Honda plans made-in-India product to challenge Hero

Last Updated: Thu, Oct 18, 2012 19:20 hrs

Japanese auto major Honda Motorcycle and Scooter India (HMSI), which has invested close to Rs 150 crore to make operational and integrated technical centre at its Manesar facility, will roll out its first indigenously developed product over the next two to three years.

Keita Muramatsu, president and chief executive officer, HMSI, said, “We will develop a new product from the scratch for the Indian market at our technical centre in Manesar. This should happen over the next two to three years.”

The decision highlights the growing importance of India in Honda’s global two-wheeler operations after the termination of the joint venture of Hero Honda with the Munjals’ promoted Hero Group early last year.

Honda has hired 200 engineers to work at the technical centre in Manesar, half of whom belong to HMSI and remaining are on the payroll of Honda Research & Development India (HRID). “The research and development (R&D) team will leverage local sourcing and production infrastructure with innovation to the maximum extent to create products that directly respond to the needs of the customers in India,” added Muramatsu.

HMSI has already declared its intention to topple erstwhile partner Hero MotoCorp and wrest the number one slot in the Indian two-wheeler market by the end of the decade. The engineers at the newly inaugurated technical centre have now been mandated to work closely with vendors to introduce products faster at aggressive price points in the Indian market.

HMSI, with a market share of 19 per cent, trails significantly behind rival Hero MotoCorp (market share of 43 per cent) in domestic sales. HMSI’s cheapest offerings — scooter Dio and 110 cc motorcycle Dream Yuga are tagged at around Rs 44,000 while Hero MotoCorp’s CD Dawn stands at around Rs 36,000. “The R&D team would look at how to reduce cost of manufacturing products without compromising on quality and also work on introducing products faster in the Indian market,” said Yadvinder Singh Guleria, operating head (sales & marketing), HMSI.

Auto companies in India have seen margins come under pressure due to rising input costs in recent times and Honda isn’t willing to lose its edge in pricing its products competitively by passing on rises in raw material costs to customers. Guleria further said, “While the engineers will focus on developing products for the Indian market, they will scale up contribution from the country to Honda’s global business.”

The Indian subsidiary’s contribution to the global revenues of parent Honda Motor Corporation’s two-wheeler venture is expected to more than double to 30 per cent by 2020. The complementing volumes would come in from both urban and rural markets, from premium as well as mass products.

HMSI has recently introduced its first serious mass offering the ‘Dream Yuga’ in May this year and has already sold 100,000 units of the product. Despite sales slowing down to a meagre 3.12 per cent in the domestic two-wheeler market, HMSI has managed to clock in growth rate of 49 per cent between April and September this financial year.

The company has sold 1.29 million units till September. Hero MotoCorp has reported a decline of around three per cent to sell 2.89 million two-wheelers 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. International business would account for 10 per cent of these sales for the company.

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