M&M’s scooter strategy banks on rural ride

While Hero Motorcycle Scooters India, Suzuki Motors and Hero Honda are focusing on the urban market for their scooters, Mahindra & Mahindra is taking the rural road.

Anoop Mathur, president (two wheeler sector), M&M, said that’s because the scooter market is growing fast in the Tier II & III towns.

“We will also focus on the rural markets,” Mathur said.

The company, which launched two new models on Thursday — Rodeo and Duro —  expects to sell 100,000 two-wheelers in the next 18 months.

M&M had entered the two-wheeler sector by buying 80% stake in Pune-based Kinetic Motor Company for Rs 110 crore last year.

Its portfolio currently comprises just one scooter, branded Flyte. M&M also sells three Kinetic products — Nuvo, 4S, and Kine — which, Mathur said, do not sell well.
With M&M adding models, the gearless scooter space is getting aggressive. The M&M products will compete against Suzuki Access 125.

M&M  is also focusing on expanding its dealership network from 300 currently.  Around 70-80 dealerships will be added in the next 8 months.

“We will also leverage our existing dealerships for four-wheelers. Two-wheelers may also be retailed in them.” The company has retained around 190 Kinetic dealers.

“As of now we are servicing demand for these products but don’t want to hang on to them, so we might look at phasing them out,” Mathur said.

The inventory level for the Kinetic products is not very high, he said. Mahindra has tied up with five non-banking finance companies — Fullerton India Credit Company, Sriram Transport Finance Company, Family Credit, Indusind Bank and Mahindra Finance — to finance its two-wheelers. Mathur said that around 25% of their two-wheelers are financed by NBFCs, about half of which comes from Mahindra Finance.

The vehicle maker is also looking at export options to south-east Asia and Latin America. Its Pithampur plant has an annual capacity of 500,000 units. The company is not looking at any major capital expenditure.

Credit Analysis & Research Ltd said the market share of gearless scooters had risen from 10% in fiscal 2006 to almost 16% last fiscal.

The two-wheeler market, including motorbikes, scooters and mopeds, grew by around 2.5% year-on-year to 7.4 million units last fiscal and the scooter segment grew 10% to 1.2 million units.