Trends in patterns of

urbanization in the next 5

years and its impact on
vehicle usage and
experience (Theme B)

Team Zoomvictors
MICA, Ahmedabad

2
Executive Summary
Urbanization has been a trend, which
defines change itself. It is an ongoing
phenomenon, which takes place all
around us. In fact, every change in
society, to families, to people's life is
somewhat related to urbanization.
Urbanization changes the way we make
choices in our lives and affects our
present and future as well. This report
highlights how urbanization has changed
the way we view the world and our own
lives. It highlights major factors of
change like population, social life,
disposable income, transportation and
environmental factors, which highly
constitute the phenomenon itself. The
shift in population towards the much
more advanced and well-equipped areas
have been the spearheading contributor
to urbanization. The migration has been
backed by certain push and pull factors
which have been discussed in the report.
The report further highlights how with
increasing aspiration coupled by global
trends have made people change their
lifestyle and consumption pattern over
the years. The second part of the report
talks about effects of urbanization on
transport and usage of vehicles.
Automobile, being the leader in product
and process technologies of the
manufacturing sector, has been
recognized as one of the major drivers of
economic growth. The Indian economy
has been growing around 8% for the
past few years. This growth has enabled
an overall change in the social status of
the Indian population. Additionally, every
year, many rural areas and Tier-III cities
are progressing to a higher status,
opening immense growth opportunities
for the two- wheeler industry.
Commuting has been a necessity for
people since ages and thus it is quite
evident that with the changes in the
pattern of urbanization even the vehicle

preferences and usage has changed.

The preferences of the mass have
changed over years owing to changes in
lifestyle technology, consumption pattern
and disposable income. Even the target
audience for categories has made a shift
for the better. Thus the future of vehicles
poses a great opportunity for companies
to decode the trends and market their
strategies accordingly. The report gives
an overview of the entire vehicle industry
with special focus on two wheelers
market in India. The overview has been
segregated into motorcycles, scooters
and electric vehicle along with their
trends.
Our report aims to study the Indian twowheeler market from various
perspectives. It entails a detailed
analysis of the market in terms of
segments. Each section sufficiently
explains the current and future market
trends, and the ongoing developments in
the Indian two-wheeler market. Our
research also foresees immense
opportunities for various international
and domestic players in this segment.
The report has also considered the
preferences by gender, and income
levels as part of macro-economic
indicators to understand this market of
India, which is one of the world's leading
two-wheeler exporters.
Our report, has comprehensively
analyzed the emerging trends, like
reviving of scooter segment and shooting
demand for executive and premium
segment bikes in two wheeler markets,
which are expected to prevail in near
future. Our proposition in this report is
likely to facilitate clients in understanding
the present and future outlook of the two
wheeler market and developments in the
country.

Urbanisation and Trends

The word civilisation, civil, citizen were
all derived from word city. The ethos of
city has full potential to be driving force
of change and is capable of finding new
patterns of civilizations that are
economically and ecologically
sustainable.
The growth driver of this change is what
we call the Urbanisation.
Urbanisation is the process by which
rural communities grow to form cities or
urban centres and by extension, the
growth and expansion of the cities.
Urbanisation began in ancient
Mesapotamia in the Uruk period
(4300-3100 BCE) where a village from
other villages was very prosperous so
there was lot of movement of people
from one village to the other. The
movement of people gave rise to the
densely populated areas where trading
and other economic activities took place
and it gave birth to cities. First city that
was formed during this period, Uruk was
mainly due to the environmental issues.
The earliest cities that were formed
during this period were Uruk, Ur and
Eridu. The fundamental reason of
formation was new cities was that the
cities had a good infrastructure and it
provided more security which attracted
people to move and set their living in a
urban centre. The temple of Ur where all
social gatherings take place is where the
trading between two cities started.
The first phrase of Urbanisation in India
is started with Indus valley civilization.
Since 600 BC onwards, cities and towns
started developing with either an Ariyan
association or Dravidan association with
them. Varnasi, Mathura, Madurai,
Uraiyur were the cities that grew during
this period.

