m&m motorcycle report final

7/30/2019 M&M Motorcycle Report Final

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MARKETING

MANAGEMENT II

PROJECT REPORT

on

Mahindra and Mahindra MotorcycleLaunch

Submitted by:

Rupa Deepanju (2012261)

Sagar Panchal (2012262)Sarath S (2012272)

Shashank Doveriyal (2012292)

Srinivasa Krishnan S (2012312)


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KLIO- Hamare Logon ke Liye

Two Wheeler market size:The Indian two-wheeler industry is divided into three segments namely motorcycles,

scooters and mopeds. Sales of the Indian two-wheeler industry were estimated at around Rs

650 billion in value terms and 15.4 in volume terms at the 2011-12. The industry has postedhealthy growth over the past 5 years, growing at a CAGR of 15 per cent and 12.7 per cent, in

value and volume terms respectively. In volume as well as value terms, motorcycles lead the

two-wheeler market. In 2011-12, share of motorcycles in sales volumes was 77.6 per cent.

The two wheeler industry is dominated by three players - Hero MotoCorp, Bajaj Auto and

TVS Motors together contribute around 80 per cent of the domestic sales volumes. Over last

5 years, the domestic industry has clocked a growth at a CAGR of 11.3 per cent during 2007-

08 to 2011-12.

Motorcycles segment continue to rule the market

Motorcycles can be further divided into three segments - economy, executive andpremium. The economy segment comprises lower-end motorcycles (priced at Rs 30,000-

40,000 when launched), whereas the executive segment (launch price between Rs 40,000-

50,000) and premium segment (launch price higher than Rs 50,000) constitute higher-end

motorcycles. The share of the economy segment in total motorcycles sales has been declining

gradually over the last few years, falling from 33.1 per cent in 2007-08 to 23.7 per cent in

2011-12, as players are shifting their focus to 110-125 cc motorcycles. This has led to

increase in share of the executive segment to total motorcycles sales from 53.4 per cent in

2007-08 to 57.9 per cent in 2011-12. The share of the premium segment has gone up to 18.4

per cent in 2011-12 from 13.5 per cent in 2007-08. Hero MotoCorp, the market leader, holds

a dominant market share of per cent and 68.7 per cent in the executive segment and economy

segment respectively; whereas Bajaj Auto leads the premium segments with a market shareof around 42.1 per cent. Global players - Honda, Yamaha and Suzuki - have been expanding

their presence in the Indian motorcycles segment. Combined share of the three players has

increased significantly from 7.4 per cent in 2007-08 to 11.7 per cent in 2011-12.

TWO-WHEELER: PLAYER-WISE SHARE IN DOMESTIC SALES


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HMSI is emerging as a strong player and has intensified the competition in domestic

market. Domestic sales of HMSI have grown at CAGR of 23.6 per cent during 2006-07 to

2011-12 and has a market share of 14.9 per cent as on 2011-12. HMSI gained market share,

due to strong volumes from its model launches in the executive and premium motorcycles

segments as well as healthy growth in scooters. Foreign players like Yamaha Motors and

Suzuki Motorcycles India are still struggling to gain a substantial market share. Mahindra &

Mahindra Ltd also entered the two-wheeler industry with the acquisition of Kinetic Motors in2008-09. However, it is yet to gain a substantial market share in domestic market.

Two Wheelers: Player-wise growth in domestic sales

Motorcycle sub-segmentsThe motorcycle segment is further classified into economy, executive and premium

segments depending on engine capacity and the price the model at the time of launch. As of

2011-12, the executive segment accounts for the largest pie with a share of 64.5 per cent

while economy and premium segments accounts for around 18.4 per cent and 17 per cent

respectively.


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Economy

Bajaj Auto holds a dominant market share of 46 per cent in total economy sub-

segment as it has strong presence (around 75 per cent share) in exports of economy

segment. Whereas, Hero MotoCorp holds leadership position in domestic economy segment

with its model CD Dawn Dlx. It is the company's largest selling model which accounts

for 42 per cent of domestic economy segment which are mainly sold in rural and semi-urban areas where the company has strong presence.

