India's largest selling scooter Activa ended FY15 with a bang. It became the largest selling two wheeler brand adding over 200,000 customers in March 2015. For the fourth time in the last one year Honda's Activa pipped Hero MotoCorp's Splendor, which sold about 195,000 vehicles in March, to the numero uno post in two wheeler brands. However, while Activa continues to be one of the fastest growing two wheeler brands in the country, on an annual basis, Splendor outsells every other two wheeler brand. Splendor had a good year registering a growth of 19 per cent over FY14.
One of the reasons for the brand's performance in March which saw sales grow by 30 per cent year-on-year has been the launch of Activa 3G in February. This is the third generation model of its popular 110 cc Activa scooter. While the new scooter retains the same engine, modifications include new head lamps, tail lamp clusters, bodywork and a 3D logo on the side panels. The Activa 3G, constitutes about 45 per cent of Honda's two wheeler sales. The other models in the Activa stable are the 125cc scooter Activa 125 and Activa i. What is working for Activa and its other scooter brands Dio and Aviator is the increased acceptability of automatic scooters as commuter vehicles. "The contribution of automatic scooter has increased to 28 per cent of overall two wheeler volumes in FY15 which indicates increased scooterisation," says Y S Guleria, senior vice president, sales and marketing, Honda Motorcycle and Scooter India (HMSI).
Share of scooters to overall two wheeler sales have nearly doubled over the last five years and it is expected to move up to 37 per cent in FY18. The reasons, according to Pramod Kumar and Sumeet Jain of Goldman Sachs, are the convenience of automatic transmission, unisex appeal and increasing demand for mobility from women. A majority of the automatic scooters are in the family usage category where Activa is positioned. Smaller segments within the category of scooters targeted at individual/youth are Dio or the Aviator which caters to the urban male or the Activa i which is for entry level users such as students. Says Guleria, "Within the family, both the male and lady members would like to use the same Activa for commuting and shopping or dropping kids to school. However the youth category is also developing; and higher volumes of Dio are an indicator that students are looking at a flashy kind of a scooter for commuting to their college or tuition classes. However, the volumes as compared to the family segment (Activa) is still small."
While the two wheeler segment is impacted by the slowdown in rural areas, scooters have not been affected given that sales are largely confined to urban and semi-urban areas. One of the primary reasons for low acceptance of scooters in rural areas has been lower ground clearance than motorcycles. However, with road infrastructure improving, the mileage offered by these vehicles also improving in line with motorcycles (60-65 kilometres to the litre) and the rise of working women in rural areas (in the social sector - primary health, school teacher) rural penetration could increase.
While HMSI dominates with 56 per cent of the scooter market share, new launches from rivals is set to increase competition. The second largest player in the scooter segment Hero MotoCorp which has a market share of 18 per cent is likely to launch two new scooters Dash and Dare over the next couple of months. Currently Hero has two products - Pleasure and Maestro - which together notched up a peak sales figure of about 77,000 units. This number could cross the one lakh mark post the launch of the two new products. The company was also the largest exporter of scooters in the country in FY15. The third key player in the market is TVS Motor, which has been gaining market share on the back of its recent launches/new products Scooty Zest and Jupiter as well as Wego. Its market share improved about 250 basis points in FY15 to 15.2 per cent from 12.7 per cent in FY14. HMSI, too, has a busy 2015. The company has already launched 6 of the 15 scooters and motorcycles it had planned for the current calendar year. With the scooter segment expected to grow at about 16 per cent in FY16 and outstrip motorcycles which is expected to grow in single digits, HMSI as market leader, should be in pole position on the back of a strong product portfolio, to take the lion's chunk of this demand.