Masters International Journal of Management Research and Development (MIJMRD) Volume I, Issue I, November, 2013 ISSN : 2347-9043 53 INDIAN TWO WHEELER MARKET: RURAL INDIA SHINES A CASE STUDY ON THE SALES OF TWO WHEELERS IN RURAL INDIAN Abhimanyu Upadhyay Research Scholar, CCS University, Meerut Abstract The Indian rural market of two-wheeler offers plethora of opportunities to manufactures and service providers. The overall two-wheeler market in India continues to be under-penetrated, and most of the equipment manufacturers have also maintained focus on expanding sales-cum-service outlets, particularly in semi-urban and rural areas and setting up satellite dealerships and service facilities in the neighboring smaller towns. This paper aims at an empirical research of rural customers and employment opportunity generated to local people providing services as mechanic of two-wheelers in rural India. The current rural market accounts for around 45% of the total two-wheeler sales by volume in India. Introduction The Indian two-wheeler industry has come long way since its humble beginning in 1948 when Bajaj Auto started importing and selling Vespa Scooters in India. Since then, the customer preferences have changed in favour of motorcycles and gearless scooters that score higher on technology, fuel economy and aesthetic appeal, at the expense of metal-bodied geared scooters and mopeds. These changes in customer preferences have had an impact on fortunes of the players. The erstwhile leaders have either perished or have significantly lost market share, whereas new leaders have emerged. Rising income levels, reducing excise duties, higher loan tenure and loan-to-value offered by the financing companies have all fuelled the growth of two-wheeler demand. Besides, mounting traffic chaos and limited parking space has also increased the demand for two-wheelers from households that can afford or actually do own a car. Furthermore, with increasing women working population, changing social philosophy and broad-mindedness, the penetration of two-wheelers in target population has increased significantly during last one decade especially in urban areas. However rural areas and smaller towns still remains considerably underpenetrated market. It has observed that the rising income levels combined with increase in finance © 2013 mastersjournals.com All Rights Reserved Masters International Journal of Management Research and Development (MIJMRD) Volume I, Issue I, November, 2013 ISSN : 2347-9043 54 penetration in rural areas and smaller towns, the demand for two-wheelers will grow swiftly in short to medium term period. Sighting this huge growth opportunity two-wheeler manufacturers have started launching models catering to the needs of rural demand. The younger generation prefers two-wheelers over cars due to convenience, easy commutation and better fuel efficiency. The Indian two-wheeler market comprises about 12 million units per annum, of which over 75 per cent is constituted by motorcycles. Scooters account for about 18 per cent of the sales in the overall two-wheeler market in India. Review of Literature Recognizing the importance of economic development of India, the canvas of the Indian economy, automotive industry occupies a prominent place. Due to its deep forward and backward linkages with several key segments of the economy, automotive industry has a strong multiplier effect and is capable of being the driver of economic growth. A sound transportation system plays a pivotal role in the country's rapid economic and industrial development. The well-developed Indian automotive industry ably fulfils this catalytic role by producing a wide variety of vehicles: scooters, motorcycles, mopeds, etc. The government is making efforts to overcome the constraints at their research centers for automobile industry. The Indian auto industry should launch programmes for market development and a wider acceptance of alternative energy-driven vehicles in India. It should also work in tandem with the government to make India a world leader in this area. Indian automobile industry is also consistently trying to meet the emerging challenges of environmental pollution and better safety standard. According to a study, automobile exhaust contributes more than 60% of the atmospheric pollution in metropolitan cities, with the growing number of vehicles; the pollution in the cities is continuously increasing. Government initiated controls by notifying emission standard from the year 1992 under which were furthers tightened in April 1996 under the Motor Vehicles Act. Objectives of the Study The study has been undertaken to:  To analyze the rural and urban sales of two wheelers in India  To study the effect of infrastructural change on the demand of two wheelers in rural India.  