A STUDY ON

ECONOMIC ANALYSIS OF
HERO MOTORCORP, HMSI
AND BAJAJ AUTO

Presented by :
Group 9

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

HERO MOTOCORP LTD.

Sales

Year 2011-2012

Year 2012-2013

(Nos)

62,35,205

60,75,583

Growth (%)

15.4

(-)2.6

Five-year CAGR (%)

13.3

12.7

70
60
50
40
year 2011-12

30

Year 2012-13

20
10
0
Growth
-10

Sales

COST ANALYSIS:
Year
Raw materials
Operational
and
other variable costs
Excise duty
Employee cost
Total Variable cost
Interest
Depreciation
Selling
administrative and
other expenses
Total Fixed cost
Total cost

2012-13 (in crores)

17,364.86
32.80

1891.80
820.92
20110.38
11.91
1141.75
2265.05

3418.7
23529.09

Cost

20110.38

3418.7

Variable Cost
Fixed Cost

PROFIT ANALYSIS:
Parameters

Year 2012-13

Product sales (No. of units)

6075583

Total net income (crores)

24166

Profit before tax (crores)

2529

Profit after tax (crores)

2118

Earnings per share

106.1

Return
on
employed

average

capital 47.8

70
60
50
40
30

year 2012-13
Year 2011-12

20
10
0

BREAK-EVEN ANALYSIS:
Year Sales
Sales
turn
Units
over (R) (S)
(crore)

Vari
able
cost
per
unit
(VC/
S)

201
213

3310 9789.8
0.32

26058.29

Sale
s
pric
e
per
unit
(SP
=R/
S)
607558 4289
3
0.18

Contrib
ution
on
margin
(CM=S
P-VC
per
unit)

Fixed
cost
(FC)
(Crore
)

Brea
keven
units
(FC/C
M)

3418.7 3492
104

Breakeven
sales
(Crore
)

14977.
71

SWOT ANALYSIS OF HERO MOTOCORP:

STRENGTH:

Leader in two wheeler segment

Huge Brand Equity

Products present in all the segments

Good and effective advertising

Large distribution network and service centers

WEAKNESS:
Low presence in premium bike segment

Products low on innovation and design

Lack of strong R&D facility

For spare parts dependent on imports almost 30% for

spare parts

OPPORTUNITIES:
Increasing demand in premium two wheeler segment in
India
Export to other emerging markets
Global Expansion by setting up plants in other
countries

THREATS:
Competition from both Indian as well as international
brands
Fluctuating Petrol and basic raw material prices in India
Improved Public transport will affect two wheelers sales

BAJAJ
Sales

analysis

Sales
(Nos)

Year 2011-12
3834405

Year 2012-13
3757105

Growth
5-year CAGR

6.3%
15%

-4.0%
13%

30
25
20
15
Year 2011-12

10

Year 2012-13

5
0
Growth
-5
-10

Sales

Cost analysis
Year
Raw materials
Operational and
other
variable
costs
Excise duty
Employee cost
Total
Variable
cost
Interest
Depreciation
Selling
administrative
and
other
expenses
Total Fixed cost
Total cost

2012-13 (in crores)

14344.00
124.00

1129.00
639
16236.00
1.00
167.00
1251.00

1419.00
17655.00
Cost analysis

0.08

Variable cost
Fixed Cost

0.92

Profit analysis
Parameters
Product sales (No. of units)
Total net income (crores)
Profit before tax (crores)
Profit after tax (crores)
Earnings per share

Year 2012-13
3757105
20792.74
4266.23
3043.57
105.2

30

25

20

15
Year 2011-12
10

Year 2012-13

Break-even analysis
Yea Sales
r
turn
over
(R)
(crore)

Sales
Units
(S)

Sal
es
pric
e
per
unit
(SP
=R/
S)
201 20792.7 37571 553
24
05
42.4
13
5

Vari
able
cost
per
unit
(VC/
S)

Contri
bution
on
margin
(CM=S
P-VC
per
unit)

4321 11663.
4.12 22

Fix
ed
cos
t
(FC
)
(in
cro
re)
141
9.00

Brea
keven
unit
s
(FC/
CM)

Brea
keven
sales
(in
crore
)

1216
685.
14

6733.
21

SWOT ANALYSIS OF BAJAJ:

STRENGTH:
Good brand presence and marketing in India
It has a loyal customer base
It has a strong Financial position
Extensive R&D focus

WEAKNESS:
Less global recognition despite high volume
production
Distribution network is not as strong as
competitors

OPPORTUNITIES:
Increasing demand in premium two wheeler
segment in India
Global Expansion by joint venture with
other global brands
THREATS:
Threat from international brands
Rising 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 displacement
It also offers sports bikes, including trial and moto crossracing, business and commuter models
It has robust production with a manufacturing plant in greater
noida and widely spread sales network
It focuses immensely on research & development thus
offering differentiated products

WEAKNESS:
Honda Motorcorp is obliged to high pension costs and postretirement benefits that affect its financial conditions
Due 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 capacity
Eg: 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 operations
Relying too much on external suppliers leads to
increase in production costs
Increased competition from Bajaj Auto and Hero
Motorcorp can lead to decrease of vehicle unit sales
and increase of inventory

THANK YOU