Urbanisation is basically the gradual

increase in the population of people
living in the urban areas and the way
each society adapts to the changes.
It is predominantly the process by which
towns and cities are formed and become
larger as more people begin living and
working in central areas.It is predicted
that by 2050 about 64% of the
developing world and 86% of the
developed world will be urbanized. That
is equivalent to approximately 3 billion
urbanites by 2050, much of which will
occur in Africa and Asia. Notably, the
United Nations has also recently
projected that nearly all global population
growth from 2015 to 2030 will be
absorbed by cities, about 1.1 new
urbanites over the next 15 years.
There are two factors which make
urbanisation possible. They are:
A) Pull Factors- The attractiveness of
city lifestyle and infrastructure make
people to move from one part of the
place to the other part. Employment
opportunities, higher incomes, joining
other rural refugees, freedom from
oppressive lifestyle, access to better
health care and education are the main
factors why people go from rural to
urban.
B) Push Factors- The poverty,
unemployment make people move from
rural set up to urban setup to fulfil their
financial status. Earning of living
impossible, land deterioration, lack of
adequate land, unequal land distribution,
droughts, storms, floods, and clean
water
shortages are some of the
other factors which make people to shift
from one city to other.
The factors which have a direct effect on
Urbanisation are as follows:

Population and its effect on

Urbanisation:
Population growth is one of the primary
reasons of urbanisation. In rural areas, In
rural areas natural increase is not high.
In 1950 there were only 30% of the
population living in urban centres/ cities.
Globally there are more than half the
population (54%) living in cities and
urban centres today and is expected that
more than 66% of the population will be
living in cities and urban centres. the
most urbanized regions include Northern
America (82 per cent living in urban
areas in 2014), Latin America and the
Caribbean (80 per cent), and Europe (73
per cent). In contrast, Africa and Asia
remain mostly rural, with 40 and 48 per
cent of their respective populations living
in urban areas. All regions are expected
to urbanize further over the coming
decades. Africa and Asia are urbanizing
faster than the other regions and are
projected to become 56 and 64 per cent
urban, respectively, by 2050.
The rural population of the world has
grown slowly since 1950 and is expected
to reach its peak in a few years. The
global rural population is now close to
3.4 billion and is expected to decline to
3.2 billion by 2050. Africa and Asia are
home to nearly 90 per cent of the worlds
rural population. India has the largest
rural population (857 million), followed by
China (635 million).
Globally, more people live in urban areas
than in rural areas. In 2007, for the first
time in history, the global urban
population exceeded the global rural
population, and the world population has
remained predominantly urban thereafter
(figure 2). The planet has gone through a
process of rapid urbanization over the
past six decades. In 1950, more than
twothirds (70 per cent) of people

worldwide lived in rural settlements and

less than one-third (30 per cent) in urban
settlements. In 2014, 54 per cent of the
worlds population is urban. The urban
population is expected to continue to
grow, so that by 2050, the world will be
one third rural (34 per cent) and twothirds urban (66 per cent), roughly the
reverse of the global rural-urban
population distribution of the midtwentieth century.
Global Urban Population Growth (1950-2050)

Source: World Economic Forum

Africa and Asia are urbanizing more

rapidly than other regions of the world.
The rate of urbanization, measured as
the average annual rate of change of the
percentage urban, is highest in Asia and
Africa, where currently the proportion
urban is increasing by 1.5 and 1.1 per
cent per annum, respectively. Regions
that already have relatively high levels of
urbanization are urbanizing at a slower
pace, at less than 0.4 per cent annually
(figure 4). In general, the pace of
urbanization tends to slow down as a
population becomes more urbanized.

Lifestyle and Social Impact:

In 1950's it was the creation of towns
and districts

5
In 2000 it was the birth of suburbans,
ring road

benefit from better services in urban

areas.

