Bottom lines bleed

It has been a windfall for the customer but it has left analyst wincing. The Hero Honda- Bajaj price war for a larger share of the motor cycle market has hit margins and pinched bottom lines for both companies.

Bajaj and Hero Honda together hold more than 80% of the market in the two wheeler auto segment. Earlier Bajaj was the market leader with its successful scooter like “Chetak”. But the market shift from scooter to bike and Hero Honda became the market leader with its key bike “Splendor”.

Bajaj has fight back with consistent improvement in its bike and getting out of the scooter business. Bajaj has challenged Hero Honda from bothe end. At the lower end it is launching new bikes at regular interval of time which are cheaper than the cheapest bike of Hero Honda and also fuel efficient. Though these bikes are not much profitable they help Bajaj to grab the market share. At the upper end it attacked Hero Honda with its bike Pulsar. The result is known to everyone. Pulsar has the highest market share (60%) in that segment.

Hero Honda is has also adopted the strategy of Bajaj. It has relaunched its bike CBZ to compete with Pulsar. Again it is giving promotional offers for the lower segment so that it will maintain its leadership in the two wheeler auto industry. This year both the companies are launching many new bikes. The problem they are facing is that the profit is reducing because of the competition. But no one is taking responsibility to improve the situation. The two wheeler industry has very few players and the market has duopolistic competition.