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Old 19th June 2018, 00:05   #1
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Default Of Splendors and Dzires

The monthly sales figures of our car market and our two-wheeler market show an interesting trend.

Of Splendors and Dzires-salesgraph.jpg

On the left is the top 20 best-selling cars in India in the month of May, in 2018. On the right is the top 10 best-selling motorcycles in the month of April, in 2018.

But you will be forgiven if you think that that motorcycle sales data is from 2001! Because, even today, the best selling motorcycle in India is the Splendor. With the top five motorcycles comprising of other entry-level commuters, the motorcycle version of the A1 segment of cars.

On the other, the best selling car in India in the month of may was a sub-4m sedan. A car with an average 'ticket value' of around Rs 7 lakhs, more than twice that of the second best selling car, the Maruti Alto. If this was mirrored in the motorcycle market, then the Bajaj Pulsar 220 would be been the sales topper, and the Splendor would have come second.

In the real world, the Pulsar sold just 6912 copies that month, just 1/40th of Splendor's sales numbers!


Going further down the sales chart, the third best selling car in India is a premium hatchback, whose average showroom price is even higher than the Dzire. On the sixth place is a Rs 10 lakh SUV, on the seventh is a Rs 15-lakh SUV and on the sixteenth place is a Rs 20 lakh MPV, 6071 of which were sold in May - or about as many Pulsar 220s!

An Innova is on an average six times more expensive to buy than an Alto, which is reflected in their sales figures, 21890 for the Alto vs 6071 for the Innova, a ratio of about 1/3.

A KTM 390 is about six times as expensive as a Splendor, but comes nowhere close to the Innova/Alto ratio. Against the 266,067 Splendors sold in May, only 800 KTM 390s found a buyer!



Infact, for all the non-stop media coverage and advertisements, performance/premium bikes do not really sell that many.

Quote:
Bajaj Dominar 400: 1373
KTM 390 : 800
KTM 200 : 2672
Honda CBR 250R : 559
Mahindra Mojo : 41
Royal Enfield Himalayan : 1029
TVS RR310 : 862
I know, this is not correct way to analyse this data, and it would wrong to come to conclusions by merely looking at sales figures of equivalently priced bikes and cars.


But thing which is interesting here is how the two markets have diverged over the years and the rate at which they have done so. Ten or even five years back, the top-five best selling cars would have been 800, Alto, Wagon-R, Santro etc. Today, the average car buyer in India spends a lot more than he would have a decade back. A lower price no longer guarantees sales performance today, the greatest example of that being the Tata Nano.

It also reflects the rate at which income has grown for people who were in that segment who could afford cars ten years back. The high rate of income growth in the upper-ish middle class has allowed them to upgrade to more expensive cars, faster. Not only are they ditching off their first cars which were Altos, Swifts and Santros, but they upgrading by jumping segments, going from an Alto to a Swift Dzire. Or from a first gen-i20 to a Creta.

On the other hand, the Altos, Omnis and Boleros are being bought by many who are upgrading to cars for the first time.

But then hasn't the motorcycle market changed in a similar way?

There are millions who are still buying Splendors. Hell, TVS even sells 67,000 XL Super Mopeds every month!. There is not much value-addition which is taking place in the Indian motorcycle market. Why is that?

It is, I think, because of a couple of reasons:

1. The lower middle class income is not increasing as fast as upper middle class income. Families which can afford to buy a motorcycle are just stuck there, with an disposable income which can afford just that one motorcycle. They best they can do is trade it in for a new 100cc commuter every, say ten years.

2. Those whose income is increasing, are making the jump from 100cc motorcycles to a 125cc one. And then, straight to a Maruti Alto. (Or even a second hand car - 5 million of them are sold in a year!)

3. Pulsar NSs, KTMs, expensive Hondas, TVSs are being bought by those who can also afford cars. Therefore, it is more of a impulse/luxury buy for them. The buyers for these motorcycles do not seem to be coming from the pool of owners of their less capacity cousins, but they seem to be coming from the car market.

For eg, if Hyundai sells 1 million i10s, it can then expect that a vast number of them will buy a car again sometime in the future and maybe Hyundai can entice half of them to buy another Hyundai. Which could be an i20 or an Excent or a Creta etc.

But Bajaj does not seem to have that luxury by having a pool of a million Pulsar 150 owners. Would a vast majority of them move and buy a 180? And then a 200? Or go from a 150 to a 220? It does not seem so. There is a precipitous drop between Bajaj 150 sales (48000+) to Bajaj 220 sales (7000). In-between, some cannot upgrade anymore, and those who can, move onto cars.

NOTE:
  • I could not find the two-wheeler sales data for May, and hence I used the April one.
  • It is a scooter which is India's best selling two-wheeler, and not a motorcycle.

