Premium model sales keep hopes alive for bike firms

It may make up for less than one-fourth of the 6-million strong annual motorcycle market in the country but the trend of flashy, jazzy and lean machines is just beginning to catch young India's imagination.

Ever shrinking margins in the entry-level commuter motorcycle segment have also prompted bike makers to ride full-throttle into the premium-end of the market in an effort to perk up the bottomline.

"There has been a change in the profile of the customer. While some customers like to upgrade, there are a lot of these young, discerning customers who want more and more sporty and smarter bikes," an auto analyst said.

Premium motorcycle segment "" with bikes in the range of 125-200 cc "" has seen healthy growth in the current financial year, even as the bread and butter segment of 100cc bikes has taken a knock.

During the first 10 months of FY08, sales of premium motorcycles have increased by almost 17 per cent on year to 1.3 million units. On the other hand, sales of the entry level 100cc motorcycles has slipped 20 per cent in the same period to 3.5 million units.

Understandably, the two heavyweights in the motorcycle segment "" Hero Honda Motors and Bajaj Auto "" are increasingly focussing on the premium motorcycle segment.

While Hero Honda's sales in the segment rose 103 per cent on year during the April-January period, Bajaj Auto saw sales increase 18 per cent in this period. In the entry-level 100cc segment, both saw a sharp fall in sales. Bajaj's sales in the 100cc segment fell 43 per cent on year in the April-January period, while Hero Honda's sales slowed down by 4 per cent on year.

Both Bajaj and Hero Honda have said in the past that they would be focussing on the premium motorcycles segment as they offer better margins. Bajaj Auto Managing Director Rajiv Bajaj had in fact said in 2006 that the company would exit the 100cc segment as it was not making any profits. "The company is planning to exit the 100 cc segment in 2-3 years," he said in 2006.

While that is yet to happen as 100cc is still the biggest segment despite falling sales, the shift in focus is discernible. Hero Honda too has increased its presence in the premium segment with four motorcycles.

"The company had doubled its market share as well as volumes in the premium segment in the last one year. We believe that there is potential for the market to expand in this segment," Anil Dua, vice President, sales and marketing, Hero Honda, had earlier said.

Even TVS Motor Co.'s Managing Director Venu Srinivasan echoes similar views. "As a company we might have to build a 200 cc bike to show the market we have the technology. But at the end of the day, sub-200 cc products are where our game will be," he says.

Bajaj has gone a step further and joined hands with Austria's KTM and Japan's Kawasaki for launching big bikes in the country. The country's second largest motorcycle maker has bought 14.5 per cent stake in KTM.

KTM and Bajaj plan to manufacture bikes on two platforms "" 125 and 250 cc "" and may even develop scooters on that platform. With Kawasaki, Bajaj plans to roll out aspirational models.