Second-hand cars not a threat -- Ms Sulajja F. Motwani, Joint MD, Kinetic Engineering

B. Krishnakumar

THE TWO-WHEELER industry is passing through an interesting phase. The motorcycle segment is buzzing with activity with more companies vying for a share in the growing market for four-stroke models. After being confined to the mopeds and gearless scooter markets, the Kinetic group has also ventured into the four stroke motorcycle market through the launch of the Challenger brand. Ms Sulajja F. Motwani, Joint Managing Director of Kinetic Engineering Limited shared her views on the two wheeler industry.

What has been the market response to Challenger? the four stroke motorcycle launched by Kinetic? Do you have plans to launch variants of this model?

Response to Challenger has been good. We did a national launch in April 2001, and are targeting this year?s sales to be about 60,000. Consumers have appreciated its styling and good fuel economy along with its many unique features like turbo induction, digital gear indicator, etc. We are planning to launch an economy variant of this model which will retain the mileage and basic styling and will be available for less. There are also plans to give Challenger an upgrade with a more powerful engine and new features and styling.

What are your company's plans for the motorcycle market? What would be Kinetic's strategy in the four stroke motorcycle market, taking into account that other established producers such as Bajaj and Hero Honda have models lined up across all price segments?

Challenger is now established in the marketplace. Challenger has many distinctive features. We have just launched GF 125 in collaboration with Hyosung Motors, a leading two wheeler manufacturer in Korea. GF is a high performance, hot looking bike, with India?s first four valve engine and standard electric start. We will soon launch the GF 150, and then the economy bike and an upgrade to Challenger. We should then be present in all segments of the market, and our bikes will all have their own distinctive features that set them apart from the rest. We think that with a good range of distinctive products, we can establish our reputation as a manufacturer of top quality motorcycles. It?s a large market and there is definitely room for numerous players.

In which price segment of the motorcycle market would Kinetic concentrate on in the future? Do you think there is a market for motorcycles at the premium end of the price segment? If so, does your company have plans to tap this market segment?

We want to address the entire spectrum of price segments. We will be present at each price point.

Specifically for the premium end of the price segment, certainly there is a good sized market and likely to grow. This is right now where CBZ and Fiero are. There could be an emerging market for very high power and expensive bikes like 250 cc, but this would be small in the near future.

We have now launched the GF 125 which is in direct competition with CBZ and Fiero. It?s a great bike, very good looking and amazing performance with 12 bhp power. We will also launch Gf 150 with a 150 cc engine soon. GF 125 is liked already by the market and auto enthusiasts alike. We expect to have a substantial presence in this market segment. With concerns on CBZ price and performance, this slot is quite vacant right now.

With the second hand car market growing from strength to strength, what impact would second hand cars have on the demand for motorcycles and two wheelers in general? Would this impede growth in demand for motorcycles, especially those priced at the premium segment?

Growth of the second hand car market does not affect demand for two wheelers. In addition to purchase cost, you also have to factor in the running cost of the vehicles. Two wheelers are much more affordable in terms of service, spares, maintenance, fuel consumption etc.

In India, with the salaries being as they are, people graduate from two wheelers to cars. The price gap between a two wheeler which costs anywhere between 15 and 45 K and a second hand car which costs about Rs. 1 lakh is substantial.

Honda has launched the Activa model of scooters recently; going by the recent pick up in volume, do you think scooters are regaining consumer fancy? If so, will this trend last long to have any impact on motorcycle demand?

The scooter market can be clearly classified between traditional geared scooters and modern scooters like Kinetic or Activa. I believe that the geared scooter market will continue to fall but the modern scooters market will sustain and grow. In two years they should be equal and then modern scooters will overtake.

Today's urban families are looking for comfortable city riding experience. Modern scooters offer comfort and convenience features like auto start, variomatic transmission, high mileage, storage space, etc.

