| breaking the price barrier
Mumbai, Sept. 9: Motor cycle manufacturers are bracing up for a bruising battle ahead, unleashing a price war in a segment which is getting overcrowded by the day, with more players joining the fray.
The big three—Hero Honda, Bajaj Auto and TVS Motor—have initiated a war in the popular segment in their effort to retain market share at a time when fringe players—Yamaha, LML and Kinetic Motor—are fighting for their place under the sun.
“It will be a bruising battle ahead,” predicts Avinash Gorakshakar, an auto analyst at Emkay Share and Stockbrokers, with margins coming under pressure as motorcycle manufacturers try and outdo others in offering discounts. Consequently, fears of shrinking margins has led fund managers and investors to give a thumbs down to the two-wheeler segment and instead accumulate four-wheeler stocks in their portfolio.
Recently, Hero Honda after avoiding a discount war for a long time finally gave in and decided to offer a discount of more than Rs 1,000 for their Passion bikes. The move paid off, and sales of the bike jumped last month after stagnating for a long time. “Price is a very legitimate weapon,” says Atul Sobti, senior vice-president, marketing & sales at Hero Honda, adding “the important thing is consistency”.
His counterpart at Bajaj Auto, R. L. Ravichandran, vice-president and marketing explains the strategy: “Every manufacturer already has enough capacity. The growth rate projection of 30 per cent for motorcycles is slowing down because of the delayed monsoon and barring the Pulsar, Victor and Activa, I am not seeing any waiting for any other model”.
On the discount war unleashed by players in the industry which has now been joined by Hero Honda, Sobti defended his company, saying, “We have been fixing the price based on our expenses”.
Whether the price war allows manufacturers to capture and retain market share is the moot question, say analysts. Sales of the Boxer, the economy bike from Bajaj Auto are stagnating. The same holds true for other popular bikes from Hero Honda and TVS Suzuki.
Agrees Sobti, who says snaring market share by offering huge discounts may no longer ensure success. “The most successful bike this year has been the TVS Victor, and price has nothing to do with it,” he points out.
“Mopeds, geared scooters, step-thrus are all down in year-on-year growth,” Ravichandran said.
“So, everybody wants to be aggressive in offering schemes, consumer promos and competitive pricing. Nobody wants to admit that they will readjust their annual targets,” Ravichandran explains.