic market shares for the manufacturers are about 27 percent for Bajaj last year and it is a shade over 27 percent this year. We have gained about 0.3 percent market share which is not very much.


To the best of my knowledge, based on the facts I have, Hero is down from over 54 to about 48.5 percent. Therefore, there is a big loss of market share there and Honda has gained that with perhaps people moving from Hero to the 100 CC bike of Honda. Honda's market share has moved up 5 percentage points from 7.5 to 12.5 percent. So those are the market shares for the three major motorcycle manufacturers.


Q: It is early days yet but, what can you say about the kind of volume trends you are expecting to see going into next year given the environment you were just discussing?


A: I would still say that one should not judge Monday morning by the Saturday night party. What I mean is that the party is over. October and November is done, nothing has changed incrementally. I think December onwards the industry will again witness a relatively flat and difficult situation. The only way to grow volume then would be to grow market share.


Our strategy would be to do that through the launch of a new 100cc motorcycle in January. So far this year we have been defending our strong positions by launching the new 200cc Pulsar and a new 125cc Discover. It was important for us to first protect what we have. Now, we are going to enter into the 100cc space.

Honda has done that a little before with the Yuga. We are going to have a new 100cc motorcycle in the market from January. We think it is the most advanced 100cc bike in the world. It will certainly be the most expensive in this market but, we think consumers are ready and willing to take it. In fact, they are aspiring to move up to something like that. In our case, we are hoping that this product is going to drive sales and market shares from January onwards.

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Piaggio bikes to compete with Harley, Enfield next year

Source : ET

Italian two-wheeler maker Piaggio is gearing up to launch its next line of products, including superbikes and cruisers, in India after the success of the Vespa brand, launched a few months ago.


The European brand, which has carved out a space in the three- and four-wheeler categories in India over the past several years, is now readying itself for a broader play in the fiercely competitive two-wheeler segment. While the Vespa, an iconic premium scooter, is already on sale in India, the company is finalising the introduction of cruiser brand, Moto Guzzi, while also expanding its product base of the superbike brand Aprilia.


At least four of the eight two-wheelers brands, which Piaggio holds internationally, would be available in India by the end of next year. While Piaggio would compete at the entry level of the segment, Vespa would continue to remain at the premium end.
Ravi Chopra, chairman and managing director, Piaggio Vehicles, said, "We are evaluating the right time for the launch of products following the Vespa. Piaggio has a reservoir of brands and products. We are trying to see how we can customise those products to Indian needs. Some time after the second half of 2013, we will see the launches."


Moto Guzzi would compete against brands like Harley Davidson, Royal Enfield and Triumph, Aprilia would battle for space against premium products of Honda, Yamaha, Suzuki, BMW, Kawasaki, KTM, among others.


The company hopes to pull in crowds by showcasing its technology by launching high-end motorcycle brands and products, which would be sold in India through the import route. The company is also not averse to customising the premium products to suit Indian tastes.


"Our focus today (for future launches) is the scooter segment, which will be under the Piaggio brand (in the low-end segment). To showcase our technology, we are bringing superbikes to India too. The market is small, but robust and growing. Moto Guzzi, which is a world-famous cruiser brand, will also make its way to India", added Chopra.


Piaggio has started with one outlet in Pune for the Aprilia brand, which has sold 15-20 machines till date. The company is contemplating three-four more outlets in key locations like Gurgaon, Hyderabad, Bangalore for the expanding Aprilia's retail reach.


According to Chopra, Indians collectively bought 2,300 superbikes last year, with engine capacities of 800cc and above. Though the number is small compared to some of the developed markets in the West or China, higher disposable incomes and the desire to own aspirational products is expected to drive demand for superbikes in India in the near future.


The domestic market is rapidly moving up the value chain with more manufacturers planning products having engine capacity of more than 200cc. Companies such as Bajaj Auto, Hero MotoCorp, KTM, Honda and Yamaha are planning multiple products in this category.


Other players, including Harley Davidson and Ducati, have enhanced their product line-up while Triumph and Polaris are contemplating a launch in India. Piaggio would launch a range of scooters competing against Honda, Hero, Yamaha and Suzuki starting next year.

Economic Times

At least once a month at the breakfast table at the Bajaj family residence within the campus of (BAL) on the outskirts of Pune, the patriarch has a question for the MD & CEO of the country's second-largest two-wheeler maker. "When will BAL become the No. 1 two-wheeler company in the country," is Rahul Bajaj's not-so-occasional query to son Rajiv.

