CHAPTER-III

MOTOR CYCLE INDUSTRY IN INDIA

3.1 World Two Wheeler Industry - Origin and Growth

A motorcycle (also called a motorbike, bike, or cycle) is a single-track, engine-powered

two-wheeled motor vehicle. Motorcycles vary considerably depending on the task for which they

are designed, such as long distance travel, navigating congested urban traffic, cruising, sport and

racing, or off-road conditions.

Motorcycles are one of the most affordable forms of motorised transport in many parts of

the world and, for most of the world's population; they are also the most common type of motor

vehicle. There are around 200 million motorcycles (including mopeds, motor scooters and other

powered two and three-wheelers) in use worldwide or about 33 motorcycles per 1000 people.

This compares to around 590 million cars, or about 91 per 1000 people. Most of the motorcycles,

58%, are in the developing countries of Asia—Southern and Eastern Asia, and the Asia Pacific

countries, excluding Japan—while 33% of the cars (195 million) are concentrated in the United

States and Japan. As of 2002, India with an estimated 37 million motorcycles/mopeds was home

to the largest number of motorised two wheelers in the world. China came a close second with 34

million motorcycles/mopeds.

The first internal combustion, petroleum fueled motorcycle was the Petroleum

Reitwagen. It was designed and built by the German inventors Gottlieb Daimler and Wilhelm

Maybach in Bad Cannstatt, Germany in 1885. This vehicle was unlike either the safety bicycles

or the boneshaker bicycles of the era in that it had zero degrees of steering axis angle and no fork

offset, and thus did not use the principles of bicycle and motorcycle dynamics developed nearly

70 years earlier. Instead, it relied on two outrigger wheels to remain upright while turning. The

inventors called their invention the Reitwagen ("riding car"). It was designed as an expedient test

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bed for their new engine, rather than a true prototype vehicle. Many authorities who exclude

steam powered, electric or diesel two-wheelers from the definition of a motorcycle, credit the

Daimler Reitwagen as the world's first motorcycle.

Figure 3.1 Replica of the Daimler-Maybach Petroleum Reitwagen

A two-wheeled vehicle with steam propulsion is considered a motorcycle, then the first

was the French Michaux-Perreaux steam bicycle of 1868. This was followed by the American

Roper steam .velocipede of 1869, built by Sylvester Howard Roper of Roxbury, Massachusetts.

Roper demonstrated his machine at fairs and circuses in the eastern U.S. in 1867, and built a total

of 10 examples.

In 1894, Flildebrand & Wolfmiiller became the first series production motor cycle, and

the first to be called a motorcycle (German: Motorrad). In the early period of motorcycle history,

many producers of bicycles adapted their designs to accommodate the new internal combustion

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engine. As the engines became more powerful and designs outgrew the bicycle origins, the

number of motorcycle producers increased.

Until .World War I, the largest motorcycle manufacturer in the world was Indian,

producing over 20,000 bikes per year. By 1920, this honour went to Harley-Davidson, with their

motorcycles being sold by dealers in 67 countries. By the late 1920s or early 1930s, DKW took

over as the largest manufacturer.

After World War 11, the BSA Group became the largest producer of motorcycles in the

world, producing up to 75,000 bikes per year in the 1950s.1 The German company NSU held the

position of largest manufacturer from 1955 until the 1970s.

Figure 3.2 NSU Sportsman streamlined motorcycle, 250 cc class winner of the 1955 Grand Prix

season

In the 1950s, streamlining began to play an increasing part in the development of racing

motorcycles and the “dustbin fairing” held out the possibility of radical changes to motorcycle

design. NSU and Moto Guzzi were in the vanguard of this development both producing very

radical designs well ahead of their time. NSU produced the most advanced design, but after the

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quit Grand Prix motorcycle racing.Moto Guzzi produced competitive race machines, and by

1957 nearly all the Grand Prix races were being won by streamlined machines. The following

year, 1958, full enclosure fairings were banned from racing by the FIM in the light of the safety

concerns.

From the 1960s through the 1990s, small two-stroke motorcycles were popular

worldwide, partly as a result of East German Walter Kaaden’s engine work in the 1950s. Today,

the motorcycle industry is mainly dominated by Japanese companies such motorcycles/mopeds.

Indian Two-Wheeler Industry: A Perspective

Automobile is one of the largest industries in global market. Being the leader in product

and process technologies in the manufacturing sector, it has been recognised as one of the drivers

of economic growth. During the last decade, well-'-directed efforts have been made to provide a

new look to the automobile policy for realising the sector's full potential for the economy. Steps

like abolition of licensing, removal of quantitative restrictions and initiatives to bring the policy

framework in consonance with WTO requirements have set the industry in a progressive track.

Removal of the restrictive environment has helped restructuring, and enabled industry to absorb

new technologies, aligning itself with the global development and also to realise its potential in

the country. The liberalisation policies have led to continuous increase in competition which has

ultimately resulted in modernisation in line with the global standards as well as in substantial cut

in prices. Aggressive marketing by the auto finance companies have also played a significant

role in boosting automobile demand, especially from the population in the middle income group.

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3.2 Evolution of Two-wheeler Industry in India

Two-wheeler segment is one of the most important components of the automobile sector

that has undergone significant changes due to shift in policy environment. The two-wheeler

industry has been in existence in the country since 1955. It consists of three segments viz.

scooters, motorcycles and mopeds. According to the figures published by SIAM, the share of

two-wheelers in automobile sector in terms of units sold was about 80 per cent during 2003-_,04.

This high figure itself is suggestive of the importance of the sector. In the initial years, entry of

firms, capacity expansion, choice of products including capacity mix and technology, all critical

areas of functioning of an industry, were effectively controlled by the State machinery. The

lapses in the system had invited fresh policy options that came into being in late sixties. Amongst

these policies, Monopolies and Restrictive Trade Practices (MRTP) and Foreign Exchange

Regulation Act (FERA) were aimed at regulating monopoly and foreign investment respectively.

This controlling mechanism over the industry resulted in:

(a) Several firms operating below minimum scale of efficiency;

(b) under-utilisation of capacity; and

(c) Usage of outdated technology.

Recognition of the damaging effects of licensing and fettering policies led to initiation of

reforms, which ultimately took a more prominent shape with the introduction of the New

Economic Policy in 1985.

However, the major set of reforms was launched in the year 1991 in response to the

major macroeconomic crisis faced by the economy. The industrial policies shifted from a regime

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of regulation and tight control to a more liberalised and competitive era. Two major results of

policy changes during these years in two-wheeler industry were that the, weaker players died out

giving way to the new entrants and superior products and a sizeable increase in number of brands

entered the market that compelled the firms to compete on the basis of product attributes.

Finally, the two-^wheeler industry in the country has been able to witness a proliferation of

brands with introduction of new technology as well as increase in number of players. However,

with various policy measures undertaken in order to increase the competition, though the degree

of concentration has been lessened over time, deregulation of the industry has not really resulted

in higher level of competition.

3.2,1 A Growth Perspective

The composition of the two-wheeler industry has witnessed sea changes in the post­

reform period. In 1991, the share of scooters was about 50 per cent of the total 2-wheeler

demand in the Indian market. Motorcycle and moped had been experiencing almost equal level

of shares in the total number of two-wheelers. In 2003-04, the share of motorcycles increased to

78 per cent of the total two-wheelers while the shares of scooters and mopeds declined to the

level of 16 and 6 percent respectively.

