Analysis: What is Mahindra Two Wheelers' game plan?
Mahindra's two-wheeler business got off to one of the rockiest starts of all with the Stallio motorcycle. It was supposed to be a basic 110cc-class motorcycle, but there were innumerable problems that led Mahindra Two Wheelers to its first major re-orientation. Prior to the Stallio, Mahindra started its business with scooters. It acquired Kinetic's two-wheeler business, gaining a plant in Pithampur, Madhya Pradesh, and a small portfolio of scooters.
Despite multiple attempts at commuter motorcycles as well as scooters, Mahindra Two Wheelers' success has been at best, modest. Indeed, Dr Pavan Goenka, who heads the automotive business, said last year that the Mahindra group was going to be patient and watch the two-wheeler unit (and another Mahindra unit that wasn't profitable) closely, indicating that while the group would continue to invest in the potential of Mahindra Two Wheelers, there was pressure on the business to turn around and make in-roads into one of the largest and toughest two-wheeler markets in the world. Now Mahindra has unwrapped its second major re-structuring of the two-wheeler business.
To sum the announcement up, Mahindra now intends to focus the business on the premium space. Mahindra owns French company Peugeot Scooters, which will be setting up manufacturing in Indonesia though India remains a bridge too far - the French scooters are too expensive as is. Mahindra also now owns the BSA brand through its subsidiary Classic Legends Private Limited (CLPL). CLPL also has a brand licencing arrangement with Jawa, the Czech motorcycle maker, for a few markets including India. In terms of the Indian market, Mahindra will roll out more Mojo variants in the future while continuing to sell the Gusto and the Centuro. Now let us get into the details.
The French scooters acquisition did not cost Mahindra all that much, to be honest. However, Mahindra Two Wheelers has yet to figure out how to fit Peugeot Scooters into the Indian market. But that is actually the shallow picture you're likely to read everywhere. The true story - and Mahindra will not reveal this until they are ready - is perhaps more like this. It was probably obvious rather quickly that the Peugeot scooter range, as extant, would not fit India in price or value terms. This is not new information; this is true for almost any vehicle sold in Europe today. The gap in only likely to increase as Europe moves to Euro IV. Indian emissions will reach global parity only when BS VI is implemented.
So the first step for Mahindra-owned Peugeot Scooters is to head to other markets where the French are absent or weak but where average scooters prices are higher. To wit, Indonesia. Mahindra has announced that a new plant will be set up to locally manufacture Peugeot Scooters. Left unsaid is that the Indonesian scooters will not be significantly different from the current European scooters. Indonesia (and Thailand) are good places to have plants because both have significant two-wheeler markets of their own as well as numerous trade agreements that open up other nearby markets.
But what about India? I suspect that the Mahindra Two Wheelers R&D and Peugeot Scooters are hard at work engineering new platforms that will produce India-ready scooters in the next couple of years at the outside. As has been seen repeatedly, products engineered for India tend to have cost and innovation benefits that travel to other markets rather easily. Empirically, I suspect that the Indian-made Peugeots scooters will offer new cost-effective technology and manufacturing ideas that will allow the Indian presence as well as have positive impacts on markets outside of India. India's huge scooter demand and growth means exports of the Indian-made Peugeots will probably only come a few years after the Indian operation stabilises.
The BSA acquisition is the one announcement that I think is on the shakiest ground. It has the potential of outsize rewards, but it also requires the most work - in care, in effort as well as in nuance. What you should know is that this is another inexpensive acquisition, but BSA currently makes no motorcycles. It substantially licences the brand - which is unspecified, but I imagine it means BSA-branded tees and what have you. Last year's revenue was just £28,000 or around Rs 24 lakh.
What Mahindra has said is that BSA will launch motorcycles in the near future. These will be developed from scratch in Europe, using unspecified resources and possibly the Mahindra Racing technical centre. That latter seems like a stretch to me because of the nature of the brand. BSA, at least at the start, needs to be a retro-flavoured product that will target the American, European and Japanese markets. It's not a natural extension of what Mahindra Racing does.
Like Peugeot Scooters, BSA also has a significant barrier to Indian entry. We are given to understand that the brand name is sub judice in India, and Mahindra cannot introduce BSA-branded products in India at this time.
The danger here? Between the retro-hipster boom, a resurgent Royal Enfield, a bustling Triumph... everyone has a retro-flavoured product either on offer or about to go on sale. Husqvarna, for instance, also aims for the same spot. BSA does have a residual brand recall and identity, but it enters an ever-closer battle where none of the brands can be dismissed off-hand as being lightweights.
Okay, all you Jawa fans need to calm down. Neither are the old bikes coming back, nor is there suddenly going to be an abundance of spares for the old bikes. The nightmare scenario is the official Jawa Owners Group, where the new Jawa owners basically regard you all as the dinosaurs. There's a JOG that won't be fun.
