Growing aspirations have transformed the domestic motorcycle market in the last five years. From being used for need-based commutes, motorcycles are now designed to meet customer aspirations of style and power. No doubt this opportunity has brought new entrants into the market, but competition is also rising.

Five-year data from the Society of Indian Automobile Manufacturers shows exponential growth in the premium segment (defined as above 150cc). Within this, sales of the higher-powered motorcycles with engine capacity of 250-800cc have raced ahead. The table shows that the share of 250-350cc motorcycles, within the premium range, has jumped from 22% to 42% between fiscal years 2013 and 2017 (FY13 and FY17).

To be sure, the largest selling motorcycle in the premium segment with scorching growth rates of 25%-plus over the last few years is Royal Enfield from Eicher Motors Ltd.

However, in FY17, compared to five years ago, many global manufacturers such as HD Motor Co. India (Harley Davidson), Triumph Motorcycles, Suzuki Motorcycles and India Kawasaki have entered the Indian market. Other listed premium motorcycle manufacturers such as Bajaj Auto Ltd and TVS Motor Co. Ltd have been around for a long time.

According to Bharat Gianani, an analyst with Sharekhan Ltd, higher urbanization, greater aspirations and affordability among the urban population, and higher purchasing power among the youth are factors that will support demand and growth momentum in this segment. Demand in this segment is also inelastic to price and cost inflation. Hence, higher raw material costs can be easily passed on to the consumers without denting demand.

The only time sales contracted in the recent past was during the transition to new emission norms and goods and services tax.

That said, the premium segment accounts for barely 12-15% of the total motorcycle sales in the country.

For now and in the near term, rising demand is likely to see more action in this segment. Analysts expect competition to increase further. For instance, Royal Enfield’s sales growth in the last couple of months, although in strong double-digits, is falling short of the Street’s expectation. After all, the new global firms who have smelt the huge opportunity in India have a range of products across the premium spectrum. Heightened competition may also lead to pricing pressure and squeeze profitability in the segment, affecting margins that have remained rich so far.