Presented by : Group 9

Presented by : Group 9

A STUDY ONECONOMIC ANALYSIS OF HERO MOTORCORP, HMSIAND BAJAJ AUTO

TWO-WHEELER INDUSTRY OVERVIEW

Largest contributor to the automobile industry having a size of 100,000 million

Has three categories namely motorcycle, scooter and mopeds

Hero Motorcorp is the market leader in the two wheeler industry followed by Bajaj Auto and HMSIHERO MOTOCORP LTD.Sales Year 2011-2012Year 2012-2013(Nos)62,35,20560,75,583Growth (%)15.4(-)2.6Five-year CAGR (%)13.312.7COST ANALYSIS:

Year 2012-13 (in crores)Raw materials17,364.86Operational and other variable costs32.80Excise duty1891.80Employee cost820.92Total Variable cost20110.38Interest 11.91Depreciation1141.75Selling administrative and other expenses2265.05Total Fixed cost3418.7Total cost23529.09PROFIT ANALYSIS:

ParametersYear 2012-13Product sales (No. of units)6075583Total net income (crores)24166Profit before tax (crores)2529Profit after tax (crores)2118Earnings per share 106.1Return on average capital employed 47.8BREAK-EVEN ANALYSIS:

YearSales turn over (R) (crore)Sales Units(S)Sales price per unit(SP=R/S)Variable cost per unit (VC/S)Contribution on margin (CM=SP-VC per unit)Fixed cost (FC) (Crore)Break-even units (FC/CM)Break-even sales (Crore)2012-1326058.29607558342890.1833100.329789.83418.7349210414977.71

SWOT ANALYSIS OF HERO MOTOCORP:

STRENGTH:Leader in two wheeler segmentHuge Brand EquityProducts present in all the segmentsGood and effective advertising Large distribution network and service centersWEAKNESS: Low presence in premium bike segmentProducts low on innovation and designLack of strong R&D facilityFor spare parts dependent on imports almost 30% for spare partsOPPORTUNITIES:Increasing demand in premium two wheeler segment in IndiaExport to other emerging marketsGlobal Expansion by setting up plants in other countries

THREATS:Competition from both Indian as well as international brandsFluctuating Petrol and basic raw material prices in IndiaImproved Public transport will affect two wheelers sales

BAJAJ

Sales analysis

SalesYear 2011-12Year 2012-13(Nos)38344053757105Growth6.3%-4.0%5-year CAGR15%13%Cost analysis

Year 2012-13 (in crores)Raw materials14344.00Operational and other variable costs124.00Excise duty1129.00Employee cost639Total Variable cost16236.00Interest 1.00Depreciation167.00Selling administrative and other expenses1251.00Total Fixed cost1419.00Total cost17655.00Profit analysis

ParametersYear 2012-13Product sales (No. of units)3757105Total net income (crores)20792.74Profit before tax (crores)4266.23Profit after tax (crores)3043.57Earnings per share 105.2Break-even analysis

YearSales turn over (R) (crore)Sales Units(S)Sales price per unit(SP=R/S)Variable cost per unit (VC/S)Contribution on margin (CM=SP-VC per unit)Fixed cost (FC)(in crore)Break-even units (FC/CM)Break-even sales(in crore)2012-1320792.74375710555342.4543214.1211663.221419.001216685.146733.21

SWOT ANALYSIS OF BAJAJ:

STRENGTH:Good brand presence and marketing in IndiaIt has a loyal customer baseIt has a strong Financial positionExtensive R&D focusWEAKNESS:Less global recognition despite high volume productionDistribution network is not as strong as competitorsOPPORTUNITIES:Increasing demand in premium two wheeler segment in IndiaGlobal Expansion by joint venture with other global brands

THREATS:Threat from international brandsRising fuel prices Economic slowdown and better modes of public transport

SWOT ANALYSIS OF HMSI LTD.

STRENGTHS:It offers a wide range of motorcycles ranging from 50cc class to 1800cc in cylinder displacementIt also offers sports bikes, including trial and moto cross-racing, business and commuter modelsIt has robust production with a manufacturing plant in greater noida and widely spread sales networkIt focuses immensely on research & development thus offering differentiated productsWEAKNESS:Honda Motorcorp is obliged to high pension costs and post-retirement benefits that affect its financial conditionsDue to a defect found in 2014 model year Honda CTX00ND motorcycles it had to recall its products which creates bad reputation

OPPORTUNITIES:Expansion by setting up new manufacturing plants and increasing production capacityEg: it has set up a new plant in Kenya where future growth is expected

THREATS:The price of raw materials are highly volatile which can affect the result of operationsRelying too much on external suppliers leads to increase in production costsIncreased competition from Bajaj Auto and Hero Motorcorp can lead to decrease of vehicle unit sales and increase of inventory

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