MAHINDRA WAR ROOM

Team Name – Lafangey Strategists

Institute – NMIMS, Mumbai
Sector – 2 Wheelers
 PART 1
• Two wheeler market – India
• Electric 2 wheeler market (China & rest of the world)
• Electric 2 wheeler market (India)
• Status quo
• Challenges
• Impact of government policies & regulation
• Growth triggers
• Future prospect
• Opportunities for Mahindra
• Competitors
• Leveraging on ‘Reva’
• Charging infrastructure business model
 TWO WHEELER MARKET - INDIA
• 76% of the overall automobile market

• Expected to cross the 10 million mark by 2010

• 35 two-wheelers per 1000 citizens

• Penetrated 7% of rural house hold and 24% of urban markets

• Share of motorcycles (80%) have increased over the years

• 2007-08 -  motorcycles and electric two wheelers segments declined by 11.90% and
44.93% respectively.

• 2007-08 - Scooters and Mopeds segment grew by 11.64% and 16.63% respectively.
 Domestic sales trend
9,000,000

8,000,000

7,000,000

6,000,000

5,000,000

4,000,000

3,000,000

2,000,000

1,000,000

0
Passenger Vehicles Commercial Vehicles Three Wheelers Two Wheelers

2004-05 2005-06 2006-07 2007-08 2008-09

ELECTRIC TWO WHEELER MARKET
CHINA
• Triggers
• Increasing pollution due to vehicles
• 45-60% NOx emission
• 85% CO emission
• Increased demand for road space and public transit
• Need for a cost effective private transport vehicle
• Load carrying capacity
• Low running cost
• Increased car and public transit congestion
ELECTRIC TWO WHEELER MARKET
CHINA

• Supporting factors

• Government restriction on registration of gasoline based motorcycles

• Extensive bicycle infrastructure

• Separate lane for bicycles

ELECTRIC TWO WHEELER MARKET
CHINA

• Two wheeler scenario

• Bicycles – 340/1000 (55% of 2 wheeler traffic)
• Motorcycles – 90/1000 (15%)
• Electric 2 wheeler – 40/1000(35%)

• 70-80% of E2W users had switched from bicycle and public transport
• Because gasoline bikes were banned.
 ELECTRIC TWO WHEELER MARKET
INDIA
• Potential – 500,000 units (2010-11)
• Sales expected to double in next year
• 1,20,000 bikes in 2009 to 2,40,000 bike in 2011
• 3,20,000 e-bikes in 2012
• Huge gap between potential and sales
• Negligible govt. support
• Various unorganized players (Quality perception)
• High priced products
• Technology barrier
Driving forces Resisting forces
Inefficient public transport (Low Strong demand for gasoline powered
accessibility) vehicles

Congestion on roads Road safety concerns

Rapid urbanization Low awareness of benefits

Need for private vehicle Lack of charging infrastructure

Rising fuel costs Lacks style and speed

Highly polluted air Quality and maintenance issues

GROWTH TRIGGERS
• Triggers
• Indigenous manufacturing of components (Low cost)
• Improvements in battery technology (Performance)
• Li-ion over VRLA batteries
• Subsidies to manufacturers (Low cost)
• Charging infra across mall parking, public offices, petrol pumps. (Recharging)
• Government regulation banning gasoline based 2 wheelers
• Country wide after-sales service centers (Servicing)
• Mobile service vans
• Innovations in the vehicle
• Mobile charging outlet
• Inbuilt Radio and earphone port
IMPACT ANALYSIS OF GOVT.
REGULATION BANNING GASOLINE BASED
2 WHEELERS
Government
• Reduction in oil import bill
• Strong global position on
climate issues
• Develop tight regulation for
electric 2 wheeler standards.
Companies Environment
• Negative impact on • Reduction in pollution
gasoline based 2 wheeler
manufacturing companies • Reduction in green house
• Mass production of e2w gases
components will lead to
standardization and low • Negative impact due to
cost. lead pollution from battery
MAJOR PLAYERS

• Indus elec-trans (Electrotherm)