To study the relationship of environmental factors affecting the people’s preference on purchasing two wheelers in rural India. © 2013 mastersjournals.com All Rights Reserved Masters International Journal of Management Research and Development (MIJMRD) Volume I, Issue I, November, 2013 ISSN : 2347-9043 55 Hypothesis of the Study In view of the objectives set for the study the following null and alternative hypothesis have been formulated respectively: H0 : There is significant increase in the total sale of two wheelers in rural and urban India. Ha : There is no significant increase in the total sale of two wheelers in rural and urban India. Scenario Change The changes are taking place in the two-wheeler segment. Global two-wheeler makers are investing heavily on upgrading technology to comply with new emission norms in different parts of the world. More stringent emission norms are going to be observed from 2015, while the Indian two wheeler market will move to BS-IV (corresponding to Euro-IV) in 2015. The European region will be upgraded to Euro-V in the same period. Over 15 million two-wheelers are expected to be sold yearly from 2015 onwards in India. In 2008-09, Indians bought over 7.4 million two-wheelers—motorcycles, scooters, mopeds, and electric two-wheelers. The demand for two-wheelers has been influenced by a number of factors over the past years. The key demand drivers for the growth of the two-wheeler industry are as follows: 1. Inadequate public transportation system, especially in the semi-urban and rural areas. 2. Increased availability of cheap consumer financing in the last three-four years. 3. Increasing availability of fuel efficient and low-maintenance models. 4. Increasing urbanization, which creates a need for personal transportation. 5. Changes in the demographic profile. 6. Difference between two-wheeler and passenger car prices, which make two-wheelers the entry-level vehicle. 7. Steady increase in per capita income over the past few years. 8. Increasing number of models with different features to satisfy diverse consumer needs. Motorcycles v/s Scooters Experts feel that there is a large untapped market in the 100cc segment, as 70 per cent of urban and 90 per cent of the rural population have not even bought their first motorcycle. if 100cc-motorcycle segment is divided into ten segments, starting from the entry of deluxe level, there is potential in every segment. There is a large market for scooters as well. Scooters now offer mileage that is not very different from motorcycles. Motorcycles are not going to marginalize scooters. At present, the top four two-wheeler makers—Hero Honda, Bajaj Auto, © 2013 mastersjournals.com All Rights Reserved Masters International Journal of Management Research and Development (MIJMRD) Volume I, Issue I, November, 2013 ISSN : 2347-9043 56 TVS and HMSI— together account for around 93.5 per cent of the sales in the domestic market. The other players are Suzuki Motorcycle, India Yamaha Motor, LML, Mahindra Two Wheelers and Royal Enfield. Statistical measure Table 1: Year wise production of Two-Wheelers in India. S. No. 1 2 3 4 5 6 7 8 9 10 Number of Vehicles Scooters Motorcycle Moped 1,259,408 1,794,093 724,510 879,759 2,183,430 694,974 937,506 2,906,323 427,498 848,434 3,876,175 351,612 935,279 4,355,168 332,294 987,498 5,193,894 348,437 1,020,013 6,201,214 2,379,574 943,944 7,112,281 379,987 1,074,933 6,503,532 430,827 1,157,432 6,801,964 435,513 Year 1999-2000 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 Source: Society of Indian Automobile Manufacturers 8,000,000 7,000,000 6,000,000 5,000,000 4,000,000 Scooters 3,000,000 Motercycle 2,000,000 Moped 1,000,000 1999-2000 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 0 1 2 3 4 5 6 7 8 9 10 The statistical model developed that attempts to forecast the domestic two wheeler sales on the basis of ownership cost and the target population that can afford to