National Council of Applied Economic Research (NCAER) had forecast two-wheeler

demand during the period 2002^-03 through 2011-12. The forecasts had been made using

econometric technique along with inputs obtained from a primary survey conducted at 14 prime

cities in the country. Estimations were based on Panel Regression, which takes into account both

time series and cross section variation in data. A panel data of 16 major states over a period of 5

years ending 1999 was used for the estimation of parameters. The models considered a large

number of macro-economic, demographic and socio-economic variables to arrive at the best

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estimations for different two-wheeler segments. The projections have been made at all India and

regional levels. Different scenarios have been presented based on different assumptions

regarding the demand drivers of the two-wheeler industry. The most likely scenario assumed

annual growth rate of Gross Domestic Product (GDP) to be 5.5 per cent during 2002^03 and was

anticipated to increase gradually to 6.5 per cent during 2011-1! 2. The all-India and region-wise

projected growth trends for the motorcycles and scooters are presented in Table 1. The demand

for mopeds is not presented in this analysis due to its already shrinking status compared to' motor

cycles to scooters.

It is important to remember that the above-mentioned forecast presents a long-term

growth for a period of 10 years. The high growth rate in motorcycle segment at present will

stabilise after a certain point beyond which a condition of equilibrium will set the growth path.

Another important thing to keep in mind while interpreting these growth rates is that the forecast

could consider the trend till 1999 and the model could not capture the recent developments that

have taken place in last few years. However, this will not alter the regional distribution to a

significant extent.

The automobile industry, one of the core sectors, has undergone metamorphosis with the

advent of new business and manufacturing practices in the light of liberalization and

globalization. The sector seems to be optimistic of posting strong sales in the next couple of

years in view of a reasonable surge in demand. The database maintained with Capacity has 29

projects related to the industry that projects this demand pattern and the initiatives taken by

different players to increase their market share.

The Indian automobile market is gearing towards having international standards to meet

the needs of the global automobile giants and become a global hub. Players are strategizing to

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consolidate their position and gradually increase market penetration with the launch of new

models, targeting different segments. Since the sector is price driven huge investment is

envisaged to-remain competitive through cost advantage, for which indigenization is highly

important. The product becomes dearer if it is manufactured using imported parts. IT in the

automobile sector plays a crucial role. Some players are working towards development of

efficient production systems that control in entire production process with high precision and

accuracy. Such systems working on real time operating systems allow efficient control o

different parts of manufacturing and production. It is essential to leverage skills of different

engineering disciplines to build these kinds of integrated systems.

Analysts foresee high scope in the electronics for auto sector and expect the retailing of

such electronics products to contribute a major chunk of future revenues. The government is

increasing the research and development (R&D) fund for the automobile industry over and above

the Rs 1400 Crores earmarked for eight years. All laboratories in the country researching on

automobile technology, such as BHEL which is developing cell technology as alternative fuel,

have also been brought together through the setting up of a national R&D working group. The

group is working out a plan to link all major laboratories across the country to give a thrust to

automotive research. Indian automobile sector being a driver of product and process

technologies, and has become a excellent manufacturing base for global players, because of its

high machine tool capabilities, extremely capable component industry, most of the raw material

locally produced, low cost manufacturing base highly skilled manpower Not only a large number

of world manufactures have set up production bases in India but also a large number of foreign

companies are collaborating with the auto component suppliers and vendors.

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 Indian Automobile Components Industry has been making rapid strides towards

achievement of world-class Quality Systems by imbibing ISO 9000/QS 9000 Quality Systems

whereby the Indian Automotive industry has become more competitive in the export market due

to its technological and quality advances, so much so that in quality conscious markets such as

Europe and America, it is emerging as a major player, based on its performance. India today

exports: Engine and engine parts, electrical parts, drive transmission & steering pats, suspension

& braking parts among others.

The sector is striding inroads into the rural middle class after its inroads into the urban

markets and rural rich. It is trying to bring in varying products to suit requirements of different

class segments of customers. States like Rajasthan, Uttar Pradesh, Maharashtra, Andhra Pradesh

and West Bengal are vying to woo global players with proposals including heavy tax exemptions

and to create a more investor friendly regime, each state is proposing to provide all regulatory

clearances at express speed.

3.2.2 Two wheeler industry in India its development after introduction of economic reforms

and present scenario

The feeling of freedom and being one with the Nature comes only from riding a two

wheeler. Indians prefer the two wheelers because of their small manageable size, low

maintenance and pricing and easy loan repayments. Indian streets are full of people of all age

groups riding a two wheeler. Motorized two wheelers are seen as a symbol of status by the

populace. Thus, in India, we would see swanky four wheels jostle with our ever reliable and

sturdy steed.

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 India is the second largest manufacturer and producer of two-wheelers in the world. It

stands next only to Japan and China in terms of the number of two-wheelers produced and

domestic sales respectively. This distinction was achieved due to variety of reasons like

restrictive policy followed by the Government of India towards the passenger car industry, rising

demand for personal transport, inefficiency in the public transportation system etc.

The Indian two-wheeler industry commenced in the early 50s, when Automobile Products

of India (API) started manufacturing scooters in the country. API and Enfield were the sole

producers until 1958. The two-wheeler industry in India has been in existence since 1955 and

consisted of segments like scooters, motorcycles, and mopeds. The increased volume of sales at

that time in this industry proved of its high growth. In 1971 sales were around 0.1 million units

per annum but rose by 1998 to 3 million units per annum. Similarly, capacities of production in the

intervening period also increased from about 0.2 million units of annual capacity to more than 4

million units. This increased trend has been sustained till the current year of 2006, and the increase

was to the tune of an additional 150% in this period.

The Two Wheeler Industry in India commenced operations within the framework of the

national industrial policy as espoused by the Industrial Policy Resolution of 1956 which divided

the entire industrial sector into three groups. One group contained industries whose development

was the exclusive responsibility of the State, another included those industries in which both the

State, and the last set of industries in the private sector could participate that could be developed

exclusively under private initiative within the guidelines and objectives laid out by the Five Year

Plans (CMIE, 1990). Private investment was channeled and controlled through extensive use of

licensing which gave the State complete control over the direction and pattern of investment. Entry

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of firms, capacity expansion, choice of product and capacity mix and technology, were all

effectively monitored by the State in an attempt to disallow the narrowing down of economic

power. Nevertheless, because of the shortcomings in the system forced the introduction of fresh

policies at the end of the sixties.

These consisted of MRTP of 1969 and FERA of 1973, which were aimed at regulating

monopoly and foreign investment respectively. Firms that came under the purview of these Acts

were allowed to invest only in a predefined cluster of industries.

This controls net on the economy in the seventies caused several firms to

a) Operate below the minimum scale of efficiency (henceforth MES),

b) Under-utilize capacity and,

c) Use out- dated technology.

While operation below MES resulted from the fact that several incentives were given to

smaller firms, the capacity under-utilization was the result of

i) The capacity mix being determined independent of the market demand,

ii) The policy of distributing imports based on capacity encouraged firms to expand

beyond levels determined by demand so as to qualify for more imports.

Use of outdated technology resulted from the restrictions placed on import of technology

through the provisions of FERA.

Acknowledgement of the negative impact of these policies led to the initiation of reforms

in 1975 which took on a more pronounced shape and acquired wider scope under the New

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Economic Policy (NEP) in 1985. These reforms drove several groups of industries towards de­

licensing and 'broad banding’ was permitted in select industries. Controls over capacity expansion

were relaxed through the specification of the MES of production for several industries. Foreign

investment was allowed in select industries and norms under the MRTP Act were relaxed.