Image credit: F2 Motorcycles LTD
But seriously, Mahindra's plan is a good one. It will engineer and produce for India Jawas. This is good because the Czech line as it is far from impressive. They are run-of-the-mill products that appear to use price as their primary advantage. In India, the nuance is that perceived value, not price, is the ultimate decision maker for most buyers. Would we accept the current Czech Jawas as premium products? I would suspect this would not happen at commercially significant levels.
The Mahindra bikes
The Mojo's engine is one of the best in the segment, and that gives me immense hope for their future. It shows that the Mahindra Two Wheelers R&D knows how to make an engine that does its job exceptionally well. As I've said before, the Mojo deserves a more modern, more capable frame, and the fact that it does what it can underline both the R&D's ability as well as the need for the product planners to push the upper management - who may not be as motorcycle savvy - in the right directions.
The other products, the Gusto scooters and the Centuro commuter, do stable sales numbers today. Mahindra has indicated that it will continue to sell these, but the focus of the business will switch to premium products in the future.
The new Mahindra Two Wheelers' plans is very interesting. The push into the premium segment is not surprising. The air in the commuter segment is stifling. Between the established players and the ever-large threat of scooters taking away from the 100-110cc motorcycle market, the space to thrive and profit is very little. And that's for established players. A new entrant would find this place very hard to survive in. Because price, the traditionally weapon of the new player, is simply not available - margins are already wafer thin.
The Mojo is far from perfect, but it has distinct signs of greatness. The variants that Mahindra Two Wheelers is planning is a natural progression and very welcome. I am hoping that there is a significantly upgraded - ideally brand-new - chassis that perhaps takes the terrific engine to another level altogether. There are rumours of a supersport et al, but I'm really hoping that the adventure tourer concept Mahindra showed at the 2016 Auto Expo received enough positive vibes for a new off-road capable motorcycle to be in the offing. Speed is of the essence because we know a wave of adventure-touring machines is headed towards us.
Peugeot Scooters is the one of two acquisitions that Mahindra has made which has products. Unfortunately, these do not directly fit India. I believe there is a solid opportunity for someone to introduce a range of premium, role-differentiated scooters in India. The Aprilia SR150 already presents a very persuasive, if polarising perspective on this. Peugeot Scooters could be that brand if Mahindra hurries. The catch is that Mahindra Two Wheelers R&D and Peugeot will likely to have significantly re-engineer current products or create new ones that match our market's need for price, value and role. I'm hoping Mahindra doesn't get sucked into making a basic 100-125cc scooter with the Peugeot brand. I think they won't - that the French scooters will form the premium line of Mahindra scooters. In the meanwhile, South-East Asia will see the French scooters.
Jawa also makes motorcycles, but I see nothing in its current range that can be made in India and presented to Indian customers as a premium motorcycle. Mahindra's plan rings right to me. Mahindra Two Wheelers R&D will work on a new India-specific Jawa line to be made and sold in India through the Jawa-branded dealer network. As is with new starts, this will be a slow process. Luckily, covering the top 5-6 cities usually allowed premium motorcycles to become accessible to a fair chunk of the Indian market.
BSA is a complete unknown. Starting with a brand with extant associations and image has pros as well as cons. The pro is obviously that the name is known already. But it also sets boundaries. Will you accept a avant-garde, high-tech BSA as the launch product for the new resurrected BSA? Chances are that the first BSAs will have to be retro-flavoured motorcycles. Which isn't a problem except that everyone and their uncles have those now. Differentiating a new BSA-branded motorcycle in that market is going to be a significant task. More importantly, Mahindra has not made clear who will develop this motorcycle for them - they do not have any technical capability in Europe outside of the Mahindra Racing technical centre.
Fundamentally, the Mahindra Two Wheelers' new plans seem a bit spread out. The move to the premium market makes complete sense, and it is something that more and more manufacturers will find themselves opting to do. The growth is steady and the horizons are still far, far from visible. The opportunity is immense. Jawa is an interesting addition to the kitty, but the automatic association that is being bandied about sounds a little optimistic to me. Mahindra will have to work to re-establish what Jawa stands for and to create the lifestyle and imagery that needs to go with the product - which is the one thing that I think Mahindra Two Wheelers R&D will effortlessly handle.
Resolving all of the brands in this mix - Mahindra Two Wheelers, Peugeot Scooters, Jawa and BSA - into a cohesive two-wheeler operation that spans the globe is going to be interesting to watch. India has to be the most important of these markets because of the size and potential of our market, and you can bet that as soon as it can, the BSAs will also be introduced here.
In the meantime, we wait for the new Mojos to be introduced and for the all-new Jawas to wow us at the 2018 Auto Expo in concept form, if not production form.
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