own a two wheeler. The motorcycles have registered the strong sales over the scooters and moped in India due to grate demand and successful operation of two wheelers on rural Indian roads. The © 2013 mastersjournals.com All Rights Reserved Masters International Journal of Management Research and Development (MIJMRD) Volume I, Issue I, November, 2013 ISSN : 2347-9043 57 other qualitative factors like macro-economic outlook, consumer confidence, willingness of vehicle financers to finance TWs, etc. have also been quantitatively built in demand forecasting model. After a strong recovery industry posted in FY06-07, which was continued even in FY 07-08 and FY08-09. It can be foreseen the high growth levels witnessed currently would stabilize in next 2-3 year period. Nevertheless the industry would register a healthy growth during FY10-FY15 period. According to this report, rural India would drive the growth, whereas the opportunity in urban India, especially bigger cities, would become limited in days to come. In FY10, almost all the manufacturers reported healthy rise in their top-line, driven by growth in both volumes and realization. Operating margins also observed improvement owing to drop in raw material prices. However, the industry would face challenge of rising input cost and rising competition levels which would strain margins considerably in short to medium term period. The domestic two-wheeler industry has been able to recover strongly from the economic crises of FY08. Rising income levels, ease in liquidity scenario and return of consumer confidence owing to revival in employment rates were the key drivers for this growth. The authors foresee the short to medium term outlook of the industry will remain healthy, majorly driven by rising demand from rural areas and smaller towns. Table 2: Domestic Sales of Two-Wheelers in India AprilSS. No. 1 2 3 4 5 6 7 8 Name of company Hero Honda Bajaj Auto TVS Motor Company Honda Mahindra Two-Wheelers Yamaha Suzuki Royal Enfield Total *Source: Society of Indian Automobile Manufacturers © 2013 mastersjournals.com All Rights Reserved Number of Vehicles April- Dec.-2009 April-Dec.2010 3,440,287 3,844,614 1,235,548 1,797,378 999,255 1,321,204 830,039 1,163,194 37,977 122,868 170,712 206,404 124,190 196,928 38,612 38,458 6,779,102 8,691,048 Masters International Journal of Management Research and Development (MIJMRD) Volume I, Issue I, November, 2013 ISSN : 2347-9043 58 *** 4,500,000 4,000,000 3,500,000 3,000,000 2,500,000 2,000,000 1,500,000 1,000,000 500,000 0 April- Dec.-2009 April-Dec.2010 The sales of two wheelers have registered increase in sales in April to December 2010 than the same period of the previous year. Which depicts the growth in sales day by day? Table 3: Motorcycle Majors’ Market Share (Domestic Sales, 2010-11) S. No. 1 2 3 4 5 6 7 8 Name of company Hero Honda (Hero Motocorp) Bajaj Auto TVS Motor Company Honda Motorcycle and Scooter India Suzuki Motorcycle India Mahindra Tow-Wheelers India Yamaha Motor Royal Enfield Market share (%) 44.69 20.50 15.10 13.20 2.39 1.40 2.35 0.46 Source: Society of Indian Automobile Manufacturers Mahindra TowWheelers , 1.4 Suzuki Motorcycle India , 2.39 Royal Enfield , 0.46 Honda Motorcycle and Scooter India , 13.2 Hero Honda , 44.69 TVS Motor Company , 15.1 Bajaj Auto , 20.5 © 2013 mastersjournals.com All Rights Reserved India Yamaha Motor , 2.35 Masters International Journal of Management Research and Development (MIJMRD) Volume I, Issue I, November, 2013 ISSN : 2347-9043 59 Hero Honda has been the largest two wheeler company in the country. The company crossed the 15 million unit milestone over a 25 year span. The second, third and fourth placed two wheeler companies are Bajaj Auto, TVS and HMSI respectively and put together as the world's technology leaders in the automotive sector and led to the development of world class, value - for- money motorcycles and scooters for the Indian market. Table 4: Year wise Domestic Sales of Two-Wheelers S. No. Year No. of Vehicles Sold 1 2004-05 6,209,765 2 2005-06 7,052,391 3 2006-07 7,872,334 4 2007-08 7,249,278 5 2008-09 7,437,619 6 2009-10 9,370,951 7 2010-11 11,790,305 Source: Society of Indian Automobile Manufacturers No. of Vehicles Sold 12,000,000 10,000,000 8,000,000 6,000,000 4,000,000 No. of Vehicles sold 2,000,000 0 The two wheeler industry has registered a continuous