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| India Infoline Sector Reports | Wed, 31-Dec-2003 10:17:37 IST (GMT+5:30) | |
| Automobile - Two Wheelers | ||
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Technology and usage of vehicles: Two-wheeler is one of the rare industries, which is capital as well as labor intensive. The setting up of a green field venture and ancillary network require enormous capital investment. The assembly operation is highly labor intensive. The capital requirement for a venture varies from segment to segment and based on amount of outsourcing. For eg setting up of 0.1mn capacity plant for manufacturing scooter requires approximately Rs1bn and motorcycles Rs1.7bn. Two-wheeler production entails an assembly of over 700 components, including those sourced from vendors / independent manufacturers(about 60-70%). In the press shop, sheet metal components like body frame, fuel tank, front fender and rear fender, muffler etc are pressed, welded, painted / plated in respective shops. In the engine plant, engine components (cast/ forged parts) are machined and assembled along-with other components. The engine is then transferred to the main plant and assembled with the body and bought out components. Due to the peculiar characteristic of high ancillarisation, balance sheet does not reveal the complete picture. The material cost which is understood as fully variable, has in-built overheads of ancillaries. Typically, when volumes are expanding, raw material cost escalations are not passed on, as ancillaries are able to spread their overheads over larger volumes. Ancillaries add as much as 50-300% value on the basic raw material. While steel and aluminum account for 5% each, of the material cost, 60-70% of the cost is incurred on components sourced from outside. Engine is the heart of an automobile. The function of an automobile engine is to convert chemical energy of the fuel into mechanical energy, to power the vehicle. In the engine, petrol and air mixture is burnt from the spark ignited by a spark plug in a cylinder. The combustion builds up pressure, which pushes the piston. The reciprocal movement of the piston (riveted to a crankshaft) is converted in rotating motion. The power is transmitted from the crankshaft to the wheels by a mechanism of gears. The engines can be broadly classified as two and four stroke engines based on number of strokes used to produce a single power stoke. In a four-stroke engine - suction, compression, power and exhaust operations are carried out by four different strokes of the piston. Therefore four-stroke engine produces one power stoke out of every four strokes of the piston. In a two-stroke engine one power stroke is produced out of every two strokes of the piston. In a 2-stroke engine, during the emission of the exhaust gases, fresh fuel/air mixture comes from transfer port to the main cylinder. This leads to emission of some unburnt gasses along with exhaust gases leading to drop in fuel efficiency and increase in pollution through emission. However, a two-stroke engine generates twice as much power as four stroke, engine size and speed being the same. A four-stroke engine is heavier, complex in design and expensive. Gears determine the ratio between engine speed and wheel speed, using a mechanism of gear wheels of different diameters. In a geared drive, the driver manually shifts the gears to change the torque supplied to the wheels. Whereas in a variometric drive, the torque is transmitted by a belt running between variable diameter pulleys, providing infinite number of gear ratios. Scooters originated in Italy and were designed for ladies, particularly nuns. It has no bar in the front and the engine and wheels are covered for the convenience of women riders. The scooter engine is shaft driven. In India, scooter manufacturing was started in 1972 by Bajaj Auto in collaboration with Piaggio, Italy. With the passage of time, scooters have taken considerable position in domestic transport as they are considered as rugged yet safe family vehicle. This perception was due to a larger board area, which can be used to carry groceries and a better carrying capacity, which helps in driving three adults on the vehicle. But the scooters suffered from poor aesthetics, low fuel efficiency and difficulty in driving. The introduction of ABS body along with variometric transmission by Kinetic Honda changed the perception leading to a shift in demand from moped users like youngsters and working women. Motorcycle - the name is evolved from motorised cycle. A motorcycle has an engine, wheels and chain exposed. Moreover, it is chain driven. Two-stroke motorcycles are positioned as power bikes by making use of their high power delivery to cater the young generation. Four-stroke motorcycle is positioned as fuel-efficient and environment friendly vehicle. The Indo-Japanese motorcycles have advantage of better fuel efficiency, more power, better road grip, low emissions and lightweight compared to scooters. Usually, motorcycles are the costliest among two-wheelers. Mopeds - the motorcycle with pedals is the entry level two-wheeler. Mopeds are the cheapest category of two wheelers, having low power compared to scooters and motorcycles. Mopeds are most popular amongst college students, ladies and low income house holds. These vehicles cost in the range of Rs12,000 and onwards. Mopeds are predominantly used for small distance transportation. Mopeds are also used as the second vehicle in the family along with car or scooter/motorcycle. Autorickshaw, as the name indicates is a motorised cycle rikshaw, a three-wheeler. The shortage of personal and mass commute transport in the country, easy maneuverability on narrow and crowded roads and low operation costs gave rise to exponential growth for three-wheeler industry in the country. Three-wheelers are also used as goods transport vehicles for small distance transportation within the city limits. The Indian three-wheeler industry is dominated with petrol engine vehicles. But the dominance was threatened to an extent with the introduction of diesel engines from Crompton Greaves, which provides a benefit of low operating cost. But higher vibration and maintenance cost lead to drop in sales of diesel engine three-wheelers. All the two-wheeler manufacturers are regulated by emission levels, noise levels, color, shape etc, which vary from country to country. Imports of vehicles therefore have to pass through homologation (approval process) of a sample vehicle. Emission norms Two-wheelers emit harmful pollutants such as carbon monoxide and hydrocarbons. The emission norms are becoming stringent the world over. In India, the norms are being implemented in two phases. While the first phase Euro 1 norms have become applicable since April 1996, even more stringent norms Euro 2 will come into effect from April 1, 2000. The details about emission norms is as given in Annexure 1. For the two-wheelers new emission norm for year 2000 will be an acid test as none of the present models except four stroke vehicles confirm to the norms. To full-fill emission norms the manufacturers have three options: to switch to four-stroke engines, to fit catalytic converters for the existing models, to improve upon the existing two-stroke engine. The temporary option for overcoming emission norms is to fit the catalytic converters, this will increase the cost of vehicles. But as a long-run solution scooter manufacturers have to opt for four-stroke engines or improvement in two stroke engines. The catalytic converters cost in the range of Rs1,500 - 2,500, but have a limited life of 10,000 km of vehicle running. Therefore catalytic converter require regular maintenance on behalf of the user. Also catalytic converter will be effective only for unleaded petrol usage, which is not widely available in the country. Scooter manufacturers have started responding to the Y2K norms by introducing four-stroke vehicles in H2 FY98. They plan to fit catalytic converters to two-stroke scooters to overcome emission norms. The Japanese motorcycle segment will be able to overcome emission norms with the technology help of respective Japanese collaborator. The Indian motorcycles have to either shift to four-stroke technology or make use of catalytic converter. But this will reduce the price difference between Indian and Indo-Japanese motorcycles, reducing the price advantage of Indian motorcycles. The mopeds segment will be badly affected due to Y2K emission norms, as none of the existing moped models confirm to the specifications. With the deadline nearing, the moped manufacturers have to tighten the belt to meet the norms. Three wheelers will be another major segment to be affected by Y2K emission norms even though they are liberal in comparison to two wheeler norms. To over come this problem the industry leader Bajaj Auto has introduced four-stroke versions in the FY2000.
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