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BW Businessworld

Honda Closes Gap With Hero

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Two years after calling it quits with its Indian joint venture partner Hero MotoCorp, Honda Motorcycle and Scooter India (HMSI) has managed to capture a big chunk of the two-wheeler market, largely at the expense of its old partner.

According to the sales figures for October, HMSI sold over 2.55 lakh units, a 40 per cent increase from October last year, compared to Hero MotoCorp’s sale of 5.29 lakh units, up 3.3 per cent from the same period in 2011. Since the two companies went their separate ways in December 2010, HMSI has almost doubled its sales, and is growing by leaps and bounds.

Hero MotoCorp ended fiscal 2011 with a market share of 56 per cent, Bajaj had about 25 per cent and HMSI controlled a mere 8 per cent of the market.

Since then, the market has seen a churn with Hero MotoCorp controlling just over 42 per cent and Honda raising its share to more than 18 per cent. And most of Honda’s gain has been at Hero MotoCorp’s expense, since the third competitor, Bajaj Auto, has been stable at about 25 per cent market share, according to data from the Society of Indian Automobile Manufacturers Association.

HMSI has come a long way since the last quarter of 2009-10, when its market share had fallen to 2.5 per cent due to its inability to meet  demands; back then, the waiting period for the Activa, its scooter, stretched to three months. At that time, Hero Honda, the joint venture, commanded nearly 70 per cent of the market share.

“Honda has a natural advantage in India which others like Suzuki don’t enjoy. It has a readymade brand recall value built over the years with partner Hero,” said Kumar Kandaswami, senior director and country leader, manufacturing, at Deloitte.

HMSI’s growth can be attributed to the introduction of a product portfolio suited to the Indian rider, such as the 150cc CB Unicorn Dazzler and the 110cc CB Twister, besides the mainstay Activa in the scooter segment. Hero MotoCorp’s first indigenous bike without Honda technology is expected next year.

“Honda has an edge with top-class benchmarked quality products at an affordable price. We hope to make a further dent in the market with the Dream Yuga, our first offering aimed at the mass market,” says Yadvinder S. Guleria, vice-president, sales and marketing at HMSI. Once its Karnataka plant gets operational, HMSI’s annual capacity is expected to increase from three million units now to over four million by 2013.

Interestingly, in 2009-10, much of the competition for Hero MotoCorp had come from Bajaj, which had re-entered the 100cc market with Discover and Pulsar.

Analysts say that foreign players like Honda will corner about 25 per cent of the two-wheeler market by 2015. Yaresh Kothari from Angel Broking says the break-up with Honda has really hurt Hero MotoCorp. “Urban customers like the name of a foreign brand attached to their bike. In fact, there have been reports from dealers about customers willing to pay extra for a bike with the Hero Honda tag,” adds Kothari.

For Hero MotoCorp, the fight-back strategy is clear. It is investing Rs 2,500 crore in R&D, and has promised an indigenous yet ‘international’ motorcycle by 2013.

(This story was published in Businessworld Issue Dated 19-11-2012)