United Motors (UM) is an American motorcycle brand present in more than 30 countries. Sensing a gap in the Indian market, UM entered India in 2015 and started manufacturing mid-range cruiser motorcycles in a joint venture with Lohia Auto. It is now planning to export bikes from India. The Dollar Business caught up with Rajeev Mishra, Director, UM India, to know more about UM’s exports plan.
Interview By Vanita Peter D’souza | June 2016 Issue | The Dollar Business
TDB: Not many have heard much about your brand that’s already two years old in the Indian market. Please tell us about its journey, leading to the Indian market?
Rajeev Mishra (RM): UM is a Miami-based US company that is present in more than 30 countries, with more than 1,300 dealers worldwide. However, India being an emerging market for higher cubic centimetres (cc) bikes and one of the largest two-wheeler markets in the world, we thought we would be incomplete without India because this is where we could find volume growth. So, in 2014, we entered India through an R&D company, which is also a subsidiary of UM International called UM Two-Wheelers Pvt. Ltd.
We developed two cruiser bikes for the Indian market – because this is a segment that is not represented much. Harley Davidson and a few others are in the higher segment, while there are a few sports bikes in the lower segment. We noticed the gap in the market and that price was a major issue. We wanted to introduce affordable and good bikes, and it took us two years to develop the product.
During the initial months, looking for a plant was cumbersome, which delayed our project by a couple of years. So, in 2015, we entered into a joint venture with a domestic company, Lohia Auto, which had all the infrastructure set up at Kashipur in Uttarakhand. We launched our products, Renegade Commando and Renegade Sports in the 300cc category in the price range of Rs1.49-1.79 lakh, during the Auto Expo last year. And in February 2016, we opened bookings for the first 1000 customers – that’s our history and journey in India so far.
TDB: Tell us more about your joint venture with Lohia Auto...
RM: Lohia Group is a Moradabad-based company, that is primarily into the handicraft business via a company called DesignCo. It entered the automobile sector five years ago and started manufacturing auto rickshaws and electric scooters. The manufacturing facility is located in Kashipur and spreads across 60-70 acres. In the meantime, we were looking for a company with good infrastructure so that we can speed up our manufacturing. I think we complemented each other – they had the infrastructure and we had
TDB: Like you said, the company owns a production unit in Kashipur (Uttarakhand). What is its production capacity and how much of it is being utilised?
RM: Our current production capacity is 50,000 bikes a year, which can be increased to 1,00,000 bikes. But I don’t think we require such a high capacity for the next few years as our plan is to sell about 25,000-30,000 bikes a year. Also, at the moment, we are under trial manufacturing, but starting June 2016 we will start producing and might use about 30% of the capacity. Later on, we have plans to scale it up to 80-85%.
TDB: As you mentioned, India is one of the largest two-wheeler markets. This means more competition. How do you plan to overcome this challenge?
RM: India is a large and segmented market, where each segment is dominated by one player. For instance, Honda dominates the scooter segment, while Hero dominates the motorcycle segment. Furthermore, TVS dominates the south and Bajaj dominates the west – each player is the king in its own segment. We also have sports segment, and now we have international players that have entered the higher CC segment, i.e. 500cc and above. Products are aspirational in the higher CC segment, but they are not affordable, which we see as a huge vacuum. Even if we put all Americas together, the market size is less than half a million units in this segment. But, I believe, India is at least about half a million units market in the cruiser segment, where we can introduce niche products.
TDB: And how do you plan to tap this half a million market in India?
RM: When we came to India, we wanted to launch international quality products within an affordable price range for the middle-class Indians, who are always ready to experiment. So, we plan to become the Harley Davidson for a
TDB: And your distribution strategy...?
RM: Today, dealership is a critical part of any business, especially in a country like India that is huge and diversified. And we too plan to reach out to our consumers through dealerships. So far, we have about 45 dealerships in tier I cities, but in the next one year we will have another 25-30 dealerships in tier II cities across India.
"Some relaxation on excise duty will only contribute to the sector’s growth"
TDB: What was the response when you displayed your product for the first time in the country?
RM: When we displayed our product in 2014, the response was amazing – that was when we decided to venture into India. This year, we showcased our product again, and the feedback was amazing from bike enthusiasts, journalists, business personnel, etc. Initially, our plan was to only do R&D, import, and assemble, and probably sell it as a CKD product. But we started manufacturing about 60% of our components in India and could bring down the price. Like I said, we took 1,000 bookings in February but closed the booking within a month. That itself is an achievement because we are a new brand and our product isn’t tried.
TDB: Where do you import your components from, any plans to reduce it?
RM: We manufacture 60% of our components in India and the rest 40% are imported, which we plan to reduce in future. We import components from Thailand, Taiwan and China, and our engine is imported from our plant in Thailand.
TDB: Are there any plans to export motorcycles from India?
RM: Starting this July, we plan to export to neighbouring countries like Sri Lanka and Nepal. We will also make our presence felt in ASEAN nations soon.
TDB: What is your take on Make in India initiative and the heavy duties on import of vehicles?
RM: Heavy import duty is probably one of the reasons why the auto industry is struggling with CKDs and other components. I think Make in India can be successful only by developing the vendor base, and not by imposing heavy duties on import. The biggest problem in India is that we do not have a quality vendor base. So, even if an auto company wants to come to India, they cannot source components locally as the vendor base is very limited. In addition, the vendor does not get any concession while importing raw materials. Hence, they are confined to one or two brands. I think the government will have to put in a lot of work in the auto sector, and surely GST will help the sector. Also, promoting SMEs will help and improve the component industry, and some relaxation on excise duty will only contribute to the sector’s growth.
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