A little over a year since the termination of the joint venture with the Munjals-promoted Hero MotoCorp, Japanese auto major Honda Motorcycle and Scooter India (HMSI) has made strong strides in the two-wheeler segment in India and overtaken its former partner in premium motorcycle sales in the 150-cc segment.
According to Siam (Society of Indian Automobile Manufacturers) data, Hero's sales in bikes with engine capacity between 125-cc and 150-cc declined by a steep 53 per cent to 80,303 units between April and October in FY13, while HMSI's volumes went up by 76 per cent to 134,650 units. Interestingly, HMSI sold 54,347 units more in the 125-150-cc segment than Hero, despite not having introduced any new products in the category. In the corresponding period last year, Honda was trailing behind Hero by 92,861 units. The category contributes over 11 per cent to overall motorcycle sales, but has strong revenue implications as product prices are 45-92 per cent higher than that of a model in the entry-level mass segment, which translates into higher margins for companies.
"Our sales in the segment have been driven by strong demand for CB Unicorn, particularly in southern and western markets. We had back orders last year due to capacity constraints, but now with the increase in production, sales of the model have increased by nearly 90 per cent in the first seven months of the fiscal," said Yadvinder Singh Guleria, vice-president (sales & marketing), HMSI. Till October in the current financial year, Honda sold 122,894 units of CB Unicorn, compared with 65,007 units sold in the same period last year.
"Two of our volume models, Hunk and CBZ X-Treme, were undergoing a rebranding exercise because of which we had no dispatches in August and September," Anil Dua, senior VP (marketing & sales), Hero MotoCorp recently told Business Standard.
But a closer look at the numbers reveals HMSI had actually overtaken Hero in segment sales in May this year, and has maintained the lead since. HMSI's market share in the segment has increased to 20 per cent (April-October 2012) from the earlier 8.9 per cent, while Hero's has slid to 12 per cent from 19.6 per cent. Of course, Bajaj Auto with the Discover and the Pulsar, continues to remain the market leader in the category with a share of over 46 per cent.
Deepesh Rathore, managing director, IHS Automotive India, said, "Hero still relies on the Splendor and the Passion for sales, HMSI has a fresh portfolio. Earlier, HMSI had distribution issues, but that gap is narrowing now. Hero used to have a lot of repeat customers, some of whom are now opting for HMSI products because of the Honda brand. Long-term, I do see Honda overtaking Hero as the number one two-wheeler maker in India."
Rathore's contention is validated by the fact that even in the 110-125-cc motorcycle segment, HMSI has closed the sales gap with Hero MotoCorp to a mere 3,418 units (April-October 2012), compared to 26,542 units in the same period in the previous year. HMSI's growth has been led by CB Shine, which saw sales increase by 54 per cent to 358,711 between April and October 2012. Guleria added, "Our growth is being driven by DNA - Demand for our products, Network expansion, and appropriate Advertising and marketing. We started the fiscal with 511 full-fledged dealerships and have added 75 outlets the last in seven months. That is the pace at which we are expanding."
Despite sales slowing down to a moderate 4.5 per cent in the domestic two-wheeler market, HMSI has managed to clock in a growth rate of 47 per cent between April and September in FY13. The company had sold 1.53 units till October, whereas Hero reported a 1.8 per cent decline to sell 3.41 million units in the same period. To close the gap with the market leader, HMSI has targeted sales of 10 million units by 2020 and could be setting up 7-8 facilities to expand production capacity over the next few years.
Hero MotoCorp has already announced its intention to have $10 billion turnover in the next five years with sales of 10 million units.