The premium bike phase has been grappling to garner volumes and profitability in India because of a slew of things corresponding to low volumes owing to its area of interest nature, excessive operational price and minimal revenue margin, fierce competitors amongst OEMs to realize share in a small phase, and the comparatively excessive tariffs on imported premium bikes.
With the long-lasting American motorcycle-maker Harley-Davidson asserting its exit from the Indian market final week, the troubles brewing on this phase have been accentuated.
“The general measurement of the premium bike trade above 500cc and the ₹5-lakh price-point continues to be area of interest. Within the final 12 months, the dimensions of the trade was 6,000-7,000 models solely. The dimensions itself is small, and that’s a cause for concern,” Shoeb Farooq, Enterprise Head, Triumph Bikes India, informed BusinessLine. The car sector had already been present process a chronic slowdown when Covid-19 hit discretionary purchases, he added.
“Within the final 12 months, the loss within the premium bike trade has been fairly massive. Round 32-40 per cent of the sector has (been) shaved off,” Farooq additional stated.
“Premium way of life merchandise in India are nonetheless very area of interest and don’t command large volumes. I’m undecided if the premium bike phase ever took off in India, by way of quantity or profitability. The time for the premium bike segments is but to reach in India,” stated Suraj Ghosh, Principal Analyst – Powertrain Forecasts, IHS Markit.
The exit of a premium model like Harley-Davidson from the market aggravates the uncertainty and dearth of confidence amongst customers and sellers in the direction of the present worldwide manufacturers within the nation, stated Vinkesh Gulati, President, Federation of Vehicle Sellers Associations (FADA).
BusinessLine reached out to gamers within the phase to grasp if they’re endeavor a shift of their India technique amid these challenges, as the talk on the viability of worldwide automakers in India has been reinvigorated because of Harley-Davidson’s exit. Ducati, BMW Motorrad and Benelli didn’t reply to BusinessLine’s queries.
Whereas Triumph Bikes’ Farooq admitted that it will take at the very least a yr for the premium bike trade to see a turnaround, he stated that Triumph already has a powerful technique in place for India, with the nation set to be certainly one of its “strongholds sooner or later”. “We try to steer the stress within the trade by some aggressive pricing technique. We all know we now have to deliver down the value level of our bikes over an extended time frame,” he stated. He additionally claimed that the corporate’s early transition to the BS-VI emission norms additionally helped.
Having launched 13 merchandise within the January-August interval, its product technique can also be on monitor with extra launches deliberate until June 2021, he added. Triumph has additionally entered right into a non-equity three way partnership settlement with Bajaj Auto to handle the 200-700 cc bike phase, with the primary product anticipated by 2022. This can give the model entry to a bigger market, he stated.
Nonetheless, the premium bike trade faces an array of challenges owing to numerous elements of the Indian market.
“The market in India is extremely cost-competitive. With Covid circumstances growing quickly in India and concrete enterprise sentiments being muted, …clients are averse to taking high-ticket loans. Moreover, from a structural perspective, street infrastructure aids gross sales of premium bikes. Lack of high-quality street infrastructure and skill to afford premium automobiles for a big phase of society has constrained development for the premium phase,” stated Hetal Gandhi, Director, CRISIL Analysis.
Demand could proceed to stay reasonable over the subsequent two years, Gandhi added.
India continues to be a creating marketplace for high-end bikes, with a small buyer base, and surviving in such a difficult situation is a check in itself for each producer, stated Gulati. “It turns into an much more difficult job for the channel companions corresponding to sellers to outlive beneath such circumstances. Working a premium two-wheeler dealership is viable solely when naked minimal numbers are offered, however with Covid, it’s turning into very tough to promote these numbers,” he added.
Another challenges dealing with the phase embrace worth consciousness amongst customers, fierce competitors amongst OEMs (authentic tools producers) to realize share in a small phase and the comparatively excessive tariffs on imported premium bikes, stated Shamsher Dewan, Vice-President, ICRA. The uncertainty concerning jobs and earnings development because of the macro-economic shock brought on by the pandemic is prone to maintain the buyer sentiments muted, he added.
“Although the import tariffs had been slashed in 2019, imports beneath CKD (utterly knocked down) fashions entice larger customized duties, making the end-vehicle costlier than indigenously manufactured fashions. Moreover, the tax charges on cars in India are larger than in different rising markets, thus making it tough to break-even or obtain vital returns within the Indian market,” stated Shruti Saboo, Affiliate Director, India Scores and Analysis.
On how the phase can drive up quantity and derive price efficiencies, in addition to compete with the Indian manufacturers, Gulati stated: “Any premium model operational in India must be focussed on its India street map, imaginative and prescient and technique to function on this market. The volumes will also be pushed by launching an India-specific product which evokes the Indian buyer and is in attain on the acquisition aspect. They need to additionally maintain in consideration that this can be a price-sensitive market and their planning ought to depend upon what phase they wish to entice — quantity or area of interest.
“Had there been a Franchise Safety Act in India, manufacturers wouldn’t have abruptly closed their operations, leaving their channel companions and clients in a repair. With each model closing its store in India, India’s capital circulate goes down the drain, together with lack of jobs within the sector,” he cautioned. Tariffs or GST fee revisions will play a big function in reviving the demand on this phase, he added.
“If beneath Make in India and Atmanirbhar Bharat, proper funding incentives are supplied, that too may assist in native manufacturing of the upper finish of the premium (bike) phase,” stated Gandhi.