Environmental Changes and

Urbanization:

In 2015, Network cities were formed

Megacities:

City borders will expand out of suburbs

to include daughter cities. The Core
City will enclose multiple downtowns.

Multiple Transportation Models will be

used and more than 50% will use
public transportation.

Most offices moved to the first belt

suburbs except non cost sensitive
activities: city centres becoming
shopping areas (small scale deliveries)
for expensive goods and living areas
for double income, no kids
households.

13/22 Mega cities belong to ASIA

PACFIC regions.Migration is a strategy
adopted by rural populations to
improve household livelihoods and

Probably most of the major

environmental problems of the next
century will result from the continuation
and sharpening of existing problems
that currently do not receive enough
political attention. The problems are
not necessarily noticed in many
countries or then nothing is done even
the situation has been detected
In recent years, the urban environment
has become a major subject of concern.
The process of rapid urbanisation poses
serious challenges to towns and cities,
which are struggling to provide and
maintain the already inadequate level of
urban services. Among the major
environmental problems faced by urban
areas are air, water, and soil pollution
and growing volume of wastes including
hazardous waste. The metropolitan cities
are experiencing critical environmental
degradation and pushing to the limit their
ability to sustain human life. Although the
entire urban population is affected, the
urban poor are the most vulnerable. It is
poor performance of local governments
in the delivery of basic urban services
that lead to environmental degradation
and lower quality of life in urban areas.
The drinking water problem in Gujarat
has accentuated over the past four
decades. Conflicts over drinking water
between the people and the industry,
between the people and government,
and between urban and rural areas have
become frequent in Gujarat. Such
conflicts are arising because of declining
availability of water resources on one
hand and rising demand of economic
activities on the other.

The Next Billion Consumers

Daily turmoil on a global scale is giving
business leaders and investors plenty of
reasons to stay hunkered down as they
confront huge challenges in the here and
now. Spreading sovereign debt woes,
volatile markets, unstable currencies,
political gridlock and stalled growth
plague the big developed economies.

Meanwhile, China, India and other

rapidly emerging economies are flexing
their strength as they adjust to the
phenomenal growth that has been the
biggest economic story of the past two
decades. In the conventional view, the
current turbulence portends deep,
enduring structural shifts that will set the
business agenda for the foreseeable
future. We fully expect macroeconomic
shocks over the coming decade, with
discontinuities that will shape the options
companies have to adapt and grow.
Europe, Japan and the US certainly face
an extended period of economic

turbulence and slow growth, particularly

in the first half of the decade. But as we
will see, half of the macro trends affect
both emerging and advanced
economies. Thus, while we embrace the
exciting opportunities in emerging
markets, we also see opportunities
where many commentators see none
right nowin the home markets of many
of the worlds leading businesses. A shift
in global growth. Although we will
continue to see pockets of economic

turbulence, look for the global economy

to expand at a 3.6 percent annual rate
over the longer term, resulting in world
GDP swelling to $90 trillion by 202040
percent larger than it is today. By 2020,
the advanced economies proportion of
world GDP will drop to 58 percent, a
sizable change over a relatively short
period. The growth of world population
by 750 million, nearly all of it originating
in developing and emerging economies,
will account for about one-quarter of the
rise in GDP. Increased productivity will
generate the rest, as per capita GDP
grows by 30 percent over that period.

7
India fast growing and relatively
productive cities will drive nearly fourfold
increase in Indias per capita income
between 2008 and 2030. The no of
households earning less than 90,000 will
decrease below 20% for the first time in
history, while the no of middle class
households will increase from 32 million
to 147 million.

Trends in Motorcycle Segment in India (Present and Future)

Over the last three years, motorcycle
segment volumes have grown only at a
moderate CAGR of 5% as slowdown in
Indias economic growth and persistently
high inflation weighed on disposable
income of buyers, particularly those who
buy entry segment (at price point near
Rs. 40,000) and executive segment (in
price range of Rs. 45,000-50,000) bikes.
Thus, pressure on Household income
growth leading to reduction in proportion
of first time buyers weighed on demand
for motorcycles. However, the recent
uptick in sales volumes of motorcycles,
reflected in growth of 10.0% YoY in 5m
2014-15, does insinuate improved
growth prospects for 2014-15. While
motorcycle volumes in 2014-15 may
indeed grow faster than the CAGR of last
three years, in our view, this would
largely be driven by increase in
replacement demand and incremental
wholesale volume contribution of new
models.

