Divorcees doing wheelies

The Patliputra Honda dealership of the Japanese automaker in Patna is bustling with activity. People are queuing to buy the Activa — India’s largest-selling scooter. Young professionals and students form the majority of the buyers, some of whom have travelled more than 100km from Hajipur, Chhapra, Siwan and other places. Across four showrooms in the city, the dealership sells nearly 1,200 two-wheelers a month and nearly two-thirds of these are Honda scooters. Not surprisingly, Honda Motorcycle and Scooter India is now the largest seller of scooters in the country.

Just a few kilometres away, at a Chandan Hero Service dealership in Kankarbagh area, motorcycles are the rage. Farmers, teachers and micro-entrepreneurs are discussing the maximum discount that the dealer can offer on Hero’s motorcycles. A farmer wants to know if his Splendor bike will last as long as his father’s did — 12 years. Showroom executive Sujeet Kumar asserts it will. “Hero bikes look macho. Its 90cc motorcycle also looks like a 110cc machine. And its service centre near my village in Purnea is efficient and reliable,” says another farmer, Vishnu Mandal.

This, then, sums up the battle for supremacy currently underway in the world’s two-wheeler capital: Honda is ahead of Hero in the scooter segment, while Hero is the undisputed leader for motorcycles. The erstwhile joint-venture partners went for a divorce in 2010-end and have been gunning for each other’s territory ever since. It’s a bitter divorce like any other, and the battle is one of equals — one is a master of Indian roads and the other is a global technology leader in the two-wheeler segment. If Hero can topple Activa, it will be an all-round winner; but if Honda gets the better of Splendor, Hero will have to abdicate the top slot. The question is who will blink first?

Honda sold only 15 lakh units in FY11, the first year after the breakup. Last fiscal, it clocked sales of 42.6 lakh units, trebling its growth in four years. “Our growth has been very satisfactory and significant (since the breakup). One of the barometers to assess performance is capacity utilisation. All our three factories are running to full capacity,” says a smiling YS Guleria, senior vice-president — sales and marketing at HMSI.

Equally upbeat is Ravi Sud, senior vice-president and CFO at Hero MotoCorp. “We have well over 50 per cent share in the domestic motorcycle market and sold 66.3 lakh units in FY15, our highest-ever annual sales. In a highly competitive and volatile market, we have not just consolidated our leadership status, but also expanded our global footprint,” he says.

Stylish and sturdy

But is that enough in a market like India, where rural aspirations are rising fast and the urban population is gravitating towards global trends? “We have seen that foreign brands have a certain pull in the urban segment and we expect them to be fairly strong in the top 20-25 cities,” says Kumar Kandaswami, senior director at Deloitte India.

These brands dominate over a period of time for several reasons: one, for the young, first-time urban buyer, it is about making a statement. Two, the perceived higher levels of sophistication in the product. Three, increasingly defined segmentation — as opposed to a motorcycle for commuting, leisure biking grows in prominence as a lifestyle statement, he adds.

Moreover, the ability to bring a range of globally researched and tested products gives foreign brands an upper hand in the domestic market.

As Guleria explains, “Globally, Honda has been investing heavily in technology. We have been into racing (vehicles) for more than three decades. New technologies are tested in extreme conditions and the learnings transferred to vehicles used for commuting.” The results are top-selling products like Activa and Dio.

The racing tracks also enable Honda to come up with vehicles that offer good mileage and safety. Its mono-suspension technology is a case in point. Honda first introduced it in India in its Unicorn motorcycle in 2004. The mono-suspension replaced the trim suspension at the rear, leading to improved handling and balance.

Learning from scratch

Meanwhile, Hero is not sitting quiet either. For 26 long years, it was dependent on partner Honda for design and technology. Suddenly, it has had to invest big bucks on R&D and new product development, as it cannot survive with refreshes for long. Besides setting up a ₹450-crore R&D centre in Kukas, near Jaipur, it has tied up with Italian two-wheeler design firm Engines Engineering and bought 49 per cent stake in US motorcycle-maker Erik Buell Racing (EBR). However, with EBR shutting operations in recent times, it is unclear what technological advantage Hero can get from the bankrupt company.

“Since charting our solo journey in 2011, we have brought a number of products with industry-first features carrying Hero-patented technology and innovation,” says Sud. He cites the Splendor iSmart technology, developed in-house, which automatically cuts the engine when idling and restarts with a simple press of the clutch, thereby offering more mileage in congested cities. The company claims a mileage of 102.5km per litre for this model.

But this is just the beginning. Hero has to consistently bring in newer products to beat the competition from Honda.

“Indian companies have to develop a range of products to compete with foreign brands and create a differentiated brand perception,” says Kandaswami.

Yet, if global branding is Honda’s strength, the ability to reach every nook and corner of India is Hero’s plus point. “The cost structure that domestic players have mastered and the networks they have created and their reach are immense. They are typically the first set of wheels anyone buys, and the fact that they are present across the country makes them strong players. They are able to maintain strong brand recall by virtue of communicating with the market for a long time,” Kandaswami adds.

Hero’s sales and service network now has more than 6,000 customer touch-points, including authorised dealerships and outlets for service and spare parts. “We keep adding more outlets to this network,” says Sud. On the other hand, Honda added 1,000 outlets last year and plans 800 more this year.

“India is a large geography. It will take time to reach every nook and corner, as we don’t want to compromise on quality (of partnerships),” says Guleria.

Country roads beckon

The key to Honda’s success now definitely lies in conquering rural India, which brings in a little over a quarter of its revenues. Rival Hero gets half its revenues from rural sales. Over the years, it has penetrated deep into the hinterland on the back of initiatives like Service Har Jagah (SHJ), where customers can get their bikes serviced in their own villages instead of travelling to nearby towns. Over 1,100 specially-designed Hero MotoCorp motorcycles, fitted with customised boxes, move across the country for the SHJ camps.

“There is a fair amount of investment that home-grown brands have made and it will stand them in good stead. Foreign brands have to figure out a way to deal with the markets beyond the top cities,” says Kandaswami.

In 2012, Honda embarked on a new approach to create a differentiated brand identity for the masses. In rural areas, it came up with wall paintings, road shows and even nukkad nataks (street plays) to promote the Honda wing mark — to emphasise that Honda is separate from Hero.

“We knew there was confusion in semi-urban areas and the hinterland. After our campaigns, there was a significant jump in awareness and this helped us accelerate our entry,” says Guleria.

As things stand, both Hero and Honda need to change gears — the former has to expand its product portfolio while the latter must find ways to connect better with the hinterland. With time, the market will evolve and, as logistics and communication improve, the lines between urban and rural markets may get blurred. “What is impossible today may not be much of a challenge in some years from now. As affluence spreads to rural markets, they may want a product not just for commuting but also for lifestyle,” says Kandaswami. And whoever can provide those products faster will race ahead.

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