Wednesday, July 3, 2013

Hero, Buell, and Indian traffic: context

It's always a little weird hearing about motorcycle manufacturers, like Hero, that are virtually unknown in the U.S. market, but huge in India, China, or Southeast Asia.

With annual revenues in the $4B range, Hero is almost as large as the Buell brand's previous owner, Harley-Davidson. And, if one considers the two companies' model ranges--most new Heros are under 200cc and retail for about $1,000--it's clear that Hero sells far more units than H-D.

It's hard to believe now, but there was a time, in the U.S., when motorcycles outnumbered cars. Then, Henry Ford released the Model T, which was more practical than any motorcycle of its day, and less costly than top-of-the-range bikes. It sold for $851 when introduced. Corrected for inflation, that's about $21,000 today. That was a tipping point for cars in the U.S. market.

It took a lot longer for that to happen in the U.K. Motorcycles provided the only affordable day-to-day transport for working blokes until the '60s. Scooters and motorcycles outnumbered Italian auto registrations into the '70s. But in those markets, too, small affordable cars like the Fiat 500 gradually became the default choice for working-class transportation.

I just saw a chart of vehicle registrations by type for the city of New Delhi. Scooters and motorcycles outnumber private autos by 2:1. (There are about 2.3M cars and 4.6M bikes in that one Indian city!)

What's telling, though, is the rate of growth in registrations. While two-wheeler registrations in the last decade have increased 6.4% on average--good news for Hero, which is the largest Indian motorcycle manufacturer--auto registrations have increased even more; on average, 7.9%.

The Indian auto industry has its sights set squarely on consumers who are now buying scooters and small motorcycles. The Tata Nano, for example, bills itself as 'The people's car' (=volkswagen?). It's powered by a fuel-injected 600cc twin motor and sells for about $3,000.

The Tata Nano is probably easier on the environment, on balance, than a lot of motorbikes. Luckily for Hero, road congestion will probably slow the automotive juggernaut there. The ability of bikes to filter through clogged streets may continue to appeal to a lot of commuters who will in the future be able to afford cars.

Even in India, however, cars will eventually shoulder aside motorbikes.

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