Premium Motorcycle Trends

Premium motorcycles market in India is
forecast to grow at a CAGR of more than
27% CAGR during 2015-20 on account
of declining premium motorcycle prices
and launch of new premium motorcycle
variants. Prior to 2011, premium
motorcycles were imported in India as
completely built units (CBUs), which
used to result in imposition of heavy
custom duty, thereby restricting the
demand for premium motorcycles in the

country. However, with lower import

duties on account of setting up of
domestic assembling units by global
premium motorcycles manufacturers like
Harley Davidson, Kawasaki and
Hyosung, the premium motorcycles
market in India has witnessed a
complete turnaround.
The market penetration of premium
motorcycles has been witnessing a
continuous increase among high net
worth individuals in the country.
Significant price differential between a
Completely Knock Down (CKD)
assembled premium motorcycles and
Completely Build Unit (CBU) imported
motorcycles has led to robust increase in
sales of premium motorcycles among
Indian consumers. Premium motorcycles
market is witnessing intense competition
due to competitive pricing strategy being
adoption by the leading players coupled
with introduction of new variants over the
last few years.
Until 2011, due to high duty levied on
imported premium motorcycles in India,
their reach was limited to the affluent
class. However, with the entry of multiple
international brands such as Harley
Davidson, Triumph, Hyosung and many
others, India's premium motorcycles
market witnessed a major turnaround
with rapid increase in demand for
premium motorcycles over the last three
years. With the trend of launching new

8
motorcycle models at comparatively
lower price tags by leading global
players gaining increasing traction, the
India premium motorcycles market is
expected to grow at a brisk pace through
2020.
Premium motorcycles with engine
capacities ranging from 500cc to 800cc
offer better manoeuvrability in
comparison to more than 800cc
motorcycles and are therefore more
suitable for rough Indian roads.
Moreover, low price point of 500cc to
800cc category further increases the
consumer interest. This segment offers
huge growth potential in the premium
motorcycle market in India over the next
five years. Major global motorcycle
manufacturers are expected to be
increasing their focus in this segment to
offer products specifically tailored to
satisfy customer requirements in 500cc
to 800cc category consulting firm.

The Super-bike Segment in India

While talking about the Indian superbike
market, which comprises of motorcycles
of 500cc and above displacement, this
segment is expected to grow over the
next five years and hit over 20,000 units
by the year 2020. The segment is
currently topped by the likes ofRoyal
Enfield and Harley-Davidson and has
been growing at a 40-50 percent range
year-on-year. Other companies in the
segment includeTriumph, Kawasaki,
Yamaha, Honda, Suzuki and DSK
Motowheels (which markets both
Hyosung and Benelli branded bikes).
The superbike segment, which consists
of motorcycles above, the 500cc
category has grown at an exponential
level from just 450 units in the period of
2008-2009 to about 3500 units in
2013-2014. The market is expected to
touch 9500 units in 2014-15 and double
to about 20,000 units by 2020.

New premium motorcycle manufacturers

like Benelli and Ducati have realized this
high potential, and have entered the
Indian market at the right time to
capitalize on the same. Whereas,
existing brands such as Suzuki, Honda
and Yamaha, are continuously bringing
in premium products to the country as
the segment has witnessed a 40-50
percent growth over the past two
years.Most of the sales in the segment
account for bikes such as theRoyal
Enfield Continental GT and the HarleyDavidson Street 750, which cost around
Rs. 4-5 lakhs.
Experts mention the reason for
superbikes not growing in our country as
expected to luxury cars because ofthe
biking habit in the country. The reason
for the same can be attributed to the
price quotient, as many premium
motorcycles cost as much, if not more
than what a entry-level luxury car costs.
As leisure biking takes off in India, the
superbike segment too will definitely
grow in numbers as well.