Economy segment: Player-wise total market share

Executive

Hero MotoCorp continues to be the leader with around 66 per cent market share in the

sub-segment. Its two major selling models i.e. and - constitute over 60 per cent of the total

sales volumes in the executive segment. However, Splendor Passion the company has been

losing market share due to capacity constraints as well as new model launches by its peers.

Over the past five years, HMSI gained maximum market share of around 5 per cent with

variant launches and expansion of dealership in the executive segment. Bajaj Auto launched

Discover 150 and Boxer 150 which enable it to gain market share in last three years. TVS

Motors also re-launched its model Flame, Victor and a new model - Jive in the last two years,

but was unable to garner any significant market share in the executive segment given

lackluster feedback to new launches and limited distribution reach. Despite its technical

expertise, Yamaha Motors has so far been unable to grab any market share in the executive

segment.


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Executive segment: Player-wise total market share

Premium

Bajaj Auto had re-launched its major selling models in the premium segment (Pulsar

150, Pulsar 180 and Pulsar 220) offering more features in last two years. This enabled Bajaj

Auto to gain market share in premium segment from 45.3 per cent in 2009-10 to 47.3 per cent

in 2011-12. However, over last five years, Bajaj Auto has lost maximum market share of

around 5 per cent mainly to Yamaha Motors. Hero MotoCorp and TVS Motors also launched

an advanced version of their models in last couple of years but were unable to gain market

share in the premium segment. The only player who has garnered significant market share(around 15 per cent) over the last 5 years in the segment is Yamaha Motors with major new

launches like FZ 16, SZ and Fazer.

Premium segment: Player-wise total market share


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GROWTH IN RURAL MARKET:

The growth in two-wheeler demand would be aided by rapid increase in the number

of addressable households in the rural market and higher penetration levels in urban markets.

During the past five years, the addressable household (defined as number of households

above the threshold income for a motorcycle of Rs 90,000, excluding inflation adjustment) in

urban and rural India is estimated to have grown annually by around 10 per cent and 20 per

cent, respectively. During 2009-10 to 2014-15, the increase in relevant households is

expected to be at a slower pace, with urban households growing at around 4 per cent and rural

households at 7 per cent, annually. Increasing model launches, attractive financing options

and price points will aid increase in penetration levels in the urban addressable market. But

the incremental demand for two-wheelers would largely come from rural markets with lower

motorcycle penetration and strong growth in the number of rural addressable households.


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Factors affecting rural incomes (direct and indirect)

Value of crop output: Is a direct measure of farm income levels which is calculated as a

sum product of crop production and their prices:

Crop output: Production of four major crops - wheat, rice, cotton and sugarcane MSP and wholesale prices: Minimum support prices (MSP) used for production

procured by government and wholesale prices for production sold in mandis.

Agricultural credit:Agricultural credit allocated by the government in the UnionBudget for the agricultural sector. This includes only credit to farmers and not salaries to

PSUs. It is an indirect measure influencing purchasing power and hence has a multiplier

impact on income generating ability of a farmer.


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Government initiatives:Initiatives taken by the government for rural development - Loan waiver: Agricultural debt waiver and debt relief scheme announced by the

Government in 2008.

NREGA: The National Rural Employment Guarantee Scheme (NREGA) waslaunched in February 2006 and currently covers 614 districts across the country. The

objective of the Act is to provide every rural household with a guarantee of at least

100 days of employment during a financial year by providing opportunities for

unskilled manual work.

Expenditure on rural development: In terms of roads, bridges, expenditure on schools,education, health, among others.

These measures provide balance sheet strength to a farmer and schemes like NREGA and

rural development enhance non-farm income capabilities of rural India.

Further, appreciation in land prices in rural areas in the past five years has had apositive effect on the borrowing capacity of the farmer, as it acts as a cushion for the

banker and his confidence in lending to the farmer increases.

All the above mentioned schemes will continue to have a positive effect on farmers'

income in the coming years. Over the last five years (2004-05 to 2009-10), farm purchasing

power posted a CAGR of 19 per cent, attributable to the above mentioned factors.

Over 50 per cent of rural households currently lie below threshold income levels,

indicating greater scope for migration of households into higher income segments. Over 50

per cent of rural households yet to attain motorcycle affordability.


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Rural total households, addressable market size and penetration levels

Short-term segmental demand

Growth to decelerate in 2012-13 with slowdown in rural sales.

