Lower margins in the entry-level 100-cc bikes, non-availability of new models in this segment and a gradual shift in customer preferences have resulted in a dip in demand for entry-level motorcycles.
As a result the segment has seen a dip of around 6.19% in market share vis-?-vis total motorcycles sold in India in 2007-08. On the contrary, market share of executive and premium bikes have gone up by 6% during this period. According to the Society of Indian Automobile Manufacturers (Siam), market share of entry-level bikes stood at 72.74% or 41,96,129 units in 2007-08 as compared to a market share of 78.93% or 51,67,623 units in 2006-07. However, market share of high-end bikes, ranging from 125-cc to less than 250-cc, stood at 26.63% or 15,36,184 units as compared to 20.61% or 13,49,193 units in 2006-07.
“Entry-level bikes are sold on very little margins. Hence two-wheeler manufacturers are now focusing on higher powered bikes, 125-cc and above, to absorb the substantial increase in prices of raw materials like steel,” says a Mumbai-based analyst.
“Unlike the entry-level two-wheelers, new product launches at regular intervals in the high-end segment gives more choice to customers in terms of style and comfort,” adds Abdul Majeed, auto partner, Price Waterhouse.
“Moreover, with a very little difference in price between a 100-cc bike and an entry-level 125-cc bike, people prefer to shell out little extra to make a style statement,” he explains. Currently, the entry-level 100-cc bikes cost around Rs 35,000 and the 125-cc bikes start from Rs 40,000, a difference of mere Rs 5,000. The fact that over 70% two-wheelers in India are financed, a customer ends up paying Rs 100 to Rs 500 more as EMI. According to R Chandramouli, vice-president, TVS Motors, major banks had cut down loans to two-wheelers, especially in rural areas, which are huge markets for the 100-cc bikes. This has further brought down the demand for entry-level bikes.