These reforms prompted an increased rate of growth of real GDP from 3.7% in the

seventies to 5.4% in the eighties. However the major set of reforms came in 1991 owing their

impetus to a series of macroeconomic crises that hit the Indian economy in 1990-91. Several

industries were deregulated, the Indian rupee was devalued and made convertible on the current

account and tariffs replaced quantitative restrictions in the area of trade. The initiation of reforms

led to a drop in the growth of real GDP between 1990 - 1992, but this averaged at about 5.5%

per annum after 1992. The decline in GDP in the years after reforms was the ' outcome of

devaluation and the contractionary fiscal and monetary policies taken in 1991 to address the

foreign exchange crisis. Thus the Industrial Policy in India moved from a position of regulation

and tight control in the sixties and seventies, to a more liberalized one in the eighties and nineties.

The two-wheeler industry in India has a great extent been shaped by the evolution of the

industrial policy of the country. Regulatory policies like FERA and MRTP caused the growth of

some segments in the industry like motorcycles to stagnate. These were later able to grow both in

terms of overall sales volumes and number of players’ once foreign investments was allowed in

1981. The reforms in the eighties like 'broad banding' caused the entry of several new firms and

products which caused the existing technologically outdated products to ‘shape up or ship out’.

Finally, with liberalization in the nineties, the industry witnessed a proliferation in brands.

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 A description of the evolution of the two wheeler industry in India is usefully split up into

ten year blocks starting from the sixties till date, where each block traces significant changes in

economic policy making. During the first time-period, 1960-1969, growth of the two-wheeler

industry was fostered through means like permitting foreign collaborations and phasing out of

non-manufacturing firms in the industry. The period 1970-1980 saw state controls, through the

use of the licensing system and certain regulatory acts over the economy, at their peak. The

period between 1981-1990 saw significant reforms being initiated in the country. The next block

which was from 1991-1999 saw reforms gathering momentum encompassing several areas like

finance, trade, tax, industrial policy etc. The current decade which started with the year 2000 till

date saw a massive surge in the production of two wheelers where demand for motorbikes

skyrocketed and has also created a great demand for super bikes (more versatile and fashionable

motorbikes), which in turn has left sales of other lesser two wheelers far behind. Some of the

major reasons are the IT Boom and the resultant entry of MNCs and IT Giants into the country,

fashion making a major impact on the current younger generation and also the different

information and advertising media who are providing and spreading information that has not

happened till a few years back.

A more detailed mention about developments during each of the blocks or periods

mentioned above will be pertinent and necessary to validate the evolution of two wheelers in

India along the years:

Evolution Stage-I

During the Sixties the automobile industry was placed on a pedestal by the Industrial Policy

Resolution of 1948 and was hence controlled and regulated by the Government. The central idea

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was to encourage manufacturing, apart from discouraging import of ready for use vehicles,

automobile assembly firms were phased out by 1952 (Tariff Commission, 1968), and only

manufacturing firms allowed to continue. Automobiles production required licensing; firms

required licensing approval in order to open a plant, also a firm’s capacity of production was

determined by the Government. During this period, foreign collaborations were encouraged.

Most firms had some form of collaboration with foreign firms.

Evolution Stage-H

During the Seventies, cumulative growth during this period for the two-wheeler industry

was high (around 15% per annum), and the levels of restriction and control over the industry was

also high. The former was the result of the steep oil price hikes in 1974 owing to which two-

wheelers became the preferred medium of personal transport because of their superior fuel-

efficiency when compared with four wheelers. On the other hand, the introduction of regulatory

policies such as MRTP and FERA resulted in a controlled industry. The impact of MRTP was

limited as it affected only large firms like Bajaj Auto Ltd. whose growth rates were curbed as they

came under the purview of this Act. However, FERA had a more far-reaching effect as it caused

foreign investment in India to be restricted. In the motorcycle segment FERA did not cause

technological stagnation, as a consequence of which, new products nor firms entered the market

since this segment depended almost entirely on foreign collaborations for technology. The

scooter and moped segments on the other hand were technologically more self-sufficient and thus

there were new entrants in the scooter segment and also in the moped segment

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Evolution Stage-in

During the Eighties the technological backwardness of the Indian two-wheeler industry

was one of the reasons for the initiation of reforms in 1981. Foreign collaborations were allowed

for all two-wheelers up to an engine capacity of 100 cc. This prompted a spate of new entries into

the industry, the majority of which entered the motorcycle segment, bringing with them new

technology that resulted in more efficient production processes and products10. The variety in

products available also improved after 'broad banding' was allowed in the industry in 1985 as a

part of NEP. This coupled with the announcement of the MES of production for the two-wheeler

industry", gave firms the flexibility to choose an optimal product and capacity mix which could

better incorporate market demand into their production strategy and thereby improve their

capacity utilization and efficiency.

These reforms had twin effects on the industry: First, licensed capacities went up from 0.675

million units per annum to 1.1 million units per annum far exceeding targets set in the Sixth Plan.

Second. The second development was that several low key players fizzled out and made way for

new entrants and better quality products.

Evolution Stage-IV

During the Nineties the reforms that began in the late seventies underwent their most

significant change in 1991 through the liberalization of the economy. The two-wheeler industry

was completely deregulated. In the area of trade, several reforms were introduced with the goal of

making Indian exports competitive.

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3.2. 3 The two-wheeler industry in the nineties was characterized by

i) An increase in the number of brands available in the market which caused firms to

compete on the basis of product features and

ii) Increase in sales volumes in the motorcycle segment vis-a-vis the scooter segment

reversing the traditional trend

The current decade, starting from 2000 till date has seen exponential growth in buying and

usage of two wheelers, especially motorcycles. What has added to the spurt is the advent of

Technology and Technology related companies in India and even the BPO organizations which have

seen a boom in job opportunities. Adding to the job boom is also the surge in earnings and salaries of

individuals working in these MNCs and major players. Even women have begun to earn highly paid

jobs and this has further fuelled purchasing power of both men and women. The media has played no

small part in such conspicuous buying, providing comprehensive and elaborate information on all

possible products along with options, features, pricing strategies etc. All this information is available on

the fingertips of a prospective consumer or is made available at their beck and call. And if that is not

enough, banks and financial institutions, through their aggressive and alluring methods, have made

buying consumer durables of even considerable prices easier and immediately affordable. Credit cards

and even debit cards have made financial transactions that much easier, providing easy and long term

credit, which in turn influences and facilitates buying decisions. Actually banks and financial

institutions, especially the private players have been able to sway prospective buyers with attractive

offers, which are not all the time cost effective, but have unwittingly tempted consumers into

purchasing decisions, sometimes without considered or any wisdom. (Whether they are affordable in

the long run is another issue altogether).

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 Two wheeler manufacturers have striven to and have been able to provide newer and better

features all the time, attempting to stay ahead of competition, which have made the demands of the

consumer insatiable. Major players in the motorcycle making business have been falling over each

other in attracting potential buyers with more and more innovations, to the extent that they have tied up

with financial institutions in providing credit for purchasers for what they call ‘zero interest’ credit

facility. The buyers have responded in no uncertain terms lapping up all the goodies such players have

thrown at them, to such an extent that even an almost hundred percent hike in fuel prices have not

prevented sales from growing all the time. Manufacturers of motorcycles have gone to the extent of

providing vehicles with better features to counter die fuel price hike and also making vehicles more

efficient by consuming much less fuel and also sticking to emission norms. All this has resulted in good

tidings for the companies concerned and also the major beneficiaiy which is the customer.