Within the two-wheeler industry, the motorcycle segment is expected to grow by 5-7

per cent in 2012-13 as against 11.9 per cent in the previous year. The GDP growth forecast

for 2012-13 currently stands at 5.5 per cent as against 7 per cent forecast at the beginning of

the year. More importantly, agricultural GDP growth is expected to slow to 'zero' per cent asagainst 3 per cent projected earlier owing to drought conditions in major states. This bleak

outlook on farm incomes would significantly hamper motorcycle sales since over 40 per cent

of the demand is derived from rural areas, and more importantly majority of incremental

volumes have been driven by rural areas in the past 12 months, while urban demand has

continued to post meagre growth.

Supply-side factors like an improving finance scenario and higher rate of new product

launches would provide some impetus to demand. In 2010-11, however, two-

wheeler financiers launched innovative products like direct cash collection (DCC) and low

internal rate of return (IRR) schemes. This led to greater affordability and aided the growth

of players in semi-urban and rural areas. However, in 2011-12, high interest rates and higher

risk premiums within the two-wheeler finance market limited the growth in finance

penetration levels and eliminated the finance-led impetus to demand seen in 2010-11.


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Finance penetration is expected to trend upwards again as the interest rate cycle turns

and players continue to pursue finance-led growth aggressively in an attempt to garner

market share in non-metro areas. To summarise, domestic two-wheeler sales growth is

expected to continue moderating in 2012-13 given negative cues on rural incomes and

continuing sluggishness in urban demand. Consumer sentiment remains weak across all

segments given the negative macro-economic cues, high fuel prices and inflationary

expectations. The bleak outlook on farm incomes would significantly impact motorcycle

sales wherein growth is largely driven by rural demand.

Long-term segmental demand

Motorcycles: Rural demand to drive sales over the long run

Motorcycles: demand trend

We expect rural motorcycle sales to grow at 14-16 per cent during 2011-12 to 2016-

17, due to factors like strong growth in farm and non-farm incomes, greater potential for

migration into higher income brackets, infrastructure penetration etc. Over 50 per cent of

rural households are yet to migrate into the motorcycles addressable market as of 2011-12 (as

per internal estimates). Motorcycle penetration (as a percentage of theaddressable market) has actually declined in rural markets over the last 5 years (despite an

increasing share in higher sales) owing to the exponential growth in the addressable base,

which has grown at a robust 14-16 per cent CAGR. Being under-penetrated at 26-28 per cent,

the rural market provides ample potential for growth. Hence, we expect a greater part of

incremental motorcycle demand to come from rural markets; rural motorcycle penetration

levels are expected to rise to levels of 40-42 per cent. Even at the end of 2016-17, around 30-

35 per cent of rural households would still lie below motorcycle threshold income levels,

signalling continued scope for growth in those markets until 2020.


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BUYING BEHAVIOR OF RURAL CONSUMERSTo understand the buying behaviour of rural consumers, we must go to the factors that

influence their buying behaviour. The factors include:

1. Cultural environment.2. Geographic location.3. Education/literacy level.4. Usage.5. Involvement of others in the purchase.

Some of these points are discussed in some detail below:

1. INFLUENCE OF CULTURE:Culture and tradition influence perception and buying behaviour. For example, the preference

in respect of colour, size and shape is often the result of cultural factors. Rural consumers

perception of products is strongly influenced by cultural factors.

2. GEOGRAPHIC LOCATIONS:Rural consumer behaviour is also influenced by the geographic location of the consumers.

For example, nearness to feeder towns and industrial projects influence the buying behaviour

of consumers in the respective clusters of villages. To cite one more example of how

geographic location affects buying behaviour, we can point out the fact that the lack of

electricity in many rural households acts as a barrier to the purchase of certain consumer

durables.

3. EDUCATION/ LITRACY LEVEL:Literacy level of the customers plays an important role in making the final decisions.Actual purchase is made after consulting the educated people among the group. In case of

bikes the young people between the ages of 20 to 40 is consulted.

4. USAGE:The situation in which the consumers utilize the product also influences their buying.

Since rural consumers cannot use washing powders/detergent powders that much, as they

wash their clothes in streams or ponds, they go in more for washing bars and detergent cakes.