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I did not include scooter sales, because an answer to where are the buyers for higher-end motorcycles, could be found in the scooter sales figures. But again, what I feel is that a size-able number of scooter sales are going to households which already have a car. Or at-least, the income structure of a an Activa or an Access buyer, is that of a person who can also afford a car. Therefore, motorcycle owners are either upgrading laterally to a scooter, or they are upgrading to a garage which consists of a small hatchback and a scooter for the missus.

So, one part of our motorcycle market is behaving as if it is in '90s India, the other part is behaving as if it is in a developed market, where motorcycles are a luxury item.

I based all my conclusions on just gut feeling, and not much scientific data analysis, so I might again be totally wrong. But it is something to talk about...

Last edited by avishar : 19th June 2018 at 00:09.
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Old 19th June 2018, 09:50   #2
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Default Re: Of Splendors and Dzires

Good subject to have discussions on, and nice analysis!'

However, I think that you should include scooter sales in your analysis of 2-wheeler sales and not set that aside. This is because there are plenty of lower middle-class households for whom either the 2-wheeler is a vehicle that will be shared between many family members - including wives/daughters. Add to that the fact that scooters offer so much more practicality, that there are a sizable section of 2-wheeler buying customers who do cross-segment shopping. They will have a budget of 60K and buy an Activa instead of a Splendor.
Also, just as there are plenty of examples of 2-car households where one car is a luxury sedan/SUV and the second car is a i20/Baleno, there are an equal proportion of working-class 2 bike households where one is a 125cc commuter and the other is an Activa/Jupiter.
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Old 19th June 2018, 10:37   #3
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Default Re: Of Splendors and Dzires

I don't see any point in comparing cars and bikes. They are two separate world's supplementing different needs. Other than price, power and luxury, cars cater to various different needs. Ground clearance, seating capacity, chauffeur driven to name a few. Whereas in bikes its basic vs I can afford better or gear vs gearless. Let me know what I'm missing.
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Old 19th June 2018, 10:37   #4
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Default Re: Of Splendors and Dzires

1) Most obvious reason is the price sensitiveness of majority of consumers who buy two wheelers. Not to forget all that jazz about rural/urban divide and how two wheelers are a necessity or mode of transport and how a four wheeler makes a wealth statement.

2) Splendor that is on sale now is very different from Splendor that was sold in year 2000. But Hero prefers not to change the name. But car manufacturers are not too teary-eyed about names. What if DZire was sold as Esteem? Alto 800 as Maruti 800? Swift as Zen? What if Grand i10 was sold as Santro? Verna as Cielo? Then the Top 5 or 10 chart for car sales too wouldn't look very different.

3) There is less incentive or need for two wheeler manufacturers to change the way they operate. They are enjoying huge profit margins. There are only 4 or 5 players (Hero, Bajaj, Honda, TVS, Enfield) in the industry. But there are 15 or 20 players jostling for market share in car industry. Newer players will try to shake up things with innovative or segment busting products (Eg: Renualt Kwid, Ford Ecosport, Tata Nano etc)

4) While premium hatchbacks have started registering good sales, so has Enfield Bullet and its variants.

Last edited by smartcat : 19th June 2018 at 10:47.
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Old 19th June 2018, 10:56   #5
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Default Re: Of Splendors and Dzires

I notice in general in terms of vehicle purchase, people are willing to pay a premium upfront if they see value/utility in it. The Dzire, Innova in fleet sales and the Bolero as a rugged go-anywhere vehicle.

Even today I've seen the TVS XL as an utility vehicle than as a vehicle for personal use. So I won't really bring that into a comparison.

Let's get one thing out of the way, other than the Innova rest of the top cars are all daily runners that you might spot in any parking lot. These are just marketed by their manufacturers as a 'premium' vehicle when in reality they are all commuter cars.

How often do you see a performance bike in any office parking lot? Our tenant own a Bullet 350 and they rarely take it out. They have multiple Activas that do duty on a daily basis and simply don't use the 350 for those purposes.

The cars also have a high approval rate in household vs bike of the same price (or even half the price). The bike is seen as a personal vehicle vs a car that can be used by the entire family. Again the operative word here is utility.

On a related note, The higher the cc of bikes, the more the household gets visions of high speed crashes

Quote:
Originally Posted by smartcat View Post
But car manufacturers are not too teary-eyed about names.
They are! Honda didn't dare change the City's name, nor did Toyota entire drop the Innova moniker. Maruti tried to capitalize the Zen's brand on the Estilo, Ford did almost a similar trick with Figo Aspire.

They've also revved away from names, the Aria for Tata. Maruti took a decade to revive the Baleno moniker, which they wouldn't have on the Baleno sedan's failure.

Brand names weren't entirely done off with, unless they had more than enough sales on the others to justify showing the brand the sunset. Santro comes to mind.

Last edited by narayans80 : 19th June 2018 at 11:06.
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Old 19th June 2018, 11:08   #6
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Default Re: Of Splendors and Dzires

Quote:
Originally Posted by smartcat View Post
Splendor that is on sale now is very different from Splendor that was sold in year 2000. But Hero prefers not to change the name.
I cannot agree with this point.