3.3 Two wheeler industry in Andhra Pradesh

The state of Andhra Pradesh has historically contributed to the overall development of

Industry in India, and there have been certain Industry in which the state has been at the forefront

since a long time.

The last decade has seen a surge in Industry in the state of Andhra Pradesh, and driven by

information technology and a very aggressive, progressive and ambitious government after the

commencement of the Industrial revolution in 1991, the state is now a forerunner as far as

developed states in India are concerned. Development is truly at its peak in the state today.

State Governments of the recent past, irrespective of the party, have been proactive and

have promoted industry aggressively, trying to rope in MNCs with various sops and benefits like

tax and excise exemptions. This has fuelled an unprecedented surge in entry and growth of

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companies in Andhra Pradesh. Lands have been allotted to major players who have planned to

invest and set up shop in the state, and a very conscious and focused effort is being made by

recent governments in the state to provide infrastructure facilities for all major companies

inviting them to have a presence in the state.

The state of AP had lagged behind the states of Maharashtra, Karnataka, Tamilnadu etc

for being considered being a major industrial player in India, and being conscious of this and in

order to take corrective measures, the recent state governments have done their best to make the

state competitive and congruent for Industrial development. Although there is still some way to

go, there are good signs evident that very soon the state will soon carve its own niche as far as

Industrial players are concerned, and even now almost all MNCs and Industrial giants have a

presence in this state.

Along with other Industry which is thriving in AP, the consumer is enjoying the benefits

of products and services which are of international standards and quality, of which the two

wheeler industry is no exception. Two-wheelers are the in-thing for youngsters and also

grownups across the country and also in the state, and brands like Hero Honda, TVS Motors, and

Bajaj etc are prominent players in this market space.

The state of Andhra Pradesh is divided into districts, small towns and its geographical

location spread in such a way that movement between such towns and places is not very easy.

Because of this, business has not been able to spread as much as would have been normally

possible. There are other intrinsic factors which have not helped the state occupy prime positions

in business developments across the country. And even though education in Andhra Pradesh is

now acknowledged to match the best in the country, it was not so till recently.

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 Education of quality is a recent phenomenon in AP and there were times when the state

was struggling to keep pace with developments in the field of education. Then there was the

factor that some businesses were thriving in isolation and there was not adequate spread of these

businesses to other parts of the state. For instance, as far as rice production and tobacco

production was concerned, Andhra Pradesh was at the very forefront in the country. But this

production was concentrated in small pockets in the state, and there was no real effort made by

concerned authorities to correct this anomaly, which in turn did not allow the state to compete

with other states in areas of business where there was definite potential. This was happening for

quite a long time. Then came the Industrial revolution in 1991, and all of a sudden, the state

caught up with other states in industrial growth. This was also helped by the fact that the

Industrial revolution was planned and executed by the then Prime Minister Mr. P. V. Narasimha

Rao who happened to belong to the state of Andhra Pradesh. Added to this, there was prolonged

Congress rule in the country as well as in the state, which helped development and growth in the

state. The state of Andhra Pradesh never looked back after that, and what we see now is at state

which is pushing hard to be the leading state in all areas of industry in the country. The citizens

of the state of Andhra Pradesh today are amongst the most sought after as far as recruitment of

quality professionals is concerned. This has led to a manifold increase in earning capacity of the

average citizen of the state, and it goes without saying that purchasing power of people in the

state has skyrocketed. An indication of this is the fact that all major consumer products

companies have set up shop in the state, as have Multinational companies who have set up

businesses here and trying to woo the best professionals to work for them. Sales and purchase of

two-wheelers, particularly motorcycles, in AP has zoomed and this has seen the entry of all the

major brands seeking to cash in on the boom. What has helped is the fact that even women have

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started competing for and earning high salaries and plush jobs, thereby increasing the number of

purchasers of niche products. Taking advantage of the recent surge is purchasing power and

demand for consumer products, banks and financial institutions have stepped in providing easy

purchase and credit facilities which further enhance the consumer’s purchase decisions. As with

other consumer durables which require higher spending capacity, purchase of motorcycles is a

longer decision making process because purchase of a motorcycle involves spending two

months’ salary of a well placed professional, and hence payments in installments along with the

highly fashionable ‘zero percent interest’ makes the decision making process shorter and easier.

Innovations like an affordable motorcycle resembling a scooter were tried out, which indicates

companies are working overtime to anticipate and satisfy consumers needs.

By 2020 Andhra Pradesh industrial sector will be growing at 11 percent a year in real

terms Andhra Pradesh will be the preferred destination for industrial investment. The State will

have a competitive economy driven mainly by private investment. Furthermore, it will pursue

sustainable development, through investments and approaches that conserve resources and

safeguard the environment.

• The Automobile sector is one of the fastest growing manufacturing sectors in

India.

• In the 90s the industry witnessed an average growth rate of above 20 percent.

• - Indian Automobile Industry is characterized by a very high percentage (75

percent) of two wheeler production ranking second only to Taiwan. India is also

the largest manufacturer of Tractors.

• The world leaders in the sector are evincing keen interest in establishing

manufacturing facilities for manufacturing and assembling components.

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• A politically stable and vibrant State, Andhra Pradesh is centrally located with the

support of seaports, international airports assured and reliable power supply,

abundant water broad base of auto component manufacturers, highly trained,

skilled and disciplined manpower and is therefore, the preferred location for

Automobile industries.

• - M/s. Ford, Mercedes, Benz, Daewoo, Fiat, Honda, Hyundai, Suzuki, Mitsubishi,

Opel, Peugeot, Proton, Skoda, Toyota etc., have already set up their units in India.

In the last two years, several joint ventures and collaborations have been set up

with investments to the tone of US $ 500 million. About 10 percent of the

productions in value terms are exported all over the world.

• Mahindra & Mahindra has a modem facility at Zaheerabad, near Hyderabad

where some of its important products, Jeeps and Voyager vehicles, are being

manufactured.

• - The interest of the state has been duty noted by Global Auto Majors, who have

indicated their interest to consider Andhra Pradesh for establishing manufacturing

facility.

• The Government of Andhra Pradesh invites leaders in the industry to set up

manufacturing facilities to manufacture vehicles or vehicle components in the

State. The ideal places to locate companies in the Auto Sector are the Hyderabad-

Zaheerabad, Visakhapatnam-Kakinada, Krishnapatnam-Tada-Sathiveedu and

Vijayawada-Guntur corridors.

• - The Government is also formulating an Auto Policy, which would give a proper

direction to the growth of the sector.

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 • There are more than 20 auto - component manufacturing companies in the State,

manufacturing components such as grey-iron castings, precision aluminum

castings, leaf springs, oils and lubricants, diesel fuel injection equipment,

electronics and auto electronics and auto electrical, front axles, gears, forging,

machined components, pressed metal components, pistons, cylinder liners,

nozzles, delivery values, state motors, alternators, electronic regulators, high

pressure die castings, clutch covers, fuel filters etc.

• • Most of these components are presently being supplied to Ashok Leyland, Honda.

Tata, Suzuki, Mahindra & Mahindra, Escorts, Kirloskar and Bajaj. Amaron

Batteries are manufactured in Chittoor district. Around 119 components

manufacturers have been certified for ISO 9000 quality standards and seven

companies achieved the QS 9000 quality standard set by General Motors,

Chrysler and Ford.

