[cooolsunny]

Originally Posted by Rajeevraj

This is not completely accurate. Taking April 2016 Sales as an example (Related Thread (April 2016: Two Wheeler Sales Figures and Analysis))Total Two Wheeler sales for the month was ~1.5 million units. Of this more than 1.2 million units or 80% of the sales were from the entry level 100-125cc models. Even here, more than 40% came from just 2 models- Activa and Splendor.

Most of these big sellers have been around a long time, so I assume manufacturing costs will be as optimized as they can be leading to higher profitability.

sir both these modes are middle range models pricewise both are above 50k, entry level 2 wheeler means vehicles starting at 30-35k like discover 100. in comparison to this more then half of the sell of cars come from lower end models like alto eon etc. and margins are very low down there.

[phamilyman]

Originally Posted by vikramvicky1984

Two wheelers can be sold with little investment, bare-bones showroom, little inventory cost, non smooth talking staff, and basic service facilities. Fast turnaround and not so much need for a prime location. Customers rarely haggle- free seat covers and key rings keep them happy.

With due respect, please visit any auto showroom to dispel this myth. While it may be less fancy but the two wheeler buyer (esp aam aadmi) is far more price conscious.

While buying my CBR -I saw a woman argue pleasantly for half an hour for an additional 500 rs discount (1% of price) on top of the free seat cover!

Every single Indian is value conscious - let's not typecast any of them.

[vikramvicky1984]

Originally Posted by phamilyman

With due respect, please visit any auto showroom to dispel this myth. While it may be less fancy but the two wheeler buyer (esp aam aadmi) is far more price conscious.

While buying my CBR -I saw a woman argue pleasantly for half an hour for an additional 500 rs discount (1% of price) on top of the free seat cover!

Every single Indian is value conscious - let's not typecast any of them.

Sir, I am not saying in absolute terms, it is far lesser compared to cars, especially in smaller towns.

[commonman]

New car dealerships really don't make that much in a car sale. They have to let go of their margin due to extreme competition. Add to that, the overheads and staff's pay, the profit is almost negligible.However, an average dealership makes money on insurance commission and finance brokerage. More than that the dealership also have service centres. All the small car dealers makes money on service. The next level is the second hand market.
In two wheeler segment, which is a mass market the overhead is less,compared to the AC showroom and suited up salesman of a car dealership. The total carpet area for the service and sales of two wheeler dealership in city area is kept very low in order to make it profitable.

[Lobogris]

Originally Posted by vikramvicky1984

Two wheelers can be sold with little investment, bare-bones showroom, little inventory cost, non smooth talking staff, and basic service facilities. Fast turnaround and not so much need for a prime location. Customers rarely haggle- free seat covers and key rings keep them happy.

Why are we assuming that customers don't ask for discounts on 2 wheelers? Two wheeler buyers are generally from somewhat lower income strata and money means even more to them. When people haggle for five Rupees on vegetables why do you assume they won't ask for discounts on a 50k motorcycle? Additionally, even a 2000 Rs discount means 4% of the price of a motorcycle while in a mid range car it wouldn't even be one fourth of a percent.

[Aragorn]

Very recently, had an opportunity to meet with a senior analyst who specialises in analysing auto stocks and advises investors and managing a auto fund himself.

Normally, I take analyst reports with a pinch of salt - because they only touch the surface and look purely at numbers.

But on this occasion, this gentleman mentioned one metric which I found very interesting and also hard to dispute - EVA or Economic Value Added.

This EVA was a terminology coined by McKinsey long back and is used regularly. Here is how it goes:

EVA = (Return on capital employed - Cost of capital) * Assets

In short, it looks at how effectively a company has utilised its capital.

The analyst and his team looked at this values for all major OEMs across the last 50-60 years. According to their analysis, only about 1 in 10 OEMs had a positive EVA!

This means only 1 in 10 auto companies have made any real economic value addition.

So, to all of who believe that all automotive companies are huge money making machines, it was a big reality check.

[apachelongbow]

That EVA model above is prone to misinterpretation. Especially cost of capital part. Cost of capital differs when one analyses differently. A penny pinching bean counter will consider cost of funds used to build a plant versus rolling the fund in borderline illegal stock short selling. A enthusiast may consider only setting up an auto plant, may not consider other industries. Also asset valuation is quite vague on assets such as brand names. As a famous quote regarding bikinis go... it's subject to interpretation. All these finance analysts keep coming up with terms to justify their jobs.

[vikramvicky1984]

Originally Posted by Lobogris

Why are we assuming that customers don't ask for discounts on 2 wheelers? Two wheeler buyers are generally from somewhat lower income strata and money means even more to them. When people haggle for five Rupees on vegetables why do you assume they won't ask for discounts on a 50k motorcycle? Additionally, even a 2000 Rs discount means 4% of the price of a motorcycle while in a mid range car it wouldn't even be one fourth of a percent.

Think of it, we have an active new cars discounts offers thread which is regularly updated. Not seen such a thread on 2 wheelers even on other forums.
Extrapolating this to entire country will be exaggeration but it is some indication.

[dhanushs]

The very immature and underexposed market and the fact that 99% of the market is for commute purpose, rather than for snob value or passion makes selling decades old technology on mass volumes soo easy. Hence the profits.

[landcruiser123]

Simple reason: Volumes.
There are more number of people buying two-wheelers than cars because they're affordable.

Other important reason: Expense on R&D: Cars are going through changes to meet changing regulations on safety/pollution etc. (Some changes may not reflect in the Indian models, but the Indian branch of the company has to pay royalty to the parent company)

On the contrary, two wheeler makers haven't been forced to spend too much on R&D as they really haven't needed to redesign too much to meet any new standards.

NOTE: I think we're deviating from the topic if we're talking about dealerships. My interpretation from the article is that these figures are from the company's balance sheets, not the data from dealers. (Feel free to correct me if I'm wrong)

[libranof1987]

I visited a four-wheeler and two-wheeler dealership over the weekend.

And the most striking difference between the two is the staff. The Ford dealership had people reasonably knowledgeable about cars, polished in their behavior and presentation and the dealership property itself is a good working environment: there's central a/c, a pantry room, someone serving water/tea, all their lineup available for TD and so on. Now this, naturally costs them a lot of money to upkeep.

Add to that, a huge area of land for storing unsold vehicles.

And then we went to a Honda 2-wheeler dealer. A chunk of their staff is probably the fly-by-night; most of the sales team was clearly unpolished and absolutely indifferent to customers and the showroom itself was like comparing a state transport bus to a Volvo.

When it comes to storage, the building had about 500 two-wheelers stored across 3 floors.

So, actual profit on the sale of a 2-wheeler vs 4-wheeler notwithstanding, there's way too much money a 4-wheeler dealer spends on capital expenditure and operational cost than a 2-wheeler would.

[KSTejaswi]

Originally Posted by hothatchaway

Very few motorcycles in India conform to BS IV norms still, thats one of the reasons why the Himalayan was initially refused registration in New Delhi since it uses a carbueretor and hence cannot meet existing emission norms.

BS IV norms do not require manufacturers to replace the carburettor with FI systems.

Minor modifications to catalytic converters, and some small equipment (canisters) are sufficient to meet the BS IV norms. Total cost increase is in the region of 400-500 bucks per vehicle.