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Future of Premium Scooter Market in India - is this segment worth it?

Snapshot: Will there be a rise in the premium scooter segment in India?

Indian two - Wheeler market as we all know is the second largest market in the world. However, being India, the two wheeler market here is both very complex and sometimes unpredictable, owning mostly towards rapidly changing customer psyche. With new trends taking birth faster than most companies can act on to and the old set patterns shaking up every now and then, over the years many companies have found it hard to balance their product portfolios for India.

The last two and a half decades have seen incredible growth in the motorcycle segment in India. A trend that started from the humble beginnings from the times of the Hero Honda CD100 has evolved into a market that now welcomes even the most technologically advance superbikes in the world, such as Ducati Panigale 1299R, with open arms. The Motorcycle market of the country has indeed matured in recent years.

The scooter market however has been more interesting study, it has seen all, from great fame to no demand at all and then again a great resurgence. The scooter segment in the Indian two wheeler industry shows the complexities companies deal everyday in designing plans for future in a country like India. In a journey that started in the country with the humble Bajaj Scooters, the scooters in India have enjoyed huge nostalgic value in the hearts of generations of Indian citizens.

Much loved were the scooters as the country opened up its arms to the world back in early 90's. The scooters did enjoy a monopoly over the sales in the 2 wheel segment in the country, almost through whole of the 90's. Sadly for the scooter fans though, the onslaught of motorcycles with monumental fuel efficiency figures made sure that motorcycles won almost a decade long fight with the scooter and started dominating the market around late 90's. The dominance of motorcycles on the market became so big that the scooter sales almost came to a halt. As the Hamara Bajaj tagline started relating to Motorcycles more than the scooters, the scooter segment was living on extension nearing oblivion.

However times changed, manufacturers realised the country needed easier to handle non gear scooters and thus there came the new entrants like the Honda Activa almost 15 years ago and through years we have come to a moment in time where the scooters have not just grown exponentially in the sales number but are also showing first signs of taking back their crown from the motorcycles. As the country's highest selling scooter, the Honda Activa out sold the iconic Hero Splendor in March 2015 sales figures, scooters have started showing their might again. The Scooter segment grew with an average of 25% for the duration of 2014-2015, an astonishing growth, where the Honda Activa grew a staggering 30% in sales.

This is where it gets interesting, the speed with which the scooters have returned to make the cash counters flow, one would believe that the future of this segment is now secure, however, there is a catch! The growth in the scooter segment of India is spearheaded by the Activa in majority and it is to such an extent that the Activa is the only scooter in the top 10 best selling 2 wheelers in the market. This signals towards a huge favouring towards the Activa brand in the market, which on one hand sound great for Honda but on the other hand is a clear symbol that other scooter brands are yet to make a big leap in getting to the heart of the Indian customers.

This also means that the scooter segment is still to come out of the danger since, relying on a single brand smells trouble, in case the Activa starts to lose its charm on the buyers. On the other hand almost all the segment in motorcycle industry have established themselves and are growing at a decent pace, with the premium motorcycle segment seeing an extra ordinary growth. While the scooter segment still hanging on with the Activa in its 110cc and 125cc variants with no real diversification in sight for customers to choose from in the segment.

For the scooter segment to really grow and make a dent in the huge two wheeler market of India, the manufacturers will have to diversify their product portfolio in the segment, offering economic solutions as well as more premium ones so that the profitability can increase. However, in order to understand the issues such move is susceptible to, we need to look into the business model of Vespa in the country and how it can be perceived as a success or a failure thus far.

Vespa came back to India around the year 2012 with its LX125, the scooter was launched with a premium pricing and Vespa was clear about being a Premium brand in the country and showed no interest in bringing more cost conscious products. Over last 3 years Vespa's model range in the country has grown up from being a single model line-up to 4 models line up with prices starting from INR 70,000 for the Vespa LX and Going up to INR 80000 for the Limited Edition Vespa Elegante. Clearly Vespa is selling the most expensive range of scooters in the country and as compared to the best selling Honda Activa 110cc which retails at as low as INR 45000 while the most expensive Honda Activa 125 sells for INR 52000, that is a whooping INR 18000 difference between the Vespa's cheapest scooter in India and the most expensive variant of the highest selling scooter in India, the Honda Activa 125.

 

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Thus it becomes a rather harsh comparison when these two brands are compared on the same sales scale. Where the Activa (combined for all 110cc and 125cc variants) sold a staggering 2,07,270 Units in March 2015 only, for the same month Vespa sold 2321 Units combined from all its 4 models in Jan 2015, looking at this, Vespa should sound like a brand in a serious shade of red, however, one needs to remember the fact that Vespa sales are steadily growing month on month and Vespa is still the only manufacturer playing in the niche premium scooter category, thus it becomes a game of chalk and cheese.

For a keen eye, a steady rise in the sales figure of Vespa shows a sign of the fact that there has been a steady growth in the market of niche premium scooters in India. This is a welcome sign as it signals towards the first signs of the market maturing enough to accept products that cost significantly higher  as compared to its rivals. This also means that there is a growing demand in the scooter segment buyers for better build and more advanced scooters in the country. With Vespa's all metal, monocoque chassis and body along with a more powerful engine combined with iconic design customers get a more aspirational product and it is just a matter of time when other big players start bringing their own premium offering in the country to spice up the segment.

In recent months we have already seen reports and spy shots of premium offerings of brands like Yamaha and Peugeot Scooters (now owned by Mahindra2wheelrs) testing in Indian conditions. Saying that, a test mule of the Yamaha's premium scooter, 'Delight' was found testing back in late December while around the same time we got the news about how Mahindra was considering bringing the premium scooters from Peugeot to India, a company they had just bought.

This shows that the manufacturers across the range are gearing up for the next leg of the growth spurt in the scooter segment. With makers like Honda and Yamaha who just not only have iconic and classic looking premium offerings, but also has more sporty looking and powerful scooters like the Honda NM4 and the Yamaha TMAX, though these two are too expensive and too powerful, but smaller more fun to ride scooters on the basis of such designs does seems to be a interesting prospect for the sake of diversification of the Indian Scooter market.

The coming couple of years will decide the future of the scooter segment in India, however, with the advent of premium motorcycle culture in India people of the country are realising their love for the aspirational part of the segment where the 2 wheelers are not just for Point A to Point B but much beyond that!

We believe that the scooter segment will grow much like the way the motorcycle market has grown and diversify in lot more categories that will ensure a holistic growth of the segment. We admire Vespa's brave decision to kick start the premium scooter segment in India and their zeal to make their presence count. We also, would like to see big brands like Honda, Yamaha to enter this game so that our home grown makers like Mahindra and TVS can be pushed forward to create a rise of the Premium niche scooter market. If only a certain big name returns to scooter market with a all new premium design and change the way the scooter industry works, just like it did with motorcycles back in early 2000's. Bajaj, are you listening?

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