Similarly in case of bikes, five factors motivate the consumers in their purchase decisions.

These were fuel efficiency, maintenance cost, price, image and warranty. Rural customersexpect it to be infunctional class (i.e.)they expect more ruggedness and durability in uneven

roads.

5. INVOLVEMENT OF OTHERS IN THE PURCHASE:The elderly person of the family usually will play the role ofDecision maker while

purchasing bike. Apart from head of the family, others play the role ofInfluencers in the

purchase decision. An increase in literacy coupled with greater access to information has

resulted in this development. The marketer has to reckon the role of the influencers while

sizing up the buying behaviour of rural consumers.

All the above factors influence the buying behaviour of rural consumer and their

responses to marketing mix variables and reference points they use for purchase decisions.


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MAHINDRA & MAHINDRA Overall Company Profile:

The following data provide the income and the growth of the various sectors of the

company during the year 2011-12.

The Automotive and Farm Divisions of the company have recorded a growthof 35.3%, thereby increasing the net income from Rs.23,894 to Rs.32,319crores.

The income ofMahindra Finance grew by 41.3 per cent to Rs.2,794.6 croresfor the year ended 31st March, 2012 as compared to Rs.1,977.5 crores.

Mahindra Forgings Ltd. registered a total income of Rs.43,468 Lakhs asagainst Rs.36,002 Lakhs in the previous year registering a growth of 21%.

Mahindra Lifespace Developers Limiteds total income as a standaloneentity was Rs.52,112 lakh as compared to Rs.50,685 lakh in 2010-11.

Club Mahindras total income grew at 19 per cent from Rs.53,416 lakh in2010-11 to Rs.63,658 lakh in 2011-12.

Mahindra Satyam recorded a total income Rs.59,643 Million fromoperations.

Tech Mahindras consolidated revenues increased to Rs.54,897 Million fromRs.51,402 Million in the previous year, at a growth rate of 6.8%.

Mahindra Ugine Steel Company Limited registered a total income ofRs.1541.52 crores from Rs.1342.91 crores at growth rate of around 15%.

STP Analysis:

Segmentation: Based on

Demographic:

Age Gender Income Occupation

Geographic:

RegionPsychographic

Lifestyle Opinions and interests Benefits sought Usage

Behavioural

Attitude


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Targeting

Age: 25-50 yrs.This groups purchase decisions were primarily focussed solely on price and

mileage. Brand name is given high moderate importance in making the

purchase decision with maintenance and service quality taking the back seat.

This can be explained by the fact that due to rising income levels, people

prefer buying a new motorbike than repairing an old one. The cost-sensitive

consumer who would put that on a high importance list seems to be markedly

absent and the market scenario seems to suggest a change but more study

needs to be done to make any credible conclusions. The data collected from the dealers

confirmed the above inclination of the young population as the maximum bikes

sold by the 3 dealers in last 6 months to the age group (25-35) are high power

bikes mostly of more than 150CC and to the age group (>35) are bikes less

than 135CC. The above results are also supported by the dealers survey result

where the only thing we could make out extra is the colours of the bike which

dealers rated as a very high influence factor.

Gender: Males Income:


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Differentiation:

FEATURES

ENGINE

SPECIFICATIONS

Name: KLIO 125 Displacement: 124.6cc

Type: Commuter Engine: 124.6cc, 4-stroke

Top Speed: 107kph Maximum Power: 12.7 Bhp @ 9000 rpmFuel Consumption: Maximum Torque: 11.2 Nm @ 7000 rpm

City 53 Gears: 5 Speed

Fuel Consumption: Clutch: Wet Multi Plate Type

Highway 67 Bore: 0

Stroke: 0

ACTIVE AND PASSIVE SAFETY No. of Cylinders: 1

Suspension(Front): Telescopic Fork Cylinder Configuration: NA

Suspension(Rear): Nitrox Monohock Valve Per Cylinder: 4

Brakes: 200mm Petal Disc Engine Block Material: NA

Brakes(Rear): 130mm Drum Chassis Type:

Semi Double Cradle

Frame

Stand Alarm: Locked gear type when Cooling Type: Air Cooling

stand is not withdrawn Carburetor: NA

0 to 60: 5.91 sec.

