BackPremium bike manufacturers rev up to tap rising demand
Sales of bikes in this category have grown at a rate of 35% over the last three years in India—the fastest among motorbikes
Premium(Bloomberg)
Chennia: Sivaraj Periaswamy, 32, owns a Pulsar 200NS motorbike, and is now looking to buy a more powerful bike. Every weekend, the 32-year-old property dealer hits the race tracks in Coimbatore with other members of a group of bikers called Cotton City Throttle.
Periaswamy, who began riding bikes at age 14 and bought his first bike, a 180cc Pulsar at 26, has already changed three bikes in eight years. He says when he was younger what mattered was how the bike looked, but now he is after a superior riding experience.
It is people like Periaswamy that BMW Motorrad, one of the world’s most recognisable motorbike brands, is targeting in India. Three years after making a fresh start in the country, city-based unmarried high-earners may be key to the German firm’s plans—not just in India but globally.
India could be a test case. Having entered into an alliance with TVS Motor in April, BMW Motorrad has plans to manufacture a range of 200-500cc bikes—a segment in which it does not have a presence anywhere in the world.
BMW Motorrad is not sharing its India plans, but its president Stephan Schaller said at the time of striking the deal, “We are in the process of re-alignment of our motorcycle business and make it profitable. Our focus is on urban mobility and electric mobility. I regard this tie-up in our endeavour to deliver sustainable and profitable growth".
For Chennai-based TVS Motor, it would mark an entry into the high-margin premium segment of over 200cc bikes. The long-term technology-sharing agreement hinges around the manufacture and export of higher-powered bikes in the sub-500cc category.
Experts tracking the sector say BMW, being a premium brand, will not step below a certain price threshold, which makes it likely that it will focus its attentions on 200cc-500cc motorbikes, a category that has a growing market in India.
Sales of bikes in this category have grown at a rate of 35% over the last three years in India—the fastest among motorbikes. Their biggest buyers are enthusiasts who look at biking as a leisure activity.
They include young entrepreneurs, affluent college-goers and salaried people with incomes of at least ₹ 10 lakh per year. The number of affluent households with over $1 lakh in investible funds in India is estimated to be three million, second only to the US, according to a 2011 survey by global market research agency TNS.
In 2012-13, India overtook China as the world’s largest market for two-wheelers. But high-powered bikes account for only 2% of motorbike sales in the country.
In the last fiscal year, a sluggish economy and high inflation saw growth in two-wheeler sales slow sharply to 2.9% to 13.4 million units—the slowest in the last four years—compared to 14% growth in the year before.
High-powered bikes remained insulated as sales rose 10% from last year. More than 248,000 bikes in the 200-500cc category were sold in the last fiscal year.
Globally, Europe and the US are by far the largest market for high-powered bikes. But India is rapidly attracting global companies with sales expected to grow at a rate of 17% over the next three years, according to Subrata Ray, senior group vice-president at Icra Ltd, a rating agency.
Experts say low-powered motorcycles sell more in emerging markets like India, South East Asia and Latin America while super bikes with engines sizes that are higher than 600cc do better in affluent countries. The 200-500cc bikes are mid-sized motorcycles that are relevant to both markets—catering to enthusiasts in the former and everyday users in the latter.
BMW Motorrad entered India in 1994 through an alliance with what was then Hero Honda to sell 650cc bikes. “But it struggled to sell a consignment of 200 bikes, as the price then was around ₹ 2 lakh and the BMW brand was not as popular as it is today," said Pradeep Saxena, executive director at research firm TNS Automotive.
In 2010 BMW Motorrad made a fresh start and currently offers nine 800cc-plus superbike models through its seven dealerships. But industry sources said the company has sold only around 70 of these bikes a year.
Now, the company’s future performance in India could prove to be significant to its global plans. In 2012, BMW sold 106,358 motorcycles around the world, up 2% over the previous year. But Austrian rival KTM Sportmotorcycle AG’s sales were up a massive 32% to 107,142 units.
The partnership with TVS Motor is expected to open new doors in Asia and South America for sub-500cc bikes that are expected to be manufactured in TVS Motor factories in Hosur or Mysore.
While TVS Motor is investing ₹ 142 crore in the partnership, BMW Motorrad will be investing in developing testing products in Berlin, where it will also design the engine of the bike that will be launched in 2015. A BMW Motorrad spokesperson declined to give the investment figures.
However, BMW Motorrad will have to play catch up with Bajaj Auto, which, with a 48% stake in KTM Sportmotorcycle, has already made India its export base. The company sold 8,500 units last year and has exported 25,000 KTM Duke bikes—of 200cc and 125cc—to countries in Europe, Latin America, Africa, Australia and Asia.
Like BMW Motorrad, KTM too did not offer sub-500cc bikes before it entered the partnership with Bajaj. Apart from the 125cc and 200cc bikes, it recently launched a 390cc bike.
The partnership with Bajaj helped KTM beat BMW Motorrad last year to become the largest selling European motorcycle brand—nearly a quarter of KTM’s worldwide volume comes from products manufactured jointly with Bajaj, said Amit Nandi, KTM’s India head and vice-president of Probiking, the premium division of Bajaj Auto that sells KTM bikes.
While BMW Motorrad refused to share its projections for the Indian market, for KTM, India now makes up close to 10% of worldwide volumes, with the Indian growth rate overtaking that of KTM worldwide, according to Nandi.
A key player in the 200-500cc bike segment is Royal Enfield of India. Siddhartha Lal, MD of Eicher Motors which manufactures Royal Enfield, said in an interview this year that “the world is converging on mid-size motorcycles", whose global market size he estimated to be at around 700,000. Royal Enfield accounted for 100,000 of these.
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