Future trends in two wheeler

market in India - Scooters
Changing customer preferences are
driving value migration from motorcycles
to scooters in India. In 1HFY14, the
share of scooters was 23.5%, up from
12% in FY07. In the economically
developed states, the share of scooters
is higher at ~34%, and is growing.
Around 51% of the dealers we surveyed
expect the scooters share to be over
40% by2020.Experts estimate the
scooters share at 37% by 2020, implying
20% CAGR in scooter. While the share
of scooters is likely to increase, we
expect the dominance of motorcycles to
continue, driven by increasing
penetration in rural markets. Motorcycles
fare better in rural areas, where road
infrastructure is relatively poor, are more

9
suitable for longer distance travel, and
offer higher mileage (an important factor
for cost conscious customers).With
greater economic development,
increasing women participation in the
workforce, demand from female
customers increased at a healthy rate till
FY12.However, post FY12, there is a
distinct trend towards large/unisex
scooters .

Customer Preference by
Category:
Urban Women and Students
Ungeared scooters, which were
predominantly plastic bodied (lighter
weight and smaller size), with lower
capacity engines (largely sub-100cc),
were popular among females. Usage by
males was limited, considering the tiny/
feminine looks of the plastic bodied
scooters. Companies promoted
automatic scooters through high female
celebrity endorsement.

Acceptance among males

Growth for automatic scooters has
accelerated over the last four years, with
26%volume CAGR. Large scooters
(>100cc) have been growing faster at
~31% CAGR. This is largely driven by
increasing acceptance of automatic
scooters among men. Among the
reasons for the growing popularity of
automatic scooters are: Significant
reduction in performance and fuel
efficiency gap with motorcycles: The fuel
efficiency gap v/s motorcycles have
reduced - 40-45kmpl v/s 60-65kmpl for
motorcycles (35-40kmpl for geared
scooters)

Universal appeal

Convenience and comfort

Primary family vehicle

Targeting the youth

Our channel interactions indicate that

scooters are gaining acceptance
amongst the youth. Brands such as
Honda Dio and Yamaha Ray-Z are being
bought by young/college going boys.
However, they are not yet attractive
relative to motorcycles, which still
constitute big chunk of the market.
Attractiveness amongst youth would be
the key inflection point. Sensing this,
two-wheeler players have launched
several male-specific products Hero
Maestro, Honda Aviator, Yamaha Ray-Z,
TVS Jupiter. With several recent
launches targeting the youth (young
boys in the 18-25 years), acceptance
amongst youth is also increasing at a
rapid pace, especially as the 'network'
effect sets in. HMCL is focusing on
positioning its Maestro scooters as a
'cool' product for young men. The
product is endorsed by Bollywood star
and youth icon, Ranbir Kapoor.

Resurgence of scooters led by

automatic segment
While traditional geared scooters died
down, the growth momentum in nongeared (automatic transmission)
scooters continued. Over the last two
decades, automatic scooters have
grown at 16% CAGR against ~7%
CAGR for the overall scooter segment.
Automatic scooters offer several
advantages over traditional scooters.
Attributes such as convenience (selfstart, no need to change gears),
contemporary looks, and powerful
engines are making them popular
amongst customers across age
categories and gender. The share of
automatic scooters continued to
increase, driven largely by higher
demand from working women, college
students (female) and senior citizens.
Urban markets could see further
increase in the share of scooters,

10
driven by (a) need demand from a wider
target audience, and (b) replacement
demand from motorcycle users.