COMFORT AND

CONVENIENCE

OTHER

SPECIFICATIONS

Fuel Guage: Analogue Weight: 122.00 kg

Self Start: yes Ground Clearance: 170.50 mm

Tacho Meter: None Fuel Tank: 10.00 ltrs

Trip Meter: None Wheelbase: 1305.00 mm

Alloys: - Electrical System: DC Ignition, Digital CDI

Warranty: NA Headlamp: 35/35W

Speedometer: Digital Battery Type: Maintenance Free

Passenger Footrest: yes Battery Voltage: 12V

Passenger Backrest: None Battery Capacity: 5Ah

Step-up Seat: None Horn: 0

Pass-light: yes Wheel Type: 3-spoke Alloys

Low Fuel Indicator: yes Wheel Size: 2.75x17" - 3.00x17" mmLow Oil Indicator: yes Tubeless: Yes

Low Battery Indicator: yes Colors: Blue, Black, Grey, Red

High Oil Temp. Indicator: none

Choked Air Filter Indicator: None


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4 Ps Analysis:

PRODUCT It will be a 125 cc bike, with mileage 60 to 65 Kmph Primary colors like red, green and blue will be the preference. It will be in functional class in which features are given more importance. Digital meters, Mono-shock rear suspension, petal disc break, anti-vibration frame,self-start will be the points of parity.

PRICE It will be priced between Rs. 40,000 to Rs. 45,000 It will be in the class ofExecutive bikes. Price will target the middle income and upper middle income groups.

PLACE It will be launched in most of the rural markets in India. Semi urban and rural markets will be the main target.

PROMOTION Ruggedness of the bike will be portrayed in all the advertisements. The strong brand image of Mahindra tractors in rural markets will be used. Opinion leaders will be the target in advertisements, as they play the important role of

influencers in the purchase decisions.

Age group between 20 to 40 will be the target customers. Advertisements will display how the bikes will help people in self-employment, as

this feature will closely relate to the target customers.

Sponsorship will be done for events involving rural games.

Mahindra Finance will be linked for easy financing of bikes. As rural and upper & middle income level, want lower operating cost. So, promotion

will be focused on easy availability of service station and repair.


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Conclusion:

Acquisition of the business assets of the Kinetic Motor Company in 2008 gave

Mahindras a smooth entry into the Two-wheelers Market. This brought them to the full-

circle in their portfolio of transportation solutions. Given the current market scenario, we see

a huge potential in the rural and semi-urban market for the launch of the new motorcycle as

they are coming up as major demand drivers for bikes in the country. More than 70% of thepopulation lives in rural and semi-urban areas. With the increasing urbanisation and thus, the

purchasing power of the people in rural areas and saturating urban markets, we see rural and

semi-urban market as the potential market. Above all, targeting rural market can be seen as

capitalising on the brand name of Mahindra & Mahindra which is like a household name due

to the expansive presence of Mahindra tractors.

References:

http://www.mahindra.com/www.mahindra2wheelers.com/india.wsj.comcrisil.comicra.comhttp://www.wbiconpro.com/http://www.siamindia.com/
http://www.facebook.com/l.php?u=http%3A%2F%2Fwww.mahindra.com%2F&h=uAQHYVDlqhttp://www.facebook.com/l.php?u=http%3A%2F%2Fwww.mahindra.com%2F&h=uAQHYVDlqhttp://www.facebook.com/l.php?u=http%3A%2F%2Fwww.mahindra.com%2F&h=uAQHYVDlqhttp://www.facebook.com/l.php?u=http%3A%2F%2Fwww.mahindra2wheelers.com%2F&h=uAQHYVDlqhttp://www.wbiconpro.com/http://www.wbiconpro.com/http://www.wbiconpro.com/http://www.siamindia.com/http://www.siamindia.com/http://www.siamindia.com/http://www.wbiconpro.com/http://www.facebook.com/l.php?u=http%3A%2F%2Fwww.mahindra2wheelers.com%2F&h=uAQHYVDlqhttp://www.facebook.com/l.php?u=http%3A%2F%2Fwww.mahindra.com%2F&h=uAQHYVDlq

m&m motorcycle report final

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