At his Vasant Vihar office in Delhi, Atul Sobti, Senior Vice President (Marketing), Hero Honda Motors Ltd, looks as smug as ever. He has with him the findings of a recent IMRB survey on customer preferences and market trends. This is the second such survey commissioned by Hero Honda in the last three years. The previous one-undertaken in 1999 -had reinforced its faith in the great Indian shift from scooters to motorcycles. This one, distilling the opinions of over 50,000 two-wheeler owners, gives the company insights into the rural market for motorcycles.

Hero Honda will need them, if it is to reinvigorate its market leadership, which was born of its early fuel-economy advantage with 4-stroke technology-something rivals Bajaj and TVS are now wielding in the race to get even, and quite successfully too. In the first six months of this financial year, Hero Honda's marketshare has slipped to 45.8 per cent from 48.8 per cent in 2001-02. The gainers? The 110-CC TVS Victor, which is smiling all the way to the bank, and Bajaj Pulsar, which has muscled ahead with its 150-cc and 180-cc variants.

If Hero Honda was the sole market ruler till recently, now the market looks set to be dominated by a troika that includes Bajaj and TVS. Together, the three have an 88.5 per cent share of the Indian motorcycle market. The competition amongst them, of course, is intense. And that fuels growth.

BT 500 RANK 12 Avg. Mkt. Cap 6,255.7* * For H1 2002-03 in Rs crore	Hero Honda expects to end the year with a 30 per cent growth over the record 1.4 million units is sol last year B.M. Munjal, Chairman/ Hero Honda

"Motorcycles is amongst the few categories that is consistently growing at a healthy pace of over 30 per cent," says a Mumbai-based merchant banker, adding that the category hits double-digits even in a bad year. The last financial year too was good for motorcycles. The market grew by 37 per cent. And motorcycles now make up 69 per cent of India's total two-wheeler sales, up from 48 per cent in 1999-2000.

Little wonder then, that the troika's worth, in the the stockmarket's estimation (measured by market-cap), has gone up so sharply. Hero Honda has moved up from the No. 25 spot in last year's BT 500 annual survey to No. 12 spot this year. Bajaj has risen by three rungs-to No. 19 this year. TVS Motor Company has made the biggest leap, up 70 spots to land at 55 this year, as opposed to being 125th in last year's survey.

Price-Value Equation

"So what if we're losing marketshare?" asks Sobti. Taken alone, Hero Honda's performance remains spectacular. It expects to end the year with a 30 per cent growth over the record 1.4 million units it sold last year. To guard its flanks against rivals, on September 4, it launched the 133-cc Ambition, priced at an enticing Rs 44,612 (ex-showroom, Delhi). "Ambition is the best product Honda has brought into India till date. It not just offers fuel-efficiency, but also power and style," says Sobti, hoping to take on Bajaj Pulsar and TVS Fiero with the product.

That's an indication of just how finely calibrated the market has become, and how market-oriented the players are. Ask a honcho of any of the three two-wheeler companies why their market cap has risen so well, and they echo the same line: "We got the product's price-value equation right." And by that, they mean the equation in the consumer's mind-where this market's battleground shifted years ago. India seems ready to move on from two-wheeled fuel-savers, and the three are working feverishly to outgun each other on attributes such as self-image enhancement. That, plus all the engine specs, form the 'value' part of the deal. And price? The more attractive the better.

For aggressive pricing, there's no beating Bajaj Auto. "Our company has the financial muscle to roll out new products at attractive prices," says R.L. Ravichandran, Vice President (Business Development and Marketing), Bajaj Auto Ltd. At Rs 27,990, its Boxer at is the cheapest motorcycle available in the market today. It is also the largest selling product after Hero Honda's blockbuster, Splendor. Bajaj has no qualms about doling out discounts from time to time on what is already a good price bait. The same goes for the two variants of Pulsar; the 150-CC is priced at Rs 45,646 (ex-showroom, Pune), the 180-cc one at Rs 53,877.