3.3.1 Advantages of Andhra Pradesh for preferred Investor destination

• Politically Stable State Government

• Proactive State Government

• Government Committed to reforms

• Location with along coastal belt

• Vibrant economy

• Availability of skilled workforce

• Appropriate infrastructure

• Fourth largest market in the nation

• Relatively high purchasing power among southern state

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 • Centrally located with manor auto hubs like Maharashtra, Karnataka &

- Tamilnadu

• Location of steel manufacturers

• Presence of strong agricultural belt

• Presence of tooling and R & D centers

• Best plant load factor among the States

• High telecom and info tech infrastructure level.

Andhra Pradesh has Industrial Training Institutes which train certified skilled personnel

that are required for Industry. In the automobile wing the ITI’s are training personnel in trades

like Diesel mechanic and motor mechanic who learn techniques in manufacturing as well as on

the maintenance/repair/service of the vehicles. The Industrial Training Institutes are turning out

5,000 of trained persons every year. Automobile components such as cylinder liners, Aluminum

alloy wheels, Diesel Engines parts, fuel injection equipment, leaf spring assembles are among the

automobile components that are exported to countries like USA, Singapore, Sri Lanka, Egypt,

Hong Kong, Brazil, Germany, Italy, Poland and Australia.

3.4 Comparative profiles the major players in the two wheeler market segment

The Indian two-wheeler industry has witnessed spectacular growth in the last few years.

The market dynamics of the industry has substantially changed with a majority of the customers

preferring bikes to scooters and mopeds. This is primarily due to better fuel efficiencies,

dynamics, looks and longer product lives of motorcycles.

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 The motorcycle segment constitutes about 81.5% of the two w'heeler market in India’. It

also contributes to three-fourths of the total exports in the two wheeler industry. The following

graph shows the market share of the top players in the two wheeler market.

Bajaj Auto Ltd

27%

14%

Chart 3.1 Market Share of the Top Players In the Two Wheeler Market Source: Primary Data

The industry exhibits some degree of collusive behaviour and thus represents an

oligopolistic form of market structure. Product and brand differentiation are seen as the primary

means of sustaining competitive advantage. In order to sustain brand equity, players spend large

percentages of their revenues in advertising and brand building activities. The supply and

distribution networks are decisive factors in staying competitive and normally need a huge

capital investment.

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 The two wheeler industry is capital intensive with large fixed cost requirements and new

model introductions mandatory at frequent intervals in order to sustain the demand. This

involves substantial design and R&D costs. Such high fixed costs can be offset only by

achieving economies of scale. Moreover, developing a distribution channel is

extremely difficult in a country like India. Therefore, it is difficult for a new player to

enter this industry.

India became the second largest two wheeler manufacturer in the world and starting in

the 1950s with the Automobile Products of India (API) that manufactured the Lambrettas and

Bajaj Auto Ltd. with its association with Piaggio of Italy (manufacturer of Vespa scooters) as the

largest manufacturers within the country.

The license raj that existed between the 1940s to 1980s in India did not allow foreign

companies to enter the market and imports were tightly controlled. This regulatory maze, before

the economic liberalization, made business easier for local players to have a seller’s market.

Customers in India were forced to wait up to 12 years to buy a scooter from Bajaj. The CEO of

Bajaj commented that he did not need a marketing department, only a dispatch department. By

the year 1990, Bajaj had a waiting list that was twenty-six times its annual output for scooters.

The motorcycle segment had the same long wait times with three manufacturers: Royal

Enfield, Ideal Jawa, and Escorts. Royal Enfield made a 350cc Bullet with the only four-stroke

engine at that time and took the higher end of the market but there was little competition for their

customers. Ideal Jawa and Escorts took the middle and lower end of the market respectively

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 In the mid-1980s, the Indian government regulations changed and permitted foreign

companies to enter the Indian market through minority joint ventures. The two-wheeler market

changed with four Indo-Japanese joint ventures: Hero Honda, TVS Suzuki, Bajaj Kawasaki and

Kinetic Motor Company (Kinetic Honda). The entry of these foreign companies changed the

Indian market dynamics from the supply side to the demand side. With a larger selection of two-

wheelers on the Indian market, consumers started to gain influence over the products they bought

and raised higher customer expectations. The industry produced more models, styling options,

prices, and different fuel efficiencies. The foreign companies new technologies helped make the

products more reliable and with better quality. Indian companies had to change to keep up with

their global counterparts.

The following table reveals the market share the giants in the two wheeler market over

the years. The table also discloses that Hero Honda has been occupying number one position in

the two wheeler market and Bajaj and TVS are next to it.

Table- 3.2 Comparatative sales of the three companies

HERO HONDA BAJAJ TVS

YEAR
SaIes(No of Units) Sales (No of Units) Sales (No of Units)
2005-‘06 30,00,751 19,12,306 8,06,000
2006-‘07 33,36,756 23, 79,499 9, 23, 000
2007-‘08 33,37,142 21,39,779 6, 10, 000
2008-‘09 37,22,00 19,19,625 6,44, 000
2009-‘2010 46, 00, 130 25, 11,643 6,38, 000

Source: Annual reports of the companies

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3.5 Company profile

Hero Honda Motors Limited is a two wheeler manufacturer based in India. Hero Honda

is a joint venture between the Hero Group of India and Honda of Japan1. The company is the

largest two wheeler manufacturer in India2 and also has been referred to as the world's biggest

manufacturer of 2-wheeled motorized vehicles since 2001, when it produced 1.3 million

motorbikes in a single year. The 2006 Forbes 200 Most Respected companies list has Hero

Honda Motors ranked at 1 OB.3

“Hero” is the brand name used by the Munjal brothers for their flagship company Hero Cycles

Ltd. A joint venture between the Hero Group and Honda Motor Company was established in

1984 as the Hero Honda Motors Limited at Dharuhera India, Munjal family and Honda group

both own 26% stake in the Company.

During the 1980s, the company introduced motorcycles that were popular in India for

their fuel economy and low cost. A popular advertising campaign based on the slogan 'Fill it -

Shut it - Forget it' that emphasised the motorcycle's fuel efficiency helped the company grow at a

double-digit pace since inception. The technology in the bikes of Hero Honda for almost 26

years (1984-2010) has come from the Japanese counterpart Honda 4

Hero Honda has three manufacturing facilities based at Dharuhera, Gurgaon in Haryana

and at Haridwar in Uttarakhand. These plants together are capable of churning out 3 million

bikes per year5 Hero Honda has a large sales and service network with over 3,000 dealerships

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and service points across India. Hero Honda has a customer loyalty program since 2000 6 called

the Hero Honda Passport Program.

In 2010, it was reported that Honda sold its stake in the venture to the Munjal family.

In December 2010, the Board of Directors of the Hero Honda Group has decided to terminate the

joint venture between Hero Group of India and Honda of Japan in a phased manner. The Hero

Group of India would buy out the 26% stake of the Honda in JV Hero Honda7. Under the joint

venture Hero Group could not sell into international markets and the termination would mean

that Hero Group can exploit global opportunities now. Since last 25 years the Hero Group relied

on their Japanese partner Honda for R & D for new bike models. So there are concerns that the

Hero Group might not be able to sustain the performance of the Joint Venture alone8

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 BAJAJ
Vnbneh’stf Aktjf/

3.6 Company profile

The Bajaj Group was founded in 1926 by Jamnalal Bajaj and now consists of 27

companies. In 1945, Jamnalal Bajaj had formed M/s Bachraj Trading Corporation Private

Limited, the flagship company, to sell imported two-wheelers and three-wheelers. The company

acquired a license from the government in 1959 to manufacture these vehicles and went public

the next year. By 1977, the company saw its plant rolling out 100,000 vehicles in a single year.

