Scooting Ahead

In 2016, India overtook China to become the largest two-wheeler market in the world. This was the first time India was leading in a particular segment in the automobile industry, globally. In FY 2018, India achieved another milestone by becoming the first market to have reported sales of more than 20 million two-wheelers in a year. Sales grew 14.8 per cent over FY 2017 - a seven-year high. Although motorcycles command a majority share of the two-wheeler market in the country today, India's global ascent to the top has largely been led by scooters.

Anupama Arora, Vice President and Sector Head - Corporate Ratings, ICRA expects the domestic two-wheeler volumes to grow at 8-10 per cent during FY 2019, on an expanded base of FY 2018. But the real story is how the humble scooter has made a resounding comeback nearly two decades after the fast and fancy motorcycles spelt its doom.

Since 2007/08, scooter sales in India have grown at a scorching 20 per cent compounded annual growth rate (CAGR) - more than three times the sub-6.6 per cent growth rate of motorcycles. In the process, their share in the overall two-wheeler market has grown from a low of 11.95 per cent in 2006/07 to almost 34 per cent today, while motorcycles have seen a decline in the same period, from 83 per cent to 62 per cent.

The reasons for this shift in the market are aplenty. The scooters of today aren't the same as the ubiquitous Bajaj vehicles of the 1980s and early 1990s. In fact, Bajaj Auto, once the scooter king of India, doesn't even make scooters any more. The vehicles today are gearless, offering much more power, space and comfort. They are also lot more stylish, packed with features like an electric start ignition, pliant suspension and a fuel economy that could rival any bike.

This turn of the tide was largely spearheaded by Honda Activa, the country's largest selling scooter for over a decade, much to the dismay of Splendor, which, with its commuter oriented 'fill it shut it forget it' campaign, decimated scooters at one point of time. In 2016, Activa ended Splendor's long reign as the largest selling two-wheeler in the country, and reinforced its position at the top last fiscal by establishing a 400,000-unit lead over Splendor.

The growth has also been propelled by favorable demography and improving per capita income in the country. Initially, scooters were the preferred mode of transport for urban women and students in the big metros and cities. In 2008, 40 per cent of scooter consumers in the country were women. In the past few years, however, a number of 'male-specific' scooters such as Hero Maestro, Honda Aviator, TVS Jupiter and Yamaha Ray-Z were launched. Scooters established themselves as the primary product for families due to its greater utility vis-a-vis a motorcycle. As a result, its appeal is more broad-based today, with women constituting only 20 per cent of the sales.

Further, scooters have made significant inroads in the hinterlands thanks to improved road infrastructure. While its attractiveness in congested and more cosmopolitan metros and state capitals remains high - share of scooters in big cities was 28 per cent in 2009/10, 40 per cent in 2012/13 and over 50 per cent in 2015/16 - in the tier I cities, too, it has grown from 26 per cent to 32 per cent and then to over 40 per cent in the same time period. Similarly, in other parts of the country, the share has grown from 19 per cent in 2009/10 to 28 per cent in 2015/16.

Vishnu Mathur, Director General, Society of Indian Automobile Manufacturers, expects scooter sales to rise sharply in FY 2019 as well. Apart from the factors listed above, he says "multiple ownership on account of convenience", given higher disposable incomes, is a rising trend.

So, how much further will the scooter speed? In global markets, except China which is completely electric, scooters outsell motorcycles with a 55:45 split in sales. In Indonesia, the world's third largest two-wheeler market after India and China, step-thrus and scooters account for 86 per cent of the market. Growing urbanisation, better infrastructure and improving economic gender parity are factors that work in favour of scooters.

Furthermore, stringent Euro VI emission norms from 2020 are likely to escalate the prices of the bread-and-butter 100-110-cc motorcycles more than scooters. Similarly, mandatory installation of combined braking system on two-wheelers from April next year will see the prices of motorcycles rising, whereas most scooters already have this feature. This will bring even greater parity in pricing between the two. Advances in technology have already diminished the fuel efficiency advantage that motorcycles had over scooters.

"Ample load-carrying space, which has been missing in motorcycles, has added to the versatility of riding a scooter. The increasing acceptance of the scooter as a family product and further improvement in road infrastructure continue to drive sales in urban and semi-urban areas," says Minoru Kato, President and CEO, Honda Motorcycle and Scooter India. From constituting 15 per cent of the Indian two-wheeler market in FY 2008/09, he says, every third two-wheeler being sold today is a scooter.

A scenario where scooters usurp the voluminous commuter segment - once the citadel of Splendor and Passion - leaving mobikes to target the enthusiasts and adventure seekers in the higher specification categories is plausible.

Motorcycles maybe faster on the road, but for now, they are making way for scooters.

@sumantbanerji