• Ultra Motor
• Hero electric
• TVS
• BSA
• EKO Vehicles
• Youth bikes
• Paradise electro auto
TVS FAILURE
• Prices higher than Chinese bike assemblers
• Speed to distance per charge trade-off
• False promises on battery performance
• With battery replacement costs, electric scooters lose the overwhelming
advantage on costs over petrol two wheelers
• Huge number of after sales support related complaints
• Battery performance (AH) is not consistent throughout and the performs tails
off after six months
CURRENT OFFERINGS
Manufacturer Top Speed Mileage Cost
25 Kph 85 Kms 30700 INR
Ultra Motor
40 Kph 50 Kms 35752 INR 180 INR price
25 Kph 70 Kms 31686 INR increase per
Km increase
Hero Electric 25 Kph 100 Kms 34670 INR in mileage
45 Kph 60 Kms 34350 INR
25 Kph 75 Kms 28000 INR

Indus elec-trans (Yo- 25 Kph 95-100 Kms 31500 INR

bikes) 45 Kph 65-75 Kms 39000 INR
55 Kph 65-70 Kms 44000 INR
25 Kph 60 Kms 26000 INR
25 Kph 75 Kms 29000 INR 500 INR price
BSA
40 Kph 50 Kms 32500 INR increase per 1
Kph increase in
45 Kph 55 Kms 34000 INR speed
 OPPORTUNITIES

• Most important components of an electric 2 wheeler

• Motor
• Batteries
• Speed-distance trade-off
• 1st mover advantage in electric 2 wheelers (No other major brand)
• One of the few companies to venture into 2 wheelers and 4 wheelers both
(after Honda and Suzuki).
• Mahindra can leverage the battery technology, motor technology from Reva.
• Look forward to the export markets for electric vehicles.
RECHARGE STATIONS – A NEW BUSINESS
MODEL

Objective • Addressing the Charging Infrastructure barrier

• An analogy to gasoline stations

The Model • Develop charging stations in a radius of 10kms
• Hold & replace charged batteries in E-bikes

Assumption1
• A station serves 1000 customers who recharge their
batteries every 3 days.

• Considering the distribution of customers visiting

Assumption 2 gasoline station over a day, we might need to stack 180
charged batteries at the station.

• The business can be improvised to achieve good

Assumption 3 returns and still serve customers at a 100% better
mileage than gasoline 2 wheelers.
 BUSINESS MODEL
Per Station Model
Customer Base 1000
Daily Usage % 30%
No. of recharges per day 300
Holding Requirement 60%
No of batteries 180

Fixed Cost
SGA & Rentals 600000 Battery Cost 5000
Battery Inventory Cost 900000
Total Fixed Cost 1500000

Variable Cost per battery Recharge

Cost per Recharge 8.64 Power Consumption 0.96
Revenue per Recharge 27 Cost per unit 9
Contribution per recharge 18.36
No. of recharges per battery 360 Red colored boxes
Total contribution 6609.6 can be edited
&
Revenue Model Cost to Customer Corresponding
Total revenue 1982880 Kms per recharge 50 change in profits
Net profit 482880 Cost per recharge 27 can be seen.
Annual Returns (%) 16.10 Cost per km 0.54
 RECOMMENDATIONS

• Different offerings for different consumers

• Urban & Semi-Urban areas
• Children (School) & Women (Home makers)
• Speed – 25 Kph, Mileage – 60 Kms, Price – 22000 INR
• Children (College)
• Speed – 40 Kph, Mileage – 60 Kms, Price – 32000 INR
• Women (Working)
• Speed – 40 Kph, Mileage – 60 Kms, Price – 32000 INR
• Young adults (Male)
• Speed – >55 Kph, Mileage – 50 Kms, Price – 44000 INR
• Old adults (Male)
• Speed – 25 Kph, Mileage – 90 Kms, Price – 28000 INR
CONSUMER SEGMENTATION
2 WHEELERS
 CONSUMER SEGMENTATION
• Earlier on the basis of product
• Engine capacity
• Type of vehicle

