Power play: Bike makers go premium for profit

As margins in the entry-level commuter motorcycle segment shrink, bike makers in India are now riding full-throttle into the premium-end of the market in an effort to perk up the bottomline.

Hero Honda on Monday unveiled its latest offensive in the premium motorcycle segment CBZ X-Treme and announced plans to roll out another model soon to expand its footprint in this segment.

"Though the segment for premium bikes would still account for just 10% of the total six million bikes sold a year , their share is growing fast," says Hero Honda MD Pawan Munjal. "We are targetting this growth segment with our new offerings, which will help us achieve leadership position."

X-Treme is among the eight new models that the firm plans to roll-out this fiscal, a majority of which will include offerings in the deluxe and premium segment of the market.

And rival Bajaj Auto is not far behind. The firm, which has carved a niche for itself in the upper-end segment with the Pulsar variants, is in the process of giving this bike a bigger heart.

It plans to roll out a 220-cc fuel-injected Pulsar by January 2007, and company officials point out that another upgrade on the Pulsar platform is expected soon. And industry buzz says other players in the market, like TVS and Honda Motorcycles, are also attacking this segment will renewed vigour.

"This is a reflection of the changing customer preferences in the market," says an industry analyst.

"Customers are fast embracing 125cc and above bikes as mainstream models today, which is reflected in the declining marketshare for 100cc bikes.

It's also beneficial for manufacturers as the margins in the bigger bikes are higher than the entry-level models, where intense competition in the past had forced companies to cut tags and even suffer losses.

This shift in strategy is also an effort on part of the companies to drive up profits," says Anang Jena of Synovate Moto Research.

The 100cc motorcycle market which accounted for nearly 94% of all motorcycles sold in the country in 2001-02 has skid to 72% of the market in 2005-06. And industry insiders believe this segment will, over the next 2-3 years, end up at under 50% of the total bike market.

This, incidentally, is the second churn for the two-wheeler market in India in the past decade. Geared scooters, which once ruled the market, suddenly fell out of favour with the customer with Hero Honda introducing fuel-efficient bikes.

A sudden shift in customer preference for more macho bikes saw scooters being edged out of the market. Today, the entry-level 100c bikes seem to facing a similar fate with buyers now picking high-powered bikes.

It's this shifting customer preference that Hero Honda and other bike makers plan to capture with its renewed focus on the premium end of the market.

Hero Honda is working on a 250cc Fuel-Injected Karizma Upgrade with water-cooled engine and Hero Honda will launch this bike Feb 2007. Yamaha is working on a 150cc bike which will be launched January 2007 . Tvs will also launch its 180cc Bike somewhere around next fiscal. Honda plans to launch its 250cc CBR in INDIA next year. Looks like 2007 has lots of surprise for Indian Motorcycle Enthusiasts.

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Source:- TimesOfIndia