2 wheeler industry in India has shown a good jump. In the last 4-5 years, 2 wheeler industry has shown average growth of 8.5%, having an overall segregation among: motorbikes (8%), scooters (12%) and mopeds (10%); all thanks to a steady revival in economic activity, low excise duties, low interest rates and relatively higher disposable incomes that enabled the demand pull.
Major players: Hero Honda, Bajaj, TVS Motors, Honda Motorcycles & Scooters, Yamaha, Mahindra & Mahinder (new player) have captured the market significantly in urban sectors and are foraying to go deep into the interiors of the country.
With cars like Tata Nano being introduced for Rs 1.5 lakhs for Indian roads along with various other schemes introduced by car companies to lure customers, 2 wheelers future lies in semi-urban and rural regions.
Immense Potential in Rural India
“With an estimated market for 2 wheelers in FY 11 as Rs 535 billion in India and 92 million potential buyers, the rural market accounts for 40% of the size which cannot be ignored,” says Manoj Mohta, Head Crisil Research.
Also, the growing demand for four-wheeler vehicles in urban India has coerced the companies to launch new products and explore other markets aggressively. With only 22% penetration in rural regions, these rural markets sound lucrative to major players. The other triggers are a combination of reasons: reduced debts by government, farm loan waivers, (MSP-Minimum Support Price), low interest rates, more financial institutions offering credit, government agri-credit programmes, schemes of NREGA(National Rural Employment Guarantee Act) Mahatma Gandhi Rural Employment Scheme-all these factors have added impetus to the purchasing power and disposable income of the local consumers in these regions.
Widespread Distribution Network required
“Along with manufacturing the product for the local consumers, another vital step involved is to reach out the product to them through very strong distributive facilities,” asserts Atul Gupta, Vice President (Sales & Marketing), Suzuki Motorcycle India Ltd. With low infrastructure facilities in these regions, the task becomes all the more challenging. Distributive dealers offer an immense opportunity to foray in the rural market.
The company has recently launched 125cc segment motorbike for masses named ‘Slingslot’ at a price range Rs 40,000 (approx).
Hero Honda which has a consolidating position in the urban sector is not far behind to take up rural vertical all the more seriously. The company’s contribution is a massive 58% of the total country's two wheeler sale, 42% of their total sales business is from rural segment. These impressive sale figures are a result of many rural initiatives with the vision “Har Gaon Har Angan”, (Every Village Every Household), undertaken by Hero Honda.
• No. of Villages Covered: Under the rural initiative, over 100,000 villages have already been covered. All non-metro dealerships conduct Opinion Leader Contact Programs (OLCP), Loan Melas and Exchange Camps on a regular basis in up-country and rural markets.
• Service Har Jagah (SHJ): Hero Honda dealerships across the country are conducting Service Har Jagah (SHJ) camps in village locations, on the same specified day of every month, thereby enabling customers to get their bikes serviced in their own villages, rather than travelling several miles to nearby towns and cities for the same.
Similarly, Yamaha is also moving on the same path to capture the untapped market in small towns and hubs by increasing their showroom count to 2000. "Yamaha Bike Corners" outlets have been set up in small towns and rural areas. Yamaha customers can get exclusive free services and test rides in Yamaha Bike Corners.
Additionally, there is a need for different retail financing policy like quarterly installments, half yearly installments instead of EMI (equated Monthly Installments) looking at the customer base of these regions.
Rural Consumer different from Urban
Though the customer base of these regions seem different from urban regions, the companies look for 60-70% commonalities to introduce the product in the market. “Customers are same everywhere, even rural customers prevail in the urban regions but while buying a product, every customers looks for maximum needs being satisfied in a product. Also the customer should have 4 A’s—Awareness, Affordability, Availability and Acceptance,” asserts P S Choudhary, LML India, Sales Head. These customers are in particular distinguished as buyers of ‘Value for Money’.
“Rural customers need a sturdy transport product which could be used for multi-purposes- carry luggage, cross the undeveloped roads, go to mundi, milk carriage etc,” says Manoj Mohta, Crisil Research Head.
Unlike urban, the customer here is not educated so there is indispensable need to educate them verbally. Further, there is great impact of reference sale or ‘Word of mouth’ publicity to increase sale.
The other exclusive marketing activities being carried out to make the product more popular are participation in local melas, rural games, rural financing and local mechanics to avoid bad publicity of the product.
With revival in the rural economy and overall growth of 2 wheeler market predicted at 17-18 % this fiscal, there is immense scope. The market potential is still not fully tapped.
Other markets which can cluster around 2 wheeler showrooms are service centres, spare part shops to name a few which are still dearth in these regions. Respective two wheeler companies could be the source to elaborate on these new markets. The race has begun!!