High-End Motorcycles Rev Up Sales in India; Harley, Yamaha, Ducati See Untapped Market Among Affluent Indians

High-End Motorcycles Rev Up Sales in India

Harley, Yamaha, Ducati See Untapped Market Among Affluent Indians


Dec. 3, 2013 7:17 p.m. ET

Indian roads have been getting a little bit louder these days as affluent Indians, longtime fans of designer watches and the Mercedes-Benz DAI.XE -2.12% sedan, are starting to snap up high-end motorcycles. Despite a nationwide slowdown, more Indians are mounting large, noisy motorcycles asHarley-Davidson Inc., HOG -0.48% Yamaha Motor Co. 7272.TO -1.74% , Ducati Motor Holding SpA and others set up shop in the subcontinent, hoping to capture its first generation of elite easy riders.The U.K.’s Triumph Motorcycles Ltd. started selling its iconic motorcycles for the Indian market late last month. Its range of 10 motorcycles have a starting price of about $9,100 extending to more than $32,000, which is over 20 times the average Indian’s annual salary.

“The Indian premium motorcycle segment has been longing for the power of choice; we are ready to capitalize on this opportunity,” Vimal Sumbly, the newly appointed managing director of Triumph in India, said.

At 69 years old, Govind Mohanty could be one of the oldest motorcycle riders in India, but that didn’t stop him from taking a long trek to the closest Harley-Davidson dealer: in the eastern metropolis of Kolkata, 450 kilometers away from his hometown in Bhubaneswar.

“I bought the cheapest Harley available in India so if I couldn’t ride it I could sell it,” Mr. Mohanty said.

Mr. Mohanty did sell his $9,500 Harley SuperLow in June but only to buy himself a bigger bike, the $24,000 Fat Boy—the model made famous by Arnold Schwarzenegger in “The Terminator.”

The Fat Boy’s price tag is about 40% more than what it sells for in the U.S. and more expensive than most cars sold in the South Asian nation.

The vast size of the country’s 1.2 billion-person population means that there are still hundreds of thousands of people like Mr. Mohanty who can afford a luxury motorcycle. A recent survey by Credit Suisse estimated that India has 182,000 millionaires. That is 24,000 more than it had in 2012.

India is the world’s largest motorcycle market after China, but the industry is dominated by cheaper 100cc to 150cc motorcycles from Hero MotoCorp Ltd. 500182.BY -0.37% , Bajaj Auto Ltd. and Honda Motor Co. 7267.TO -1.40% , among others.

Sales growth rates for motorcycles with engine capacities of more than 300cc—which includes both high and midrange bikes—are zooming ahead of the smaller-size competitors. Sales of midsize and large motorcycles surged nearly 60% in the seven months ended in October, while the broader two-wheeler market—made up mostly of low-powered motorcycles—was stagnant, growing only 3.6%.

Millions of people in India still don’t have the means to buy an entry-level motorcycle that costs about 40,000 rupees ($640). Companies therefore believe that the Indian market has a large untapped potential for the future as incomes rise in line with economic growth.

Harley-Davidson set up shop in India in June 2010 and is adding three new dealerships this year. Anoop Prakash, the managing director of its operations in India said that while sales in India are still small compared with markets in the West, motorcycle companies expect the market for premium motorcycles in India to expand at a rapid pace in the next decade, mirroring the growth in the Indian market for luxury cars.

“The way we look at it is that every leisure motorcyclist, whether they’re starting off at 100cc or 250cc and climbing up to 500cc, is a future Harley rider,” said Mr. Prakash.

Indian Motorcycles, the oldest motorcycle company in the U.S., has announced plans to enter the Indian market in the first half of 2014, said Pankaj Dubey, the managing director for India of Polaris Industries Inc. PII +0.20% —which owns Indian Motorcycles. Its powerful two-wheelers are expected to cost about $33,000 in India.

Indian motorcycle makers, who have always focused on smaller, less expensive motorcycles, have been looking to target the large bike market by joining forces with international companies.

India’s largest motorcycle producer, Hero MotoCorp, this year bought a 49% stake in Erik Buell Racing LLC—a new U.S. maker of high-end street motorcycles run by a former Harley engineer.

Bajaj Auto, India’s third-largest producer of motorcycles, has a 48% stake in Austria’s KTM Sports AG and sells two of its motorcycles in India. Bajaj also sells Kawasaki motorcycles in India.

The country’s fourth largest two-wheeler company, TVS Motor Co. 532343.BY -1.28% , has started cooperating with BMW AG to develop bigger motorcycles with up to 500cc engines for sale in India and overseas.

Motorcycle companies, however, cite the high import tax on motorcycles as one of the bottlenecks for rapid growth for the segment. After import tariffs, the price tag of many big motorcycles is almost double in India of what a consumer would have to pay in the U.S.

Harley-Davidson assembles nine of the 12 models it sells in India from completely knocked-down kits. That allows the company to keep its prices competitive.

Bad roads pose another potential deterrent to more sales. India’s city roads and highways will need billions of dollars in new investment every year before most of them are safe for motorcycle riders who want to enjoy a more powerful engine and faster speeds.

Still, most of the Indians buying expensive bikes today can afford the extra amount they have to pay in taxes. And with an increasing number of India’s climbing into the wealthy category, analysts and executives say high-end motorcycles will be taking up an increasingly large share in India’s 10 million-motorcycle-a-year market.

“All these companies are coming because India is poised for a good future and these companies want to have the early-mover advantage,” said Roy Kurian, vice president at Yamaha Motor India Sales Pvt. “All these companies are not looking at a time frame of one or two years. They are looking at maybe 10 or 20 years from now.”

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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