increase in its production and sales volume which shows a strong demand of two wheelers in the country. The Different government schemes for developing the rural roads have also prepared a strong base for better use of the two wheelers in rural areas. © 2013 mastersjournals.com All Rights Reserved Masters International Journal of Management Research and Development (MIJMRD) Volume I, Issue I, November, 2013 ISSN : 2347-9043 60 Year wise Domestic Sales of Two-Wheelers (Data Collected from Dealers in NCR Region especially in Ghaziabad, Meerut and Modinagar) Hero Motocorp (formally Hero Honda) Table 5: Year wise Domestic Sales of Two-Wheelers M/s. Jai Kumar Arun Kumar Pvt. Ltd, Meerut - A dealer Hero motorcycle S. No. Year 1 2 3 4 5 6 2004-05 2006-07 2007-08 2008-09 2009-10 2010-11 Total No. of Vehicles Sold Rural Urban Total 234 765 999 346 543 889 543 765 1308 543 543 1086 643 654 1297 654 564 1218 Source: Primary data collected and compiled by the researcher Applying Paired t- test difference of mean method on the collected data |t cal| =1.5843 at 5% of significance level and degree of freedom 4 (n-2). Now, for the given data the tabulated value of test at 5% significance level and 4 degree of freedom is 2.776. Since |t cal| < |t tab| therefore, the null Hypothesis (Ho) is accepted. Conclusion Hence there is significant increase in the total sale of two wheelers in rural and urban India. The graphical representation of Data is presented below. 900 800 700 600 500 400 300 200 Total No. of Vehicles sold to customer Rural Total No. of Vehicles sold to customer Urban 100 0 The Hero in the FY 2007-08 have witnessed a growth in the sales of two wheelers among the rural customers and show continuous increasing trends in the succeeding years. It has crossed the total sales of urban market in the FY 2010-11. It shows a gradual but steady © 2013 mastersjournals.com All Rights Reserved Masters International Journal of Management Research and Development (MIJMRD) Volume I, Issue I, November, 2013 ISSN : 2347-9043 61 growth in demand for two wheelers from rural areas, accompanying the growth of the overall segment Bajaj Auto Ltd. Table 6: Year wise Domestic Sales of Two-Wheelers M/s. VIKRANT BAJAJ, Vikrant House, Mohakampur, Delhi Road, Meerut – 250001 S. No. Year 1 2 3 4 5 6 2004-05 2006-07 2007-08 2008-09 2009-10 2010-11 Total No. of Vehicles Sold Rural Urban Total 234 432 666 432 342 774 439 456 895 546 549 1095 543 543 1086 643 654 1297 Source: Primary data collected and compiled by the researcher Applying Paired t- test difference of mean method on the collected data |t cal| =1.318 at 5% of significance level and degree of freedom 4 (n-2). Now, for the given data the tabulated value of test at 5% significance level and 4 degree of freedom is 2.571. Since |t cal| < |t tab| therefore, the null Hypothesis (Ho) is accepted. Conclusion Hence there is significant increase in the total sale of two wheelers in rural and urban India. The graphical representation of Data is presented below. 700 600 500 400 Total No. of Vehicles sold to customer Rural 300 Total No. of Vehicles sold to customer Urban 200 100 0 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 The Bajaj Auto Ltd. in the FY 2005-06 have witnessed a growth in the sales of two © 2013 mastersjournals.com All Rights Reserved Masters International Journal of Management Research and Development (MIJMRD) Volume I, Issue I, November, 2013 ISSN : 2347-9043 62 wheelers among the rural customers and show continuous increasing trends in the succeeding years. It has registered a fall in the total sales of urban market in the FY 2010-11. TVS Auto Ltd. Table 7: Year wise Domestic Sales of Two-Wheelers M/s. Sharda Auto, Meerut - A Dealer of TVS in Meerut District S. No. Year 1 2 3 4 5 6 2004-05 2006-07 2007-08 2008-09 2009-10 2010-11 Total No. of Vehicles Sold Rural Urban Total 543 657 1200 654 743 1397 543 564 1107 654 549 1203 654 543 1197 754 654 1408 Source: Primary data collected and compiled by the researcher Applying Paired t- test difference of mean method on the collected data |t cal| =0.1481 at 5% of significance level and degree of freedom 4 (n-2). Now, for the given data the tabulated value of test at 5% significance level and 4 degree of freedom is 2.571. Since |t cal| < |t tab| therefore, the null Hypothesis (Ho) is accepted. Conclusion Hence there is significant increase in the total sale of two wheelers in rural and urban India. The graphical representation of Data is presented below. 