• Should be done on the basis of consumer’s needs

• Emotional
• Parent company image
• Brand
• Price
• Looks
• After sales service
• Rational
• Mileage
• Sturdiness
• Power
• Weight of the vehicle
 SURVEY QUESTIONNAIRE
• Age
• Education
• Income
• Location
• Gender
• Daily Commuting period
• Type of work
• Vehicle ownership status
• Preference towards buying during festivals
 SURVEY QUESTIONNAIRE (CONTD.)
• Exposure to sources of information
• TV Commercials
• Print Ads
• Online Media
• Friends/Family/Relatives
• Bike dealers
• Factors influencing your preference
• Parent company
• Price
• Looks
• Average
• Delivery period
SURVEY QUESTIONNAIRE (CONTD.)
• Attributes looked for in a 2 wheeler
• Power
• Sturdiness
• Performance
• Light-weight
• After sales service
• Prospective concerns with electric two wheelers
• Charging issues
• Looks
• Speed
• Sturdiness
• After sales service
PERCEPTION ANALYSIS
• Segment 1 (46%)
• Influencing factors
• Parent brand
• Price sensitive
• Seeks looks and mileage.
• Attributes
• High emphasis on sturdiness
• Performance
• After sales service.

Daily commuting time – More than 45 Major sources of information – TV

minutes Ads, WOM.
PERCEPTION ANALYSIS
• Segment 2 (33%)
• Influencing factors
• Parent brand
• Not price sensitive
• Seeks looks
• Attributes looked for
• Mileage
• Would like heavy vehicles.
• Low emphasis on after sales service.

Daily commuting time – 30 - 45 Sources of information – Print Ads,

minutes Online media, WOM.
PERCEPTION ANALYSIS

• Segment 3 (21%)
• Influencing factors
• Emphasis on shorter delivery times
• Attributes looked for
• Like light weight vehicles
• Want good after sales service.
OTHER INSIGHTS

• Higher the preference for good looks in the vehicle, lower the
preference for gearless 2 wheelers
• Gearless 2 wheelers are not perceived as good looking as
bikes.

• Results of discriminant analysis on type of city

• Respondents from Tier 2/3 city perceive heavy vehicles to
be sturdy.
• Respondents from Metro cities prefer light weight vehicle.
RURAL MARKETS & DISTRIBUTION
RURAL MARKETS

• Rural – any location with a population of less than 50,000

• Availability determines volume and market share
• Challenge : Reaching 6 lakh villages
• 68% of rural markets still lies untapped due to inaccessibility.
• 50% of rural population resides in 1 lakh off large villages
( 2000+ population)
• Account for 60% of rural wealth
• 2.3 lakh tiny villages (<500 population) – hardly any shops
• Distribution becomes uneconomical towards smaller towns
PROBLEMS FACED IN RURAL
DISTRIBUTION

• Large number of small markets

• Dispersed population and trade
• Poor road connectivity
• Multiple tiers – higher costs
• Poor availability of suitable dealers
• Low density of shops per village, high variation in their
concentration
• Inadequate bank and credit facilities for rural retailers – poor
viability of retail outlets
PROBLEMS FACED IN RURAL
DISTRIBUTION
• Poor storage systems
• Highly credit-driven market, low investment capacity of retailers
• Poor visibility and display of product
• Poor communication of offers and schemes – poor reach of
media
OUR RECOMMENDATION
 RURAL DISTRIBUTION

Inhabited Villages Classification by size

Our target - 50% of rural population
29.8 is located in 12% of villages
30 25 25.7
24.3
25 19.7
17.9 16.8
20
15 10.8 11.2
10 7.8 7
5 1.7 1.8 0.5
0

Percent of villages in the size group Percent of population in size group

RURAL DISTRIBUTION

Percentage Distribution of Annual Income for a village

1%
4% 5%

Upto 6000
26% 26% 6001-12000
12001-24000
24001-60000
60001-120000
Above 120000

39% Target Market – 31% of

households in a village
•Advertize Town/Village
•Sell Mobile Van • Sub-Dealer Mobile Van
•Financing
Rural Executive
Info
•Service

