Auto Stocks: The Indian motorcycle industry is the favoured and always beloved Industry among commuters and enthusiasts alike. In most tier 2 and tier 3 cities it is the primary mode of transportation for people with a budget. This industry is experiencing a new wave of excitement with the entry of foreign automobile companies partnering with well-known Indian brands.
In the quest to establish their foothold in India, Triumph, Harley Davidson, and Norton are drawn to India because of its vast expansion possibilities and growing consumer base. They have ventured into partnerships with well-known Indian companies such as Bajaj Auto Ltd, Hero MotoCorp Ltd, and TVS Motor Company Ltd.
This article will allow you to understand the intricacies of these partnerships, analyze the mutual benefits derived from these alliances, and forecast the future trajectory of the industry.
Table of Contents
Trends and Innovations in the Motorcycle Industry
With a market size of USD 299.2 billion as of 2024, the Indian two-wheeler industry is poised for significant transformation in the upcoming years. Fueled by rising incomes and urbanization, the middle class with disposable income has exposed international brands to a lucrative opportunity.
This rising economic growth has led to a demand for personal mobility and premium motorcycles. This trend is robust among urban youth and professionals who view motorcycles not just as a mode of transportation but as a lifestyle statement. Secondly, technological advancements are playing a crucial role in shaping the industry.
Modern motorcycles are now equipped with sophisticated features such as Anti-lock Braking Systems (ABS), fuel injection systems, and smart connectivity options, enhancing safety, efficiency, and user experience. The shift towards electric two-wheelers is gaining momentum, spurred by environmental concerns and government incentives.
ICE engines have dominated the two-wheeler industry all these years, but recently electric and hybrid engines have taken the population by storm with companies like Ather and Ola surging with demand.
The Rise of Foreign-Indian Brand Collaborations in India’s Market
India can be seen as the dream destination for producing auto parts because of its cost advantages, even then why did so many American automakers face such failures and shutdowns in their lives in India? GM, Ford Motors, and even Harley Davidson faced such challenges.
The companies had it hard adapting to the Indian market as their product planning was not up to par, and catching up with the technological advancements while keeping the cost of the product low was a huge challenge for these companies. As it is understood now Indian consumers typically prefer affordable yet technologically advanced vehicles.
Recognizing these challenges, foreign motorcycle manufacturers are now adopting a different approach by partnering with Indian brands. Indian brands possess a deep understanding of local consumer preferences, regulatory environments, market dynamics, and mainly they have a low cost of production and sales cost.
Due to this, Harley Davidson is partnering with Hero MotorCorp, Triumph is partnering with Bajaj Auto Ltd, and Norton is partnering with TVS Motor Company. These three Indian companies alone take up around 61.55% of the Indian Motorcycle market as of 2023 by sales. This collaborative approach mitigates the risks associated with entering a new market and maximizes the potential for success by leveraging the strengths of both partners.
Brand Partnerships
Bajaj Auto (Triumph)
Bajaj Auto is mainly focusing on exporting Triumph to the International market, as they have exported around 19,000 Triumph bikes to around 57 countries and started to retail in around 50 of those countries. The Indian company’s factory in Chakan, Pune will be responsible for producing the motorcycles, which will then be distributed worldwide.
Bajaj will also take over Triumph’s distribution activities in India. As of Q3FY2024, they have delivered about 15,000 units, 8,000 of which were domestic. They have currently penetrated 41 cities where 10-11 of those cities were in the past 6 months.
Accordingly, they have achieved a total market share of around 4-5% of the 250cc – 500cc industry, and only in Bangalore, they have achieved a 20% market share with Triumph. This strategic alliance is expected to truly unlock the potential of both brands on a global scale. By combining their respective strengths, Triumph and Bajaj aim to deliver a range of winning products that cater to the needs of mid-size motorcycle enthusiasts around the world.
| Key Ratios | 2024 | 2023 | 2022 | 2021 | 2020 |
|---|---|---|---|---|---|
| Revenue from Operations (Cr) | 44,870.43 | 36,455.38 | 33,144.71 | 27,741.08 | 29,918.65 |
| EBIT Margin (%) | 21.91 | 20.16 | 18.89 | 21.41 | 21.3 |
| Net Income (Cr) | 7,708.24 | 6,060.21 | 6,165.87 | 4,857.02 | 5,211.91 |
| RoE (%) | 26.61 | 20.63 | 20.64 | 17.80 | 24.06 |
| D/E | 0 | 0 | 0.01 | 0.01 | 0.01 |
| Interest Coverage Ratio | 167 | 199.48 | 780.16 | 938.15 | 2,118.76 |
| Current Ratio | 1.30 | 1.83 | 2.21 | 2.51 | 1.56 |
TVS Motor Company (Norton)
TVS Motor Company has been investing in the design and development of the product, with an estimate of around Rs. 88 crores. The company is expected to invest Rs. 400 crores in Norton in the upcoming quarters and is expected to enter the premium segment. TVS Motor Company, known for its innovative designs and cost-effective manufacturing capabilities, will partner with Norton Motorcycles to bring a new range of motorcycles to the market.