Bikes have changed a lot during this period, but the changes are there in 160cc and above only. 100 & 125 segment has not changed.

However, all other points stated are spot on.
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Old 19th June 2018, 20:06   #7
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Default Re: Of Splendors and Dzires

One important aspect that has not been considered is -
> I can buy a car (Alto etc) when i want to upgrade from a 2 wheeler. Which helps me in multiple ways - family commute, protection from harsh weather, safety, long distance travel. An Alto ( new as well as second hand) costs almost similar to a premium bike (say Duke 390). A premium bike doesn't give me any material advantage.
> There is nothing beyond cars so if i have to upgrade from my current car, i have to go for a bigger or feature rich car. There is not other alternative. Also bigger and feature rich car do have advantages in comparison to smaller cars like aribags, ABS, multimedia features, comfort, snob value.
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Old 20th June 2018, 00:20   #8
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Default Re: Of Splendors and Dzires

The data shown is misleading. Let me clarify.

The migration to C segment or B+ segment in cars is comparable to the migration to 150 plus cc segment in bikes which is the trend in two wheelers. The fastest growing segment in the two wheeler market is scooters in fact. The commuter segment has been under pressure for a long time. So the trend is consistent across two categories and not really contradicting.
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Old 20th June 2018, 08:10   #9
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Default Re: Of Splendors and Dzires

Could the continued dominance of Splendors and Omni/Eeco be attributed (atleast partially) to the ever expanding doorstep delivery and sourcing businesses (Grofers, Swiggy, Courier companies, etc)?
Even the WagonR, I guess, which remains a cab favorite for Cities (unless this data is for private cars only)?
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Old 20th June 2018, 19:11   #10
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Default Re: Of Splendors and Dzires

It is absolutely amazing how a poorly engineered bike with outdated tech is light years ahead of all its competitors when it comes to sales. You ve got to hand it to Siddhartha Lal and team for milking the image associated with Royal Enfield to the last drop.
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Old 21st June 2018, 19:32   #11
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Default Re: Of Splendors and Dzires

Interesting topic, though i am not too surprised with the insights. There are a whole lot of reasons why Indians won't vest in premium motorcycles

1. Cultural: Cars are symbolic, motorcycles (except RE) aren't.
2. Environmental Conditions: Like someone mentioned with 2-3 Lakh budget, one would consider buying an alto over a premium motorcycle to escape air pollution etc.
3. Traffic Conditions: Even with a premium motorcycle, moving around in crowded cities is a pain, wearing safety gears makes it worse
After applying the above filters, there are only a handful interested in riding motorcycles and some of them shy away due to safety issues
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Old 28th June 2018, 01:27   #12
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Default Re: Of Splendors and Dzires

Interesting thread.
Adding to what the OP mentioned about initial purchase cost, the running(fuel+maintenance) costs are significantly higher once you move past that 100/125cc stage. Splendors comfortably give 70 KPL for many years and even moving to 150cc Pulsar/FZ drops the mileage to around 50 KPL. Once you go beyond 250cc, mileage drops to 30 KPL or lower. I would hazard a guess that even if Splendors and Pulsars were sold at the same price many people will just pick the Splendor. For cars, the drop is less significant. ~120 bhp Honda city gives only slightly lower mileage than a ~40 hp Alto/Eon. And DZire diesel is probably more efficient than Alto petrol.

Anecdotally, in pretty much every bike trip I did, people in tea-shops, small restaurants always asked my bike mileage(Enticer, R15). Few people have asked cost of purchase and no one asks power rating/FI/ABS etc.
On the other hand, only rarely do people ask my car mileage during car trips. Not that people don't care about mileage in a car but am guessing that increase in fuel costs of Rs 200 for a person spending Rs 500 is more worrisome than someone else's fuel cost going up from say Rs 3000 to Rs 3500.
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Old 28th June 2018, 10:23   #13
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Default Re: Of Splendors and Dzires

Great analysis Avishar. Another point that comes to mind is the VALUE ADDITION. Dzire/Innova provides much more value addition to Alto in terms of luxury, status, comfort etc where as a P220 would only provide extra displacement in the engine. The comfort & luxury factors remain more or less the same.

Therefore, for a layman, the itch to upgrade a car is more than upgrade a bike.

Cheers

Pawan
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Old 28th June 2018, 15:31   #14
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Default Re: Of Splendors and Dzires

No wonder Hero never bothered to launch the HX250. Because they knew nobody is going to buy them, and especially why bother when you can print money selling Splendors?

Look at the huge hullabaloo going on about the BMW G310 launch. The noise is not going to convert into sales figures though. Looking at the competition, BMW will be lucky to see 500+ units a month, especially considering their dealer network. Rather plaltry, considering their development cost of the G310 family. I wouldn't be surprised if India is not G310's largest market.
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