In another nine years, Bajaj Auto could produce 500,000 vehicles in a year. The present

Chairman of the Bajaj group, Rahul Bajaj, took charge of the business in 1965. He was the first

licensee of the Indian make of the Italian Vespa scooter.

Japanese and Italian scooter companies began entering the Indian market in the early

1980s. Although some boasted superior technology and flashier brands," Bajaj* Auto had built

up several advantages in the previous decades. Its customers liked the durability of the product

and the ready availability of maintenance; the company's distributors permeated the country. By

1994-95, Bajaj was racing to beat Honda, Suzuki and. Kawasaki in the two-wheeler segment

internationally.

By 1997, Bajaj faced tough competition in the domestic market and its market share

stood at 40.5%. Under the leadership of Rahul Bajaj, the turnover of Bajaj Auto has gone up

from Rs.72 million to Rs.46.16 billion (USD 936 million), its product portfolio has expanded

from one to many and the brand has found a global market. Bajaj as a brand is well-known

across several countries in Latin America, Africa, Middle East, South and South East Asia. The

124
company has a network of 498 dealers and over 1,500 authorised service centers and 162

exclusive three-wheeler dealers spread across the country.

Bajaj has identified a segment of customers called 'Probikers’, who are knowledgeable

about motorbikes and appreciative of contemporary technology. They are trendsetters and very

choosy about what they ride. Hence, Probikers need to be addressed in a meaningful way that

goes beyond the product. Bajaj Auto is in the process of setting up a chain of retail stores across

the country exclusively for high-end, performance bikes. These stores are called "Bajaj

Probiking". Fifty two such stores have been opened across India.

Catering to demand in this sector requires a strong and effective distribution network as

consumers are more demanding and expect delivery on time. Earlvn Vlivprv is a cause of delight

for customers. With such vast global and Indian rural presence, designing an efficient

distribution system becomes a complex task even for a company like Bajaj Auto. Lot of

time and effort goes into designing a strategy based efficient distribution system.

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 Table3.4 Management

Name Designation

Rahul Bajaj Chairman

Madhur Bajaj Vice Chairman
Rajiv Bajaj Managing Director
Sanjiv Bajaj Executive Director
Pradeep Shrivastava President (Engineering)
Rakesh Sharma CEO (International Business)
R CMaheshwari CEO (Commercial Vehicles
S Sridhar CEO (Two Wheelers)
Abraham Joseph President
Eric Vas President (New Projects)
C P Tripathi Vice President (Corporate)
Kevin D'sa Vice President (Finance)
K Srinivas Vice President (Human Resources)
N H Hingorani Vice President (Commercial)
S Ravikumar Vice President (Business Development)

Source: company reports

Timeline of new releases

> 1971 - three-wheeler goods carrier

> 1972 - Bajaj Chetak
> 1976 - Bajaj Super
> 1977 - Rear engine Autorickshaw
> 1981 -Bajaj M-50
> 1986 - Bajaj M-80, Kawasaki Bajaj KB 100
> 1990 - Bajaj Sunny
> 1994 - Bajaj Classic
> 1995 - Bajaj Super Excel
>. 1997 - Kawasaki Bajaj Boxer, Rear Engine Diesel Autorickshaw
> 1998 - Kawasaki Bajaj Caliber, Legend(India's first four-stroke scooter)

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 > 2000 - Bajaj Saffire
> 2001 - Eliminator, Pulsar
> 2003 - Caliberl 15, Bajaj Wind 125, Bajaj Pulsar
> 2004 - Bajaj CT 100, New Bajaj Chetak 4-stroke with Wonder Gear, Bajaj
Discover DTS-i
> 2005 - Bajaj Wave, Bajaj Avenger, Bajaj Discover
> 2006 - Bajaj Platina
> 2007 - Bajaj Pulsar-200
Scooters
> Bajaj Sunny
> Bajaj Chetak
> Bajaj Cub
> Bajaj Super
> Bajaj Wave
> Bajaj Legend

Motorcycles
> Kawasaki Eliminator
> Bajaj Pulsar
> Bajaj Kawasaki Wind 125
> Bajaj Boxer
> Bajaj CT 100
> Bajaj Platina
> Bajaj Caliber
> Bajaj Discover
> Bajaj Avenger
> Bajaj Pulsar 220 DTS-Fi

Upcoming Models
> Bajaj Krystal
> Bajaj Blade
> Bajaj Sonic
> Bajaj XCD String

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New Image

The company, over the last decade has successfully changed its image from a scooter

manufacturer to a two wheeler manufacturer, product range ranging from Scooterettes to Scooters

to Motorcycle. Its real growth in numbers has come in the last 4 years after successful introduction of a

few models in the motorcycle segment. The company is headed by Rahul Bajaj who is worth more

than US$1.5 billion.

Group of Companies:

• Bajaj Auto Ltd.

• Bajaj Holdings & Investment Ltd.
• Bajaj Finserv Ltds
• Bajaj Allianz General Insurance
• Company Ltd.
• Bajaj Allianz Life Insurance Co. Ltd
• Bajaj Financial Solutions Ltd.
• Bajaj Auto Finance Ltd.
• Bajaj Allianz Financial Distributors Ltd.
• Bajaj Auto Holdings Ltd.
• WT Bajaj Auto Indonesia (PTBAI)
• Bajaj Auto International Holdings BV
• Baja} Electricals Ltd.
• Hind Lamps Ltd.
• Bajaj Ventures Ltd.
« Mukand Ltd.
• Mukand Engineers Ltd.
• Mukand International Ltd.
• Bajaj Sevashram Pvt. Ltd.
• Jamnalal Sons Pvt. Ltd.
• Rahul Securities Pvt Ltd
• Shekhar Holdings Pvt Ltd
• Madhur Securities Pvt Ltd
• Niraj Holdings Pvt Ltd
• Shifhlr Holdings Pvt Ltd
• Kamalnayan Investments & Trading Pvt Ltd
• Sanraj Nayan Investments Pvt. Ltd.

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 • Hercules Hoists Ltd.
• Hind Musafir Agency Pvt. Ltd.
• Bajaj International Pvt. T **
• Bachhraj Factories Pvt. Ltd.
• Baroda Industries Pvt. Ltd.
• Jeevan Ltd.
• Bachhraj & Co Pvt Ltd
• The Hindustan Housing Co. Ltd

Mission

• Focus on value based manufacturing

• Fostering team work & enhancing the capability of the team

• Continual Improvement

• Total elimination of wastes

• Pollution free & safe environment

Vision

• To attain World Class Excellency by demonstrating Value added products

to customers

Objective

• Bajaj Limited is to cater the market needs of transportation by providing 2

wheeler and 3 wheeler vehicles. BALW has been producing the catalogue

products to cater to the changing market requirements. Based on the

customer feedback, improvements are being made continuously in the

existing products.

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Goal

• To catapult Bajaj Auto as the country's largest automobile company.

