Despite slowdown, motorcycle firms pin hopes on faster growing mid-segment

A slowdown may be gripping the broader two-wheeler market, but motorcycle makers are revving up in the mid segment. This is the segment that includes bikes in the 250-650 cc category priced over Rs 1.5 lakh.

Driving the trend among consumers is a growing preference for pricier, higher capacity bikes that can be used for daily commutes as well as for leisure biking. For manufacturers, healthier margins on bigger motorcycles compared to the mass market ones explains the acceleration in a segment that accounts for 3 per cent of the market.

Though all manufacturers are competing for the same set of buyers who are looking to upgrade from 150 cc models, each one is following a different strategy to gain market share. Market leader Royal Enfield has always chosen to play in the adventure and tourer segments, whereas KTM, Bajaj Auto and Honda Motorcycle and Scooter India are vying for the sports segment.

Classic Legends is the latest to stake its claim here. Close to two-and-a-half years after reviving the famed Jawa brand in India, the Mahindra & Mahindra Group-backed company last week re-launched the Yezdi brand as part of a larger strategy to fortify its presence in the segment. This is the first time ever that the two classic motorcycle brands — Jawa and Yezdi — will sell alongside each other.

“I’m a big fan of the mid-market segment in motorcycles. It will grow fast and for the longest,” Anupam Thareja, co-founder, Classic Legends, told Business Standard last week. With six models and more coming, the start-up aims to straddle the segment.

So what is prompting manufacturers to gun for a segment that has a minuscule share in the overall motorcycle market? Among other things it’s the bigger profit pool that these bikes offer, according to equity analysts.

A rough calculation shows that mar­ket leader Hero Moto­Corp, which draws the bulk of its sales from mass models, earns a margin of 6,000 to Rs 6,500 (inclu­ding spares) on each unit sold. The average selling price (ASP) of Hero models is Rs 50,000. But Royal Enfield, which leads the mid-segment, earns Rs 30,000 to Rs 35,000 per unit. Its ASP is Rs 1.7 lakh.

The two-wheeler market dropped to a nine-year low in the first nine months of the current fiscal. But sales of 350 cc and above have advanced year-on-year (see table “The middle track”). That is hardly a consolation given the small base and a pie that has remained almost unchanged for the last three years. “The slowdown is pervasive and it hasn’t spared any segment,” said Rakesh Sharma, executive director, Bajaj Auto. Bajaj sells the KTM brand of motorcycles (it controls 48 per cent in KTM AG) and Dominar in the mid-segment. The mid-segment would have done better but for the chip shortage, he added. Last week, Bajaj launched the KTM 250 Adventure in India.

Others are also looking to make the most of the so-called “premiumisation” trend. Honda Motorcycle and Scooter India (HMSI) currently has two products — CB350 and CB350RS — in the middle-weight motorcycle category. The second-largest two-wheeler maker by sales is targeting sales of 300,000 units a year in the category with a new locally made range for the segment, a company official told a newspaper in November. Yadvinder Singh Guleria, director-sales and marketing, HMSI, did not respond to a text message seeking comment for the story.

No company can vouch for the growth prospects of the mid-market segment better than Royal Enfield, which is credited with creating the segment and expanding it single-handedly over the past decade. “We have grown the market tremendously over the last decade, and have set up the ecosystem for future growth as well,” a company spokesperson said.

Royal Enfield corners 90-95 per cent of the middle-weight segment. Even as headwinds, such as the shortage of semiconductors, have clipped sales, the company is bullish about the long term. It launched two new motorcycles — the Meteor 350 in November 2020 and the new Classic 350 in September 2021. Both motorcycles “have received excellent response from consumers in India and across global markets”, said the spokesperson.

The huge parc of entry-level two-wheelers has made upgrades inevitable, Thareja pointed out. However, there were few choices for an upgrade. “We started with the Jawa range and in the process ended up creating a segment within the mid-market. These segments were available globally, but in India it was always compromised. We never had a full range,” he said.

Classic Legends is selling close to 8,000 to 10,000 units of Jawa motorcycles (Jawa 42 and Jawa Perak) every month and expects volumes to multiply with the Yezdi range. The very fact that Yezdi as a brand stayed on till the late nineties from the seventies makes it easier to re-establish the connection. “It will be a wild seller,” Thareja claimed.