Hero Honda Success

Motorcycles are a smash-up in coarse areas Monday, April 15, 2002 Many last out to be surprised at the susceptibility of India s 2-wheeler segment to buck the subject recessionary trend in the economy. What, they look at themselves, accounts for such resilience competitive set? Quality? Technology? Or, is it ready availability? Mr. Brijmohan Lall Munjal, chairman, Hero Group of Companies, addresses many of these issues in an interview with Soumya Kanti Mitra. What makes the 2-wheeler segment so run-resistant to take fluctuations? A 2-wheeler is the most demand consumer durable good owned by lower Middle, and middle class, ho engagementholds.There is fourfold ownership of this product in such fellowships. Firstly, there is an income effect that influences 2-wheeler demand. Per Capita GDP harvest-time of 3. 7 per cent per annum has been pushing households up into high income brackets. The push effect is to a greater extent in lower and middle- income groups hence the emergence demand. It in addition links up with the higher contri merelyions of the service sector to GDP the income relate of that has been greater on lower income households. A second major reason is the unretentive public transport. The percentage of people who use public transport has fallen from 85 per cent to 75.Entry-level transport options like two- and terzetto-wheelers yield mostly filled this gap. They bear also amaze a sort of prerequisite and thus do not channelise heavy fluctuations in demand. Increased demand for two-wheelers from households has also led financial institutions to increase credit in a uphold way in the last three or four old age. That to a fault has imparted stability to this item, compared to others. A good proportion of gross revenue owes to replacement demand. Are motorcycles gaining an edge all over motor scooters? What is your experience as a mart leader? There are hardly a(prenominal) fresh issues with scooters. Firstly, the tec hnology was dated.Secondly, most were two-stroke vehicles, little fuel-efficient compared to motorcycles. The only advantage was that one could clear along a spare tyre. save motor- cycles have been favorite(a) in rural areas for go against ground clearance, larger wheels and better suspension. They can easily be use on rough roads. Scooters are preferred in urban segments. New multiplication vehicles with four-stroke engines may soon hit the championship and that will boost the sagging scooter market. For the last two years scooters sales have been less than a trillion per annum. Are you, and others in the industry, planning changes in output and investment?Considering the developments in household incomes and transport requirements we believe that the average one-year twistth of 2-wheelers for the next three years should be of around 8-10 per cent. There is over-capacity, just investments may be made in individual instances. The demand for motorcycles, however, is e xpected to grow by 15-18 per cent. That should attract investments. Abroad, certain top-end models in BMWs, Hondas or Ducatis ranges have actually become lifestyle statements for executives. Do you see anything like that occurrent in India ? The next 2-3 years may see a small scratch line with the introduction of high-end motorcycles.But the concept is too early for India . We do not have nice roads where the customer can ride such high-end bikes. With affordability not organism widespread, who will manufacture to cater to such small volumes? We may see some inroads after imports get fully liberalised, but I think it is early eld for that. Are exports from the sector under military blockade owing to the international slowdown? That could be a major factor. Also, there is over capacity in most countries in the 2- wheeler industry. Markets in Latin the States and Africa are impacted, while intra- Asian trade is very competitive.