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Can Honda vault to pole position?


Over the past two years, Honda has made deep inroads into its erstwhile partner Hero’s market share in the bike segment, which once looked unassailable. The gap is still wide but Honda has been narrowing the lead. And thanks to its leadership in the scooter segment, Honda thinks it can upset Hero’s applecart in the two-wheeler industry. By Deepanshu Taumar
DEEPANSHU TAUMAR | Issue Dated: July 28, 2013, New Delhi
Tags : Honda | Hero group | Two-wheelers | HMSI | Bajaj Auto |

The two-wheeler industry in India, which which was generally thought of as having circumvented the withering effect of the ongoing economic slowdown, seems to have eventually become a victim of anaemic growth sapping the country’s automobile industry. While sales of cars have been tapering off for the last many months, now two-wheelers too are going through the wringer even though they have managed to eke out a modicum of growth. But that’s a poor apology for the kind of heady growth witnessed till sometime ago. Now it seems, like their bigger alter ego – the passenger car segment – two wheelers too have hit a speed bump.

According to data given out by the Society of Indian Automobile Manufacturers, two wheelers registered a growth of only 2.25% during H1 2013. The motorcycle segment, which accounts for around 70% of total two-wheeler purchases, reported a dip in sales, owing to tepid demand from the domestic market as well as on the export front. This pulled down the overall two-wheeler sales growth in the period with the segment reporting flattish numbers.

But at a time when most two-wheeler manufacturers are being forced to rethink their sales forecast and future plans, Honda Motorcycle and Scooter India (HMSI) is looking to strengthen its position in the market and further bridge the gap between itself and market leader Hero MotoCorp. Within two years of its separation from Hero, Honda has made short work of TVS and Bajaj overtaking them in quick succession to become the second-largest two-wheeler manufacturer in India. According to SIAM’s data, HMSI sold 26.06 lakh units between April 1, 2012 and March 31, 2013, as against 59.12 lakh units sold during the same period by Hero. Bajaj Auto, which sold 24.63 lakh units in the same period occupies the third position.

Honda’s aggressive solo journey in India’s two-wheeler industry is shaping up well, giving plenty of confidence to the company to recover the top slot it ceded to the Hero group after the duo parted ways in 2011. In an open challenge to its erstwhile partner Hero recently, Honda has said that it could become the No.1 two-wheeler maker by 2015-16 if the industry remained at its current size. Earlier, Honda was working on plans of hitting the numero uno spot by 2020. But owing to its dominance in the scooter segment, which commands a 21% share in the two-wheeler market, Honda feels it’s in a realistic position to make its ambition come true. Currently, it has a market share of 46% in the scooter segment, which is followed by TVS (20%), Hero (16%), Suzuki (10%) and Mahindra two wheelers (5%). Other players like Yamaha and Piaggio have also joined the fray, but being newcomers their market clout is still not formidable.

In order to maintain its edge in the scooter segment, Honda has recently refreshed its models by making them more fuel-efficient. The company has introduced the all new Honda Eco-technology across its Activa, Aviator and Dio range of scooters, making them more fuel-efficient in keeping with its strategic approach of ‘Mileage Up’ for maximizing customer satisfaction. Honda hopes that its mileage benchmark will reinforce its leadership in the Indian automatic scooter market. The company, which virtually revived the scooter market in India with models like Activa after the exit of Bajaj Auto from the segment, has also been getting aggressive in the motorcycle segment. Honda has announced that it will launch new bike models every quarter, which it hopes will propel it to become the top player in the two-wheeler market in the next three years. At the recent launch of its new 150cc bike CB Trigger, Honda Motor Co’s COO Shinji Aoyama said: “Today the market is almost 1.4 crore units in India. So, if it remains at the same level, with no growth happening, we may become No.1 in 2015 or 16.” Interestingly, while sales of Hero have gone down by 1.2% in FY2013, Honda has witnessed a growth of 37% during the same period.

Buoyed by the numbers, Honda is planning for new launches in the price range of Rs.40,000-20 lakh, which will include economy bikes, automatic scooters, premium street bikes, sports bikes, big scooters, hybrid scooters, super bikes and commuter bikes. The company, in a bid to further consolidate its market share in the 150cc bike segment, recently introduced the CB Trigger, which will take on the Hero Hunk, Bajaj Pulsar, Yamaha FZ and TVS Apache. It’s CBR150R and Unicorn have been selling well and the introduction of CB Trigger will lend further consumer traction for its 150cc bikes – a category that contributes over 11% to overall motorcycle sales. In fact, product prices are 45-92% higher for 150cc models than that of a model in the entry-level mass segment, which translates into higher margins for companies.

Even in the entry level 75-110cc bike segment, which accounts for about 64% of motorcycle volumes and in which Hero is the undisputed leader with the likes of the Splendor, Passion and Dawn motorcycles dominating sales charts, Honda is looking to make deeper inroads. Its launch of the Dream Yuga 110 has allowed the Japanese two wheeler major to make a dent on Hero’s sales. Apart from the Dream Yuga, the company sells the 110cc CB Twister in the segment. In the years ahead, Honda is looking to chip at Hero’s sales leadership in this segment and is said to be mulling a new entry level commuter motorcycle that could be priced between Rs.30,000 and Rs.40,000. At this price, the new Honda 100cc motorcycle is expected to be the least priced offering from the Japanese brand for the Indian commuter motorcycle market.

Although Honda has a reputation for being a technological powerhouse, it is not resting on its spurs. To maintain its edge in technology, the company has set up its first integrated R&D centre at Manesar, which will specifically develop two-wheelers for the country and will also launch both refreshed versions and new models of motorcycles and scooters from the centre. Honda is also about to start a third manufacturing facility at Narsapur in Karnataka, which will ramp up its overall production capacity to 4,000,000 two-wheelers per annum.

Further, Honda has also embraced the 4S concept, i.e. striving for the best in terms of sales, service, spares and safety. Certainly, the Japanese auto maker wants to make India a global innovation hub, and will continue carrying out product innovations that would help make it a one-stop centre of choice for all kinds of two wheelers. The past couple of years have seen Honda make all the right moves – whether it’s launching new products, refreshing existing ones or ramping up its production and distribution network; and with its rich legacy of technology it is well placed to turn its dream into a self-fulfilling prophecy.

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Issue Dated: Feb 5, 2017