800 700 600 500 400 300 200 Total No. of Vehicles sold to customer Rural Total No. of Vehicles sold to customer Urban 100 0 The TVS in the FY 2007-08 have witnessed a growth in the sales of two wheelers among the rural customers and show continuous increasing trends in the succeeding years. It has also maintained the total sales of urban market in the FY 2010-11. © 2013 mastersjournals.com All Rights Reserved Masters International Journal of Management Research and Development (MIJMRD) Volume I, Issue I, November, 2013 ISSN : 2347-9043 63 HMSI Table 8: Year wise Domestic Sales of Two-Wheelers M/s. Hidon Honda, 42, Harbans Nagar, Delhi Meerut Road, Ghaziabad - Dealer of HMSI S. No. Year 1 2 3 4 5 6 2004-05 2006-07 2007-08 2008-09 2009-10 2010-11 Total No. of Vehicles Sold Rural Urban Total 234 432 666 321 322 643 432 543 975 554 549 1103 543 543 1086 456 567 1023 Source: Primary data collected and compiled by the researcher Applying Paired t- test difference of mean method on the collected data |t cal| =2.7778 at 5% of significance level and degree of freedom 4 (n-2). Now, for the given data the tabulated value of test at 5% significance level and 4 degree of freedom is 2.571. Since |t cal| > |t tab| therefore, the null Hypothesis (Ho) is rejected. And alternative hypothesis (Ha) is accepted in case of HMSI. Conclusion Hence there is no significant increase in the total sale of two wheelers in rural and urban India. The graphical representation of Data is presented below. 900 800 700 600 500 400 300 200 Total No. of Vehicles sold to customer Rural Total No. of Vehicles sold to customer Urban 100 0 The HMSI in the FY 2005-06 have not witnessed a high growth in the sales of two wheelers among the rural customers during initial period and show continuous increasing trends in the succeeding years. It has crossed the total sales moderately in urban market in the FY 2010-11. © 2013 mastersjournals.com All Rights Reserved Masters International Journal of Management Research and Development (MIJMRD) Volume I, Issue I, November, 2013 ISSN : 2347-9043 64 Finally the Indian two-wheeler industry has shown a strong volume growth over the last two-years, having grown by 25% in 2009-10 and 27% in 2010-11 to reach 13.3 million units. This strong double-digit growth has been driven by multiple factors including pent-up demand of the 2007-08 and 2008-09 period when the industry volumes were essentially flat, besides various underlying factors including India’s rising per capita GDP, increased purchasing power, increasing rural demand, growing urbanization, swelling replacement demand, increasing proportion of cash sales and the less measurable metric of improved consumer sentiment. Conclusion The industry has recorded phenomenon growth during the current last two financial years. A market trend is growing at a faster rate in favor of rural area than urban areas. According to survey the two wheeler market will further grow in years to come. The demand of two wheeler in rural areas is expected to enhance further. The opportunities can be grabbed through more and quality infrastructure in the form of good roads and the use of latest technology can provide an edge over competitors across the country. © 2013 mastersjournals.com All Rights Reserved Masters International Journal of Management Research and Development (MIJMRD) Volume I, Issue I, November, 2013 ISSN : 2347-9043 65 References - Ranawat and Tiwari (2009) Influence of Govt. Policies on India’s Automotive Industry, March 2009, Working Paper No. 57, Hamburg University of technology. Asian Journal of Technology & Management Research, Vol. 01 – Issue: 02 (Jul - Dec 2011) - Badri Narayanan and G, Pankaj Vashisht, Determinants of Competitiveness of the Indian Auto Industry, Working Paper No. 201, January 2008, Indian Council for Research on International Economic Relations - Cooper and Schindler - Business Research Methods (Tata McGraw Hill, 9th Edition) - Kotler, P., Armstrong, G., Saunders, J. & Wong, V. (2001), Principles of Marketing, 5th European Ed. Lombarda: Rotolito - http://www.infibeam.com/bikes/make/kinetic.html - http://www.automobileindia.com/two-wheelers/statistics/buying-two-wheeler.html © 2013 mastersjournals.com All Rights Reserved