Rajiv's answer on many such days is: "We are No. 1 in technology, in exports, in market cap, in profitability....the only bit that remains is to be a leader in volumes."

A few days ago, the 46-year-old CEO told this writer. "We need to take the longer route to that [to become No. 1 in volumes] because only in mathematics is a straight line the shortest distance between two points. I tell my father it's not as if we have given up on that metric; we're just taking the more profitable road there."

The Scooter Segment

The "longer route" Rajiv is talking about involves a re-entry into the entry-level market, which accounts for 65% of the bike market; BAL recently launched the 100 cc Discover T in this segment, and Rajiv is at pains to point out that it is not a me-too product, but a well-differentiated one with superior power, features and styling, and "more expensive than the most expensive product" in the 100-cc segment.

The second milestone of the "longer route" is unlikely to appear in the short to medium term. Rajiv says he "may" return to scooters, but only after BAL reaches a "dominant" global share in bikesscooters but I am sure it will be a premium product, and high on fuel efficiency," says RL Ravichandran, executive director, a former marketing honcho at the Pune-headquartered two-wheeler maker.


Honda to Hero MotoCorp to Mahindra & Mahindra scoring healthy gains in this segment, there's adequate reason for the chairman ( Rahul BajajHonda Motorcycle & Scooters India ( HMSI): "You can take an Indian out of the scooter market but not a scooter out of an Indian heart. Scooters are now selling in the commuting segment and in terms of mileage are comparable to motorcycles."

Strategy or U-turn?

Armed with charts, numbers, quotes of everyone from Bertrand Russell to Margaret Thatcher and case studies of iconic brands like McDonald's, Apple and the German luxury carmakers, Rajiv illustrated the method to the entry into the top end of the mass market; the point in time scooters will get back on the drawing board (not any time soon), and how the humble three-wheeler at a company that prides itself for its sporty bikesChanging Lanesmost-powerful bike

Money Machine

If BAL has succeeded in creating a perception of building powerful, stylish and feature-packed bikes, it's thanks to the track record of the Pulsar and Discover. Now it's time for that track record to rub off on the Discover T. "Start as an opposite, create an aura around yourself. Marketing is not selling. Marketing is about making yourself desirable," says Rajiv. And, for good measure, ensuring that you still earn robust double-digit operating margins with an entry-level product.
Rajiv says BAL's strategy is not too different from that of Mercedes or BMW or Audiscooters

Big Boys in Bikes Firstglobal motorcycle market share...I fear that if we put resources into scooters right now, we will lose out in bikes. Strategy is specialisation, and specialisation means sacrifice," says Rajiv.

Analysts agree that the core business line could suffer as focus shifts to a new one. For instance, even as Hero Moto's share in scooters has climbed from 12.6% in fiscal year 2009 to 18.1% in the first nine months of fiscal 2013, its share in bikes has dipped from close to 60% by almost seven percentage points over this period. Similarly, Honda's scooter slice has reduced from 54% to just under 49% even as its share in bikes has jumped from 6.2% to 11.4%.
Rajiv makes the point that Hero Moto got into scooters only after dominating mobikes. Similarly Honda got into motorcycles in a big way only after crossing a 50% share in scooters. "The purpose of a brand is to dominate its category," he says. BAL still has some way to go in bikes

Bajaj Auto: Two-wheeler market will rise after 6 months

Bajaj Auto intends to increase market share in the Deluxe Commuter segment.



In an interview with CNBC TV-18, Kevin D'sa, Vice President, Finance, Bajaj Auto, said that the slowdown in the two-wheeler market is temporary and the market will bounce back. 2014 will be a challenge, but growth is expected in the longer term.

The dip in the market will not effect the 20% margins of Bajaj Auto, claimed the vice president finance. The recent rate cut by the Reserve Bank of India will not have any direct effect on the market. As motorcycles sales are not influenced by interest rates drastically. But the rate cut might improve the health of the economy and this might help increase the sales. In the past whenever the country was growing at a healthy GDP, so was the motorcycle market.

Bajaj Auto currently holds around 24% of the market share. It intends to increase this share to 27 - 30% in the near term. In the premium segment, Bajaj holds 49% market share, while it has a healthy 20% in the base commuter segment. The company is targetting improving in the Deluxe Commuter Segment in 2013-14. This is the fastest growing segment fells D'sa.

Source: 2-wheeler industry to strengthen FY14 onwards: Bajaj Auto

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its good that bajaj is optimistic ...

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