Town/Village District Town/Village

• Sub-Dealer • Sub-Dealer
• Dealer

Region
DC

District District
• Dealer • Dealer
TEST MARKET – SELECTION CRITERIA

• Compare no. of districts & inhabited villages

State

• Study the distribution of villages acc. to size,

District around the district

• Identify the villages qualifying for setting sub-

Village dealership and those requiring mobile vans.
 SUB-DEALERSHIP AND MOBILE VANS

Village
Village population Village
population < 10000 population
< 10000 < 10000
Village Village Village
Village
population
< 10000
Village population
< 10000 population population

Village
Populatio Village
> 10000 > 10000

population
< 10000
n >10000 population
< 10000 Village Village
Village Village population population
population Village population > 10000 > 10000
< 10000 population < 10000
< 10000

Mobile vans would cover A single sub-dealership would

regional distribution as above cover regional distribution as above
TEST MARKET - HARYANA

• Districts: 16  16 District Dealers

• Villages: 6760
• No of villages/district: 422
• No of villages/district with >10000 (0.5%): 2
• 1 sub-dealers per district
• No of villages with > 2000 & <10000 (12%): 50
• 50 villages to be covered under 2 Mobile Vans
TEST MARKET - GUJARAT

• Districts: 19  19 District Dealers

• Villages: 18028
• No of villages/district: 950
• No of villages/district with >10000 (0.5%): 5
• 1 sub-dealers per district
• No of villages with > 2000 & <10000 (12%): 110
• 110 villages to be covered under 4 Mobile Vans
RURAL PROMOTION
• Campaign tagline – “Aapki pragati ka saathi - Mahindra”
OR
“Pragati ka aasaan tareeqa – Mahindra”
• Banners across strategic places – Schools, Colleges, Panchayat offices, Hospitals
• Presence of mobile vans at Melas and Haats
• Test rides during melas and haats
• Availability of financial consultant with vans

• Rural executive
• Should influence opinion leaders like Panchayat heads, doctors, student leaders,
school and college teachers
• Sub dealer
• Joint workshop of bike mechanics from various villages to create awareness and
expertise on Mahindra 2 wheelers.
SUPPLY CHAIN – ASSET LIGHT MODEL
• Supply Chain Components

Suppliers Internal
(Ancillary Supply Distributors
Industries) Chain

Use of ‘Milk Run’ concept

Strategically located
manufacturing plants
Outsourcing - inbound
logistics, milk run collection
and consolidation,
warehousing and inventory
management to Mahindra
logistics.
Strategically located cross
docks for other procured
parts
• Low Inventory Levels (70-80%
less)
• Lower WC investment
• Therefore Lower Cost of
Manufacturing
• Setup Factors - Government
incentives, auto-ancillary
industry proximity
Supply Chain - Distribution Side
Features -
Reduction in cash to cash cycle
Cheque payments RTGS

Manufacturing Customer Order

Decoupling Point ( CODP)

District level CODO sub-

Regional dealers/
Main DC dealer/
DCs retail outlets
distributor

Metrics for performance

 Delivery performance
 Order fill rate Mobile Vans and
 Perfect order fulfillment Rural Reps
 Order fulfillment lead times
 Cash to cash cycle
 Inventory days of supply
  Selecting proper metrics for focus (as mentioned earlier)

 Shifting the CODP from POS to district DC. Thus, to maintain low lead time,
 Fixed inventory maintenance at all CODO outlets
 Replenishment based on inventory depletion

 The regional DC and upstream members should be forecast driven

 Error minimization due to aggregation

Supply Chain Agility

 Census data highlights that 70% of the population lives in small villages, where agility
might not be a good strategy ; going lean might be a better strategy

 In small villages(Class 4,5 and 6) type villages, time lag between order receipt and final
delivery is permissible as competition is currently low. Therefore, production based on
confirmed orders can be considered.
THANK YOU