I also expect to see a saturation in the rural market and a higher growth in urban riding which should lead to a growth in the modern scooters market as they are the only product that is suitable for city riding for many consumer segments (e.g. women, students), and as a family vehicle. In fact, I believe that once this recession is over and the urban market is revived, modern scooters will be the fastest growing segment and this growth will come at the expense of motorcycles and geared scooters.

Given the recent developments in the two wheeler industry and taking into account the mounting competitive pressure, do you think there is a case for the merger of Kinetic Motors and Kinetic Engineering?

There are no immediate plans to merge Kinetic Engineering and Kinetic Motor Company Limited. All operational synergies of the two companies have already been tapped to the maximum including distribution network, common sales and marketing, etc.

What is Kinetic's strategy towards the scooter market in general and four stroke scooter market in particular?

We are the market leaders in the modern, automatic scooter segment. Our scooters are known for comfort and convenience features like auto start, variomatic transmission, high mileage, storage space, etc. Our strategy is to have a whole range of scooters at various price points but all with essentially these features.

Our current range of products in the scooter segment begins with the Style at under 30,000, AX at about 33,000 to Marvel at about 40,000. The recently launched Zx Zoom with a 110 cc engine has been received very well by the market and has sold over 10,000 numbers in hardly five weeks. We are launching a 65 cc aggressively priced scooterette and a four stroke brand new scooter by end of this year. With this, we have an enviable product portfolio.

So based on our formidable range of products and the tremendous goodwill that Kinetic enjoys for its proven comfortable and convenience models, we are confident that we can retain our leadership position in modern scooters.

Considering the falling import tariff rates, how serious is the threat of imports to the domestic two wheeler industry at current duty levels? At prevailing tariff structure are domestic companies placed in a position to compete on the price front?

Current duty levels are a good barrier. In the long term, main threat of imports is from Chinese manufacturers in the long term. Their costs are lower due to a better manufacturing enviroment based on flexible labor laws, lower labor costs, cheaper component costs due to large scale of manufacturing of vendors. Currently, they are at a disadvantage in terms of quality, technology , fuel efficiency, emission, etc. However, over a period of years, this disadvantage may be corrected. Meanwhile, Indian companies need to work closely with Indian vendors to reduce input costs by about 20% to be prepared for the competition.

On an average, what would be the price differential between the landed cost imported bikes and the retail price of local bikes?

The difference in cost of manufactured product is about 30% for comparable products. But when you factor in local taxes and duties., the cost differential nearly disappears.

The sales volume in mopeds segment has dropped in the recent months; what reasons do you attribute to this fall in volume? Do you think mopeds by itself is a fading concept? What have been your company's plan and strategy to towards the mopeds segment?

Sales volume in mopeds had dropped in recent months. This was largely due to poor state of the economy, especially in rural markets where mopeds are largely sold, the purchasing power had taken a beating. But I do not think mopeds is a fading concept ? there will always be a market for mopeds as a basic entry level product, and a product for load carrying.

We have already taken very aggressive steps in order to rejuvenate the mopeds market. We have launched two new upgraded variants of our Luna range ?with 70 cc engines, variomatic transmission and other features. The Luna is now priced also very aggressively at under Rs. 11,000. These steps have proven very effective in increasing our moped sales. Last month, we sold 10,000 mopeds. In November, we expect to sell 11,000 and this growth should continue.

What sort of growth rate do you foresee in the two wheeler industry in general and in individual segments such as motorcycles, mopeds and scooters?

In general, I expect that this year will close on moderate growth of about 5-8 %. There is a spark of hope due to a good monsoon this year, just before the upcoming festival buying season. But this year still could end up being flat if the economic scenario worsens. So right now the fate will be decided by general health of the economy. If the economic scenario improves the consumer confidence will grow and the market will do well as several new product launches are slated in the coming months, and finance is available.

Sector-wise, the motorcycles segment as well as the modern scooters and scooterette segments will continue to grow based on a shift from geared scooters. Obviously, the geared scooter market will continue to fall. Moped market has generally stabilized around 5-6 lakh vehicles/year as the entry utility vehicle and it will retain this volume.