 "M&M gives two-wheeler biz a second shot")
Mahindra & Mahindra has decided to give its ailing two-wheeler business one more chance.
Mahindra Two Wheelers, the bike and scooter arm of M&M, has pinned its hopes on two old brands which it has committed to bring back to life as part of a major overhaul of the two-wheeler business, the biggest loss making entity within the group.
The Mumbai-based company said that it will infuse Rs 250-300 crore into the two-wheeler vertical to resurrect British brand BSA (Birmingham Small Arms) and Czech brand Jawa, push Peugeot products into newer global markets and develop new products for the home market.
The renewed push by the struggling venture comes at a time when the domestic two-wheeler space is getting fiercely competitive: more than two-thirds of the market, estimated at 16.5 million units a year, is controlled tightly by Hero Motocorp, Honda and Bajaj Auto.
Two weeks ago, Mahindra Two Wheelers acquired defunct BSA through a newly-formed subsidiary, Classic Legends. Subsequently, it acquired the rights to produce, market and sell Jawa in India.
Both the brands were present in India several years ago. They operated in niche segments, catering to a small set of customers. But changing consumer choices, heightened competition and stricter emission regulation resulted in their exit from the market. Though both the brands are very distinct from each other, they do enjoy some brand equity.
Bringing old brands back to life
BSA, which started making bikes in 1907, was once the largest motorcycle producer in the world. BSA bikes were known for their reliability and were initially sold to the British armed forces before they were retailed to the general public.
Jawa, on the other hand, came to India as Ideal Jawa, based in Mysore, and built licensed Jawa motorcycles initially and later expanded to a new brand called Yezdi. These bikes had engines of 50 cc to 250 cc. Though production stopped years ago, there are in the country several private biking clubs dedicated to the Yezdi.
This recall, Mahindra Two Wheelers hopes, could help revive its fortunes in India.
BSA is a full buy-out (for Rs 28 crore) by Mahindra Two Wheelers. The company hopes to sell these bikes in the US and Europe. Jawa, on the other hand, is a licence agreement for the Indian market. Yezdi is not part of the agreement.
It sold 144,355 two-wheelers last year, down 12 per cent, even as the industry posted growth of 3 per cent. Its market share stood at 0.87 per cent as of last year.
M&M has already pumped in nearly Rs 2,000 crore into the two-wheeler business since the time it got into the space in 2008 with the acquisition of the business assets of Kinetic Motors.
Several new products in the scooter and motorcycle category were launched, but most failed to set the roads on fire. Limited retail reach, a lack of exciting products, product recalls and well entrenched rivals hampered growth. The company even tried to sell its two-wheelers as joint packages with tractors in rural areas.
M&M Executive Director Pawan Goenka says: “In two-wheelers, we have not been able to attain the kind of success we had hoped for. We had the option of shutting down the business completely or to reorient it. We decided to restructure the business. We were waiting for the last piece to fall in place which is the acquisition of the BSA brand. Our plan is to focus on the premium two-wheeler business.”
The three pillars of its strategy
M&M’s two-wheeler business now stands on three pillars: Peugeot Motorcycles, Classic Legends and its own two-wheeler business. The company has a business plan laid out for each of them.
Under Classic Legends, it will work towards rebuilding BSA and Jawa with an aim to position them against brands like Triumph, Indian and Royal Enfield. Though both brands will be independent of each other even in the area of product development, they will be appealing to a very niche set of customers.
BSA and Jawa will have independent retail networks and independent product development and marketing teams. Both will see product launches after two years. The brands will not carry any Mahindra branding.
While product development and manufacturing of Jawa bikes will happen in India at M&M’s existing plant at Pitampur, Madhya Pradesh, BSA will be produced largely outside India. Actual production plans of BSA bikes have not been finalised yet. BSA will not come to India till the time a court battle pertaining to the BSA brand is settled: TI Cycles makes BSA branded bicycles in India.
Products under Jawa will be developed from scratch and will not be a recreation of its older models.
Amongst its legacy products, Mahindra Two Wheelers has decided to focus on the premium segment for the time being where it has a 300cc bike named Mojo. New variants of this bike will be launched progressively, while regular small capacity bikes and scooters will not see any new product launches.
“We have restructured the organisation. Today, we are half the size of what we were about a year ago. We have cut down our marketing expenditure,” adds Goenka.
France-based Peugeot Motorcycle, owned 51 per cent by Mahindra Two Wheelers, is in the process of setting up an assembly unit in Vietnam. The French company which makes small but premium scooters, powered by engines smaller than 100cc, wants to explore new markets in South East Asia.
While India remains one of the fastest growing scooter markets in the world, there are no immediate plans to get Peugeot scooters to India simply because of their premium price tag. However, engineering teams of M&M and Peugeot are trying to work out an affordable solution for the Indian market.