Global trends in the two

wheelers segment
Scooters constitute ~55% of the global
two-wheeler market (ex China and
Africa). Excluding India, the share of
scooters is ~79%. Globally, large
evolved two-wheeler markets are
largely scooter/step-through markets,
with share as high as 100%. Market
dynamics in India are similar to other
Asian countries, though India is behind
its Asian peers in terms of economic
evolution. The evolution of the twowheeler market in India is likely to be
on similar lines as in other Asian
countries. Indonesia, the third-largest
two-wheeler market in the world after
China and India, with annual sales of
7m units, is primarily a scooter/stepthrough market. A similar shift is likely
in India, but not as fast and steep,
considering the difference in fuel
efficiency, aesthetics and road
infrastructure (especially in rural
areas).

Local experience of select

developed states indicates
higher share of scooters
The share of automatic scooters has
been rising in the overall two-wheeler
industry across states over the last few
years. Anecdotal evidence suggests that
states with higher economic
development and open culture have
higher scooter sales penetration. Our
analysis of last few years' town-wise twowheeler sales in Gujarat, Madhya
Pradesh, Maharashtra and Chhattisgarh
(four states contributing 27% of panIndia market) indicates that scooter
penetration is increasing even in smaller
towns.Top-6 states (four in the South and

two in the West) contribute over 60% of

scooter demand. All these states are
relatively more developed; hence, the
higher scooter penetration.

Electronic Vehicle (EV)

Scenario and Trends
The Number of Electric Vehicles Is
Growing on Land, in the Water, and in
the Air. Some 400,000 electrically
powered automobiles are currently on
the road worldwide, according to a study
by the Centre for Solar Energy and
Hydrogen Research Baden-Wrttemberg
(ZSW). This means that the number
doubled throughout 2013. The highest
demand for such vehicles was in the
U.S., Japan and China. In its BLUE Map
Scenario, the International Energy
Agency (IEA) estimates that almost 80
percent of automobiles sold in 2050 will
be plug-in hybrids, electrics, or will be
powered by fuel cells.
There are three types of Electronic 2
Wheelers based on nature of technology:
a) electrical cycles and mopeds (ECM),
b) electrical scooters (ES), and
c) electrical motorcycles (EM).
Classification Criterion for E2Ws
Vehicle
Type
EC
ES

EM

Maximum
Payload
(KG)
mostly
less than
80
more
than 80
more
than 150

Top
Speed
(km/hour)
less than
75
between
25 and 75
more
than 75
Source: UNEP

The current market for EVs is very

small in India. The EV market is India is
between 2.5 to 3 lakh units. The EV
market in India has grown at 84 per
cent CAGR compared to the petrol

11
vehicle market, which grew at 11 to 13
per cent.x Though there are different
types of E2Ws (scooters and bikes),
E4Ws (electric cars), and electric
buses, the overall share of EVs is
negligible. In the 1990s, a couple of
Indian firms introduced electric two- and
three-wheelers in the market, but these
were unsuccessful and were
discontinued later.
A report by Frost & Sullivan put the EV
market in India in 2013 at 125,257
units. It is estimated to reach 1.1 million
units by 2021, Global and Indian
manufacturers are expected to launch
more than 25 EV models by
2021.clocking a CAGR growth of 31.6
per cent.

Capital Subsidy on Electronic

Vehicles proposed in NEMMP
2020
Vehicle
Category

Electronic
2
Wheelers
Electronic
4
Wheelers
Electronic
Bus

Subsidy
Range

Limit/
Year
(Units
Sold)

5000 15000

1000000

25000 150000

200000

500000 3700000

900
Source: UNEP

The Indian government is expected to

invest around Rs 120 billion for power
generation as well as the charging
infrastructure.

Barriers to Electric Vehicles

Source: UNEP

11

Conclusion

Mega trends are connected and inter-wined

which suggests synergetic opportunities
between them.
It is important to understand the ecosystem of the mega-trend and the elements
of the value chain which have most
profitability.
All these trends are global and have global
ramifications thereby offering scalable
opportunities.
These forces are changing rapidly and
bringing new competencies into play at half
the life-cycle speed of the past decade.
Organisations need Mega Trend
champions and teams within their
organisation structure to best exploit the
opportunities.

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