Norton, with its rich heritage and iconic brand, will contribute its expertise in design, engineering, and performance to the partnership. The partnership will also see TVS Motor Company take over Norton Motorcycles’ distribution activities in India, further expanding its presence in the country. In other key overseas markets where Norton is not currently present, TVS will represent the brand and offer the new mid-capacity bikes as part of the full Norton line-up.
It is expected to be in the market by FY2024-25 which will offset the amount of expenses being entered in the accounts of TVS. They have announced the Norton V4CR Café Racer in India, this is the first ever bike announced about Norton after its acquisition. However, the company is not planning to release it in India as there is little to no market for the 1200cc V4 engine.
The strategic alliance is expected to unlock significant growth opportunities for both companies, particularly in the mid-capacity motorcycle segment. By combining their strengths, TVS Motor Company and Norton Motorcycles aim to create a new range of products that will truly resonate with customers worldwide.
| Key Ratios | 2024 | 2023 | 2022 | 2021 | 2020 |
|---|---|---|---|---|---|
| Revenue from Operations (Cr) | 39,144.74 | 31,973.99 | 24,355.31 | 19,420.82 | 18,849.31 |
| EBIT Margin (%) | 11.94 | 10.46 | 8.39 | 8.85 | 9.38 |
| Net Income (Cr) | 1,686.37 | 1,328.67 | 756.82 | 594.26 | 624.62 |
| RoE (%) | 24.85 | 24.13 | 17.20 | 15.52 | 19.03 |
| D/E | 0.25 | 0.43 | 0.36 | 0.43 | 0.51 |
| Interest Coverage Ratio | 2.93 | 3.07 | 2.96 | 1.95 | 2.07 |
| Current Ratio | 1.02 | 0.88 | 0.93 | 0.97 | 0.97 |
Hero MotoCorp (Harley-Davidson)
Hero MotoCorp then entered into a partnership with Hero to develop and sell a range of premium motorcycles. Before that Harley-Davidson had entered the Indian market but exited due to only selling 4,533 units in FY20, compared to 11,753 units in FY16, which is a decrease of – 59.8%.
The Harley-Davidson and Hero MotoCorp partnership is a game-changer for the Indian motorcycle industry. By combining their strengths, these two giants are set to create a new range of premium motorcycles that will truly resonate with customers in India and beyond.
Harley-Davidson will provide its renowned design and engineering expertise to create a new range of premium motorcycles that cater to the growing demand for high-performance bikes in India. As of March 2024, Harley Davidson has a market share of around 10% in the premium motorcycle market. Their current product Harley Davidson X440 has an order book of 30,000 as of FY2024.
The Harley-Davidson X440, the first co-developed model under this partnership, is being manufactured at Hero MotoCorp’s Neemrana plant in Rajasthan, allowing Harley-Davidson to avoid high customs duties on imported bikes. While the focus is currently on the domestic market, there are possibilities of exporting the Harley-Davidson X440 to other markets in the future.
| Key Ratios | 2024 | 2023 | 2022 | 2021 | 2020 |
|---|---|---|---|---|---|
| Revenue from Operations (Cr) | 37,788.62 | 34,158.38 | 29,551.28 | 30,959.19 | 29,253.97 |
| EBIT Margin (%) | 14.41 | 11.60 | 11.20 | 12.73 | 13.48 |
| Net Income (Cr) | 3,744.83 | 2,809.96 | 2,316.88 | 2,917.75 | 3,638.11 |
| RoE (%) | 21.15 | 16.87 | 14.62 | 18.92 | 25.25 |
| D/E | 0.03 | 0.01 | 0.01 | 0.01 | 0.01 |
| Interest Coverage Ratio | 81.24 | 44.46 | 75.33 | 84.94 | 84.60 |
| Current Ratio | 1.46 | 1.57 | 1.92 | 1.75 | 2.02 |
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Conclusion
As the biggest bike industry in the world, the entry of foreign motorcycle giants into India through strategic partnerships with Indian brands holds a lot of prospects. These collaborations are driven by the immense market potential, cost efficiencies, and the desire for mutual growth.
The impacts are evident in the expanded product portfolios, enhanced brand images, and deeper market penetration for both foreign and Indian companies. Indian companies also benefit from these partnerships through exports to various countries.
This, in turn, helps foreign companies get a better foothold in the vast Indian market by leveraging the wide distribution networks and customer reach of their Indian partners. This blend of global experience with a local perspective has worked incredibly well making it an ecosystem where businesses can align supply with demand optimally.
Associating with Global Brands provides them recognition and raises their overall brand credibility, which in turn helps them target larger market segments who are brand-conscious and want value for their money.
Written By Rithesh Balaji
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