Cultures and values

• brand identity

Brand is the visual expression of our thoughts and actions. It conveys to everyone our

intention to constantly inspire confidence. Our customers are the primary audience for our

brand. Indeed, our Brand Identity is shaped as much by their belief in Bajaj as it is by our own

vision. • Everything they do must always reinforce the distinctiveness and the power of their

brand. They can do this by living their brand essence and by continuously seeking to enhance

their customers' experience. In doing so, they ensure a special place for themselves in the

hearts and the minds of customers.

• brand essence

Brand Essence is the soul of their brand. Their brand essence encapsulates their mission

at Bajaj. It is the singular representation of terms of endearment with their customers. It

provides the basis on which they grow profitably in the market.

Their Brand Essence is Excitement. Bajaj strives to inspire confidence through excitement

engineering. Blending together youthful creativity and competitive technology to exceed the

spoken and the implicit expectations of customers. By exploring the unknown and thereby

stretching them towards tomorrow, today.

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 Brand values

They live their brand by values of Learning, Innovation, Perfection, Speed and

Transparency. Bajaj will constantly inspire confidence through excitement

engineering.

♦ Learning: Learning is how they ensure proactively. It is a value that embraces knowledge as

the platform for building well informed, reasoned, and decisive actions.

♦ Innovation! Innovation is how they create the future. It is a value that provokes them to

reach beyond the obvious in pursuit of that which exceeds the ordinary.

Perfection! Perfection is how they set new standards. It is a value that exhibits their

determination to excel by endeavoring to establish new benchmarks all the time.

♦ Speed: Speed is how they convey clear conviction. It is a value that keeps them sharply

responsive, mirroring our commitment towards their goals and processes.

Distribution network

Bajaj Auto is restructuring its marketing and distribution network to address the different

requirements of the urban and rural markets. The company has recently launched its high-end

bike dealership — Probiking — and is now in the process of categorising its existing 479

dealership network into urban and rural dealerships. Rajiv Bajaj, MB, Bajaj

AuLo odiu, "Besides Fiobikiiig, which is our channel for high-end bikes, we will split the rest of

the two-wheeler dealer network into rural and I urban. This is being done to

cater to the different needs of the rural and urban customer in terms of product, infrastructure,

working capital, financing and servicing. As competition hits up in the Indian motorcycle

131
industry, Bajaj Auto Ltd and TVS Motor Company are chalking out aggressive marketing plans

to race ahead in this sector. In a bid to regain its leadership position, Bajaj Auto is planning to

expand its distribution network to reach out to a wider target audience. Likewise, TVS Motor

Company is all set to extend the number of its dealership and service centers in the near future.

Clearly, Bajaj Auto and TVS Motor are shifting gears. On Bajaj Auto's distribution strategy,

says Bajaj Auto vice-president (business & product development) RL Ravichandran: "We plan

to expand our dealership network and service centers to improve our penetration into same %

towns across the country.

In fact, we plan to increase the number of dealerships and service centers by 20 to 25 per

cent. With this move, we will be able to cover towns with a population of two to three lakh."

Incidentally, the company is all set to unveil its entry-level motorcycle called BYK this

month. "Priced at Rs 30,000, BYK is positioned as a 'stylish bike targeted at the entry-level

audience'. Ogilvy & Mather India will be designing the communication strategy for the new bike

from the Bajaj stable. As part of its offline promotion strategy, the company recently hosted the

Bajaj Boxer Indian Telly Awards 2002 on Star Plus to promote its Bajaj Boxer range.

Positioning strategies

Ever since losing its leadership position, BAL was trying out new strategies including

use of new technology and new marketing communication campaigns. For instance, in the early

2000s it started focusing more on the motorcycle market with new product launches,

complemented by new communication campaigns to inject vibrancy into the Bajaj brand .The ad

spots launched in late 2001 showed 'slice of Hfe1 situations of "new age"India. Analysts felt that

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by 2004, BAL's image had undergone considerable change in the mind of the target audience.

BAL reinforced this through another campaign called 'Inspiring Confidence* that year.

In addition to bringing change in its products and creating brands that inspired

confidence, BAL wanted its products to be 'distinctly ahead' in the wake of growing competition

in the intensely competitive automobile market.

BAL's new corporate strategy, announced in mid 2007, 'Distinctly Ahead', was aimed at

embedding these changes in the collective consciousness of the company. It was aimed at

offering consumers products that were unique and at the forefront compared to its

competitors.

The 'Distinctly Ahead' strategy focused on three core values - innovation, speed, and

perfection. Commenting on its new strategy, Rajiv Bajaj, Managing Director, BAL, said, "We

believe it is not good enough to be better, it is important to be distinct.

That is a filter that we apply to everything we do - be it product development,

manufacturing processes or communication development. Our flagship brand Pulsar is the

strongest evidence of this philosophy. It is only a differentiated offering that customers see value

in and aspire for."3

The company launched a 'Distinctly Ahead' communication campaign, created by ad

agency Lowe, to signify its new aggressive and fast paced image. The ad showed a 220 Pulsar

DTS-Fi morphing into several 220 Pulsars as they raced with each other. The ad featured the

pay-offline, "Alag Andaaz, Alag hai Khoj, Rakhe Aage, Hamari Soch"and a background theme

mrsic that was a much peppier version of the original Hamara Bajaj' theme music. Through this,

133
the company sought to communicate that BAL lays down its own standards and principles and

believes in competing with itself. Bajaj Auto's new brand strategy in motorcycles paid off well

with the company on course to recording its best year ever in terms of profitability and market

share.

Its market share, which was barely 17 per cent 2 year ago, has increased since to 35 per

cent today. "We have more than doubled our market, share in a year and would be at our highest

level by the end of this quarter," Mr Rajiv Bajaj, Managing Director, told Business Line.

The confidence stems from the fact that there are still three months to go for the recently

launched Pulsar 135 to consolidate itself in the market and start clocking volumes. Bajaj Auto

has targeted a monthly output of 100,000 Pulsars by end-Mareh 2010 and believes the new

135CC will play a key role in achieving this goal. At present, the Pulsar 150, 180 and 220

versions together account for around 60,000 units each month.

Supply chain management

Vendors

Bajaj Auto has a consolidated base of 180 vendors supplying components to all Bajaj

Auto's plants. A large number of vendors are located either near Pune or Aurangabad. Those that

are far are encouraged to tie up with third party logistics providers, who along with local vendors

supply multiple deliveries daily to Chakan & Waluj plant. Bajaj Auto has extended the TPM

(Total Preventive Maintenance) to vendor as well. Around 60% by value of Bajaj vehicle is

outsourced. Virtually no components are imported & 70% of Bajaj Auto's requirements are

sourced from within the state of Maharashtra. To improve quality, Bajaj Auto has also begun

134
actively assisting its suppliers in finalizing joint ventures with counterparts in Japan, Italy,

Taiwan & Spain.

Dealers

Bajaj Auto has a network of 422 dealers and over 1,300 authorized service centers. The

company plans to increase the number of dealers to 500 by this financial year. A large number of

these new dealerships are planned in semi-urban & rural areas. During the financial year 2007-

OS, the company extended BASS (Bajaj Auto Service Standard) to standardize the workshops of

250 dealers & 50 authorized service centers. These programmers included a uniform external &

internal look. This initiative has improved work hygiene, promoted consistent & better service

quality, & greater productivity. Faster turnaround of serviced vehicles coupled with higher spare

parts sales in converting such workshops into independent profit centers for the dealers.

