Competition in the Two Wheeler Industry

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COMPETITION IN THE TWO WHEELER INDUSTRY A PROJECT OF MANAGERIAL ECONOMICS 22 Aug 2008 COLONEL AJAY REDDY Bajaj and Honda, two friends were going for a walk in the jungle. Suddenly, a tiger appears and both Bajaj and Honda began to run. Honda pantingly asked Bajaj, “Do you think we will be able to outrun the tiger?” Bajaj replied, “I don’t have to out run the tiger. I just have to outrun you”. {the tiger will do the rest!!}. That is the essence of the tem “competition”. The two-wheeler industry in India has been in existence since 1955. It consists of three segments viz., scooters, motorcycles, and mopeds. The increase in sales volume of this industry is proof of its high growth. In 1971, sales were around 0.1 million units per annum. But by 1998, this figure had risen to 3 million units per annum. Similarly, capacities of production have also increased from about 0.2 million units of annual capacity in the late nineties in the seventies to more than 4 million units in the late nineties . Background The two wheeler market in India is an Oligopoly. This is because there are only 6-8 major players in the field. The buyers are in millions. The various two wheeler majors in India are:- (a) Bajaj Auto Limited. (b) LML. (c) TVS. (d) Rajdoot. (e) Hero. (f) Enfield. (g) Kinetic. Aim This document seeks to analyse the competition between important two-wheeler firms in India. Preview This document is laid out in the following parts:- (a) Part 1: Govt Control. (b) Part 2: Market Share of Two Wheeler Sales. (c) Part 3: What Should the Firms do? PART 1: GOVT CONTROL The price of the two-wheelers varies across the country due to variation in registration charges, state taxes and octroi levied by states. Years ago, the GOI used to consider the automobile industry as a luxury segment. But the growing importance of two-wheelers and the increasing

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