BT 500 RANK 55 Avg. Mkt. Cap 1,015.3* * For H1 2002-03 in Rs crore	The indigenously developed Victor has taken TVS' marketshare up from 15.5 per cent in 2001-02 to 19 per cent this fiscal Venu Srinivasan, Chairman/ TVS Motor

That was what forced Hero Honda to cut Ambition's earlier planned Rs 46,500 tag. The company has been offering discounts of Rs 2,000 on its earlier-launched model Passion as well, just to prevent it being cannibalised by Ambition. If Hero Honda has felt uneasy of late, it's because its last few launches were non-starters. In April, it withdrew Joy-a basic motorcycle launched at Rs 40,117 (ex-showroom, Delhi) in April last year, aimed primarily at the rural buyer. It was found to be priced too high, and Hero Honda hopes to correct that with Dawn, a bike launched in April this year at Rs 37,011 (ex-showroom, Delhi). As for deal-sweeteners, Hero Honda has been running its Passport Programme, which awards loyalists points, free gifts and tickets for movies, cricket matches and the like. The programme now has over 700,000 members. "Our philosophy is to be customer-centric," says Sobti, "rather than buying market share through discounts."

However, the show this year, at least in the first half, was stolen by TVS Motor Company, which staged a smart recovery with its TVS Victor. Its success gives Venu Srinivasan, the chief, a huge sense of relief-because this was the bike that strained TVS' relations with erstwhile partner Suzuki Motor Corporation of Japan. Launched in September 2001, Victor is indigenously developed, and has taken TVS' marketshare up from 15.5 per cent in 2001-02 to 19 per cent this year. So enthusiastic has been the response, that TVS claims a six-week waiting period for the bike. "We are still in the process of ramping up our capacity," says a spokesperson. As of now, the company sells around 34,000 units of Victor every month. By November, it hopes to be cranking out 50,000 units per month. If that happens, Victor could overtake Boxer for the mantle of India's second largest selling motorcycle. Of course, analysts are waiting to see how well TVS can plug other price-value slots to consolidate its success. "TVS has made a comeback with the Victor, but what's important is to see what it does next," says a competitor.

BT 500 RANK 19 Avg. Mkt. Cap 4,794.3* * For H1 2002-03 in Rs crore	For aggressive pricing, there is no beating Bajaj. It has no qualms about doling out discounts on what is already a good price bait Rajiv (L) & Sanjiv Bajaj, President & VP (Finance), Bajaj Auto

Strategic Differences

Should Hero Honda worry? While both Bajaj Auto and TVS have developed engineering strengths and have the capability today to offer spiffy models at good prices, Hero Honda continues to rely on its technology partner for new models and upgrades. "Hero Honda's position is the most precarious of them all today," says a Mumbai-based auto analyst, hinting at the possibility of Honda seeking a solo future in India. "With the entry of more new and contemporary models, this is the company that will be hit the most. But much depends on how the market leader chooses to retaliate," he adds.

As if the pincer attack by Bajaj and TVS is not bad enough, Yamaha and LML are also getting into the act with new offerings. Can the leader sustain its lead?

Hero Honda has adopted the stance that in an expanding market, absolute growth counts for more than market share. Also, keeping over half the market for a prolonged period would have been unrealistic. Still, those who decry its market predominance as a stroke (four of them, actually) of luck, are ignoring the marketing prowess that the company has displayed (overshadowed by TVS over the past year, though). Vendor relationships are the other thing it is proud of. Also, Hero Honda is busy making up for lost time in moving up the engine-power scale. Next year, Hero Honda plans to launch a 200-cc motorcycle that would take on Bajaj Eliminator.

Expect TVS to get into rapid-launch mode soon. It has over half a dozen products lined up over the coming year. Bajaj, meanwhile, has cracked the market's lower end, having sold around 6.5 lakh motorcycles last financial year. This year's target: an ambitious 900,000 units. The company has three new products for launch over the next 12 months. A new Caliber variant, a mobike for collegians and a 125-cc bike from the Kawasaki stable.

All very exciting. But the big question is: How long will the market continue to grow at the obscene pace of over 30 per cent per annum?

Sobti expects the double-digit story to continue so long as India's agri-sector is doing alright (half the market is rural now). "Motorcycles are already touching 70 per cent of two-wheeler sales. I don't think they will grow beyond 80 per cent. So a 15 per cent growth in motorcycles should translate into a 10 per cent growth in two-wheelers," he adds.

Ravichandran expects the customer to get more discerning. "Only those players that offer fresh and contemporary products at attractive prices will win," he adds. Who that might be is anybody's guess. To some, technology has a way to go. To others, technology is already approaching parity, so it's the rest of the pitch that must swing the deal. But for those who dabble in two-wheeler stocks, there is lots of action to look forward to.