Management of Global Supply Chain

With operations spanning to such vast gap. Otrranhips. managing a supply chain globally

becomes more and more complex. In countries where Bajaj perceives a strong market potential,

they establish a tie up with one major industrial establishment eager to invest in the project. This

investment may include setting up strategic manufacturing or assembly units, apart from a weii-

estabiished nation-wide network for marketing, distribution and after sales services. These

investors who form alliances with Bajaj Auto are termed as "Business Partners".

Bajaj Auto offers a number of services to it include: Business partners. They are

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 Training in sales, service and spare parts management based on the Bajaj distribution

system. Active support for setting up manufacturing facilities overseas including transfer of

technical know-how. Assistance in setting up an assembly plant for assembly of vehicles from

complete knocked down (CKD) kits. Selecting of machinery and equipment and training of

technical personnel, all in a phased manner as required by the regulations in the recipient

country. Active support in setting nation-wide dealer network, also involving identification and

recommending suitable partner who would assist the distributor in Business growth.

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3.7 Company profile

TVS Motor Company (BSE: 532343, NSE: TVS MOTOR) is the third largest two­

wheeler manufacturer in India9 and is among the world's top ten10 It is the flagship company of

the parent TVS Group employing over 40,000 people with an estimated 15 million customers11 It

manufactures motorcycles, scooters, mopeds and auto rickshaws. It is India's only two-wheeler

company to have won the Deming Prize awarded for commitment to quality control, received in

2002.

History

The Legacy of TV Sundaram Iyengar

TVS Motor traces its origins back to the entrepreneurial spirit of Trichur

Venkagaruswamy Sundaram Iyengar who gave up lucrative careers in the Indian Railways and

in banking to set up his own business. He began with Madurai's first bus service in 1912 and

founded T.V.Sundaram Iyengar and Sons Limited, a company that consolidated its presence in

the transportation business with a large fleet of trucks and buses under the name of Southern

Roadways Limited12 When he died in 1955 his sons took the company ahead with several forays

in the automobile sector, including finance, insurance, and manufacture of two-wheelers, tyres

and components. The group has managed to run 33 companies that account for a combined

turnover of nearly $3 billion.

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The Early Years

Sundaram Clayton, then the flagship company, was founded in 1962 in collaboration with

Clayton Dewandre Holdings, United Kingdom. It manufactured brakes, exhausts, compressors

and various other automotive parts. The company set up a plant at Hosur in 1978 to manufacture

mopeds as part of a new division13 A technical collaboration with the Japanese auto giant

resulted in the joint-venture Ind Suzuki Limited in 1982 between Sundaram Clayton Ltd and

Suzuki Motor Corporation. Commercial production of motorcycles began in 1984.

The TVS Suzuki Relationship

TVS and Suzuki shared a 19 year long relationship that was aimed at technology transfer

to enable design and manufacture of two-wheelers specifically for the Indian market.

Rechristened TVS-Suzuki, the company brought out several models such as the Suzuki Samurai,

Suzuki Shogun and Suzuki Fiero. Differences in opinion on how to run the joint venture

eventually led to the partners going their separate ways in 2001 with the company being renamed

TVS Motor, relinquishing rights to use the Suzuki name. There was also a 30 month moratorium

period during which Suzuki promised not to enter the Indian market with competing two-

wheelers14 The company also got over a period of labour unrest that required Chairman Venu

Srinivasan to take tough measures to resurrect a company that was in a state of turmoil. He

would go on to invest in new technology, nurture in-house design, and implement Toyota-style

quality programs15

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Rise to Present Prominence

Over the years TVS Motor has grown to be the largest in the group, both in terms of size

and turnover, with four state of the art16 manufacturing plants in Hosur, Mysore and Nalagarh in

India and Karawang in Indonesia. TVS Motor is credited with many innovations in the Indian

automobile industry, notable among them being the introduction of India's first two-seater

moped, the TVS 50cc. The company became the leader in its category of sub lOOcc mopeds,

having sold 7 million units. It also introduced the TVS Scooty, which is India's second largest

brand in the scooterette segment17 The TVS Jive launched in November 2009 became India's

first clutch-free motorbike aimed at a stress-free rider experience while the unisex scooter Wego

is targeted at urban couples, featuring body-balance technology for easier handling18

Awards

TVS Motor won the Deming Application Prize in 2002, becoming the first and only

Indian two-wheeler company to win the award given to companies that do outstanding work in

the field of Quality Management. It is considered to be one of the world’s most prestigious

quality awards The same year, the work done for the TVS Victor motorcycle won TVS Motor

the National Award for successful commercialization of indigenous technology from the

Technology Development Board, Ministry of Science & Technology, Government of India20 In

2004, TVS Scooty Pep won the 'Outstanding Design Excellence Award' from Business World

magazine and the National Institute of Design, Ahmadabad 21 The effective implementation of

Total Productivity Maintenance practices won TVS Motor the TPM Excellence Award given by

the Japan Institute of Plant Maintenance in 2008.

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 TVS Motor has won several management awards, notable among them being the

Emerging Corporate Giant in the Private Sector awarded by The Economic Times and the

Harvard Business School Association of India. Business Today magazine awarded TVS Motor

the Best Managed Company and the Most Investor Friendly Company awards. Its advertising

practices won it the Good Advertising award by Auto India Best Brand Awards 200922 Company

Chairman Venu Srinivasan is a recipient of several awards for corporate excellence such as the

Star of Asia Award by Bloomberg BusinessWeek and the JRD Tata Corporate Leadership

Award23 The University of Warwick, United Kingdom gave him an honorary Doctorate of

Science degree24 while the Government of India honoured him with the Padma Shri, one of

India's highest civilian distinctions25

Innovative implementation of Information Technology has won TVS Motor the Ace

Award for Most Innovative Net Weaver Implementation in 2007 awarded by technology major

SAP AG26 and the Team Tech 2007 Award of Excellence for Integrated use of Computer-aided

engineering Technologies27.

The major products

Motorcycles

> TVS Ind Suzuki AX 100

□ TVS MAX 100
□ TVS MAX R 100
□ TVS Supra
□ TVS Suzuki Samurai
□ TVS Suzuki Shogun
□ TVS Suzuki Shaolin
□ TVS Suzuki Fiero

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 □ TVS Fiero
□ TVS Star
□ TVS Star City
□ TVS Star city deluxe
□ TVS Star Sport
□ TVS Fiero F2
□ TVS Fiero FX
□ TVS Centra
□ TVS Victor (110 cc)
□ TVS Victor GLX( 125 cc)
□ TVS Victor EDGE (125 cc)
□ TVS Flame (125 cc,ccvti technology)
□ TVS Apache (150 cc,13.7 Ps @8500rpm)
□ TVS Apache RTR 160
□ TVS Apache RTR 160 EFI (Electronic Fuel Injection)
0 TVS Flame
Scooterettes
> TVS Scooty ES (60 cc)
□ TVS Scooty KS (60 cc)
□ TVS Scooty Pep (75 cc)
□ TVS Scooty Pep + (90 cc)
□ TVSTeenz
□ TVS Teenz Electric

Mopeds
□ TVS XL 50(50 cc)
□ TVS XL (60 cc
□ TVSEco
□ TVS Astra
□ TVS XL Super (60 cc)
□ TVS XL Super Heavy Duty
□ TVS Champ (60 cc) and TVS Super Champ (60 cc)

141
TVS Group Companies

□ Sundaram Brake Linings

□ Sundaram Fastners
□ Southern Roadways
□ Sundaram Finance
□ Sundharams Private Limited
□ Brakes India Limited

142
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