Mahindra Two Wheelers, the bike and scooter arm of M&M, has pinned its hopes on two old brands which it has committed to bring back to life as part of a major overhaul of the two-wheeler business, the biggest loss making entity within the group.
The Mumbai-based company said that it will infuse Rs 250-300 crore into the two-wheeler vertical to resurrect British brand BSA (Birmingham Small Arms) and Czech brand Jawa, push Peugeot products into newer global markets and develop new products for the home market.
The renewed push by the struggling venture comes at a time when the domestic two-wheeler space is getting fiercely competitive: more than two-thirds of the market, estimated at 16.5 million units a year, is controlled tightly by Hero Motocorp, Honda and Bajaj Auto.
Two weeks ago, Mahindra Two Wheelers acquired defunct BSA through a newly-formed subsidiary, Classic Legends. Subsequently, it acquired the rights to produce, market and sell Jawa in India.
Both the brands were present in India several years ago. They operated in niche segments, catering to a small set of customers. But changing consumer choices, heightened competition and stricter emission regulation resulted in their exit from the market. Though both the brands are very distinct from each other, they do enjoy some brand equity.
Bringing old brands back to life
BSA, which started making bikes in 1907, was once the largest motorcycle producer in the world. BSA bikes were known for their reliability and were initially sold to the British armed forces before they were retailed to the general public.
Jawa, on the other hand, came to India as Ideal Jawa, based in Mysore, and built licensed Jawa motorcycles initially and later expanded to a new brand called Yezdi. These bikes had engines of 50 cc to 250 cc. Though production stopped years ago, there are in the country several private biking clubs dedicated to the Yezdi.
This recall, Mahindra Two Wheelers hopes, could help revive its fortunes in India.
BSA is a full buy-out (for Rs 28 crore) by Mahindra Two Wheelers. The company hopes to sell these bikes in the US and Europe. Jawa, on the other hand, is a licence agreement for the Indian market. Yezdi is not part of the agreement.
It sold 144,355 two-wheelers last year, down 12 per cent, even as the industry posted growth of 3 per cent. Its market share stood at 0.87 per cent as of last year.
M&M has already pumped in nearly Rs 2,000 crore into the two-wheeler business since the time it got into the space in 2008 with the acquisition of the business assets of Kinetic Motors.
Several new products in the scooter and motorcycle category were launched, but most failed to set the roads on fire. Limited retail reach, a lack of exciting products, product recalls and well entrenched rivals hampered growth. The company even tried to sell its two-wheelers as joint packages with tractors in rural areas.
M&M Executive Director Pawan Goenka says: “In two-wheelers, we have not been able to attain the kind of success we had hoped for. We had the option of shutting down the business completely or to reorient it. We decided to restructure the business. We were waiting for the last piece to fall in place which is the acquisition of the BSA brand. Our plan is to focus on the premium two-wheeler business.”
The three pillars of its strategy
M&M’s two-wheeler business now stands on three pillars: Peugeot Motorcycles, Classic Legends and its own two-wheeler business. The company has a business plan laid out for each of them.
Under Classic Legends, it will work towards rebuilding BSA and Jawa with an aim to position them against brands like Triumph, Indian and Royal Enfield. Though both brands will be independent of each other even in the area of product development, they will be appealing to a very niche set of customers.
BSA and Jawa will have independent retail networks and independent product development and marketing teams. Both will see product launches after two years. The brands will not carry any Mahindra branding.
While product development and manufacturing of Jawa bikes will happen in India at M&M’s existing plant at Pitampur, Madhya Pradesh, BSA will be produced largely outside India. Actual production plans of BSA bikes have not been finalised yet. BSA will not come to India till the time a court battle pertaining to the BSA brand is settled: TI Cycles makes BSA branded bicycles in India.
Products under Jawa will be developed from scratch and will not be a recreation of its older models.
Amongst its legacy products, Mahindra Two Wheelers has decided to focus on the premium segment for the time being where it has a 300cc bike named Mojo. New variants of this bike will be launched progressively, while regular small capacity bikes and scooters will not see any new product launches.
“We have restructured the organisation. Today, we are half the size of what we were about a year ago. We have cut down our marketing expenditure,” adds Goenka.
France-based Peugeot Motorcycle, owned 51 per cent by Mahindra Two Wheelers, is in the process of setting up an assembly unit in Vietnam. The French company which makes small but premium scooters, powered by engines smaller than 100cc, wants to explore new markets in South East Asia.
While India remains one of the fastest growing scooter markets in the world, there are no immediate plans to get Peugeot scooters to India simply because of their premium price tag. However, engineering teams of M&M and Peugeot are trying to work out an affordable solution for the Indian market.