Is the Splendor doing a Chetak of 12 years ago? Arch rival Bajaj Auto believes this is indeed the case as Hero MotoCorp’s bread-and-butter motorcycle has seen its numbers nosedive for the first half of this fiscal.
To Bajaj, this is an all-too familiar script. Years ago, the company was the monarch of the two-wheeler segment, thanks to its geared scooter and, specifically, brand Chetak. Customers were hopelessly wedded to the product for years, and nobody expected the fall to be as abrupt as it was over a decade ago.
“It was like a virtual tsunami in 2000 when the motorcycle momentum just consigned the Chetak to oblivion. It was not as if numbers began falling, they just plummeted overnight and left Bajaj in a state of shock and disbelief,” old-timers of the auto industry recall. The company soon lost its top slot to (the then) Hero Honda, which grew from strength to strength thereafter.
As in the case of the Chetak, nobody expected the Splendor to cave in so meekly, as has been the case in recent months when sales have virtually halved since April to close at 1.21 lakh units in September. Bajaj did not waste too much time in announcing that its Discover (motorcycle) brand had overtaken the Splendor in the process, clearly signalling that leadership stakes in the commuter segment were poised for a change.
Are they comparable?
Typically, the move evoked mixed reactions. Hero was quick to retort that this was a one-off thing and reiterated that it was confident of replicating sales of over two million Splendors this fiscal. Other industry experts agreed saying that Bajaj was ‘making too much of an aberration’. “One swallow does not make a summer. It is only a matter of time before the Splendor bounces back and takes the lead,” they said.
Bajaj, however, remains unfazed, and its leadership team believes that the script has completely changed in the motorcycle arena. “Nobody, similarly, thought the Chetak would crumble the way it did, and it took us time to cope with this new reality,” they recall. This was the time the company realised that it would have to change its focus to motorcycles and the success of the Pulsar in 2001 gave it the impetus it so desperately needed. But can the Chetak and Splendor be compared? After all, one was a scooter that was wiped out by a completely different product category in the form of motorcycles.
Since then, India has traditionally remained a bike market even though gearless scooters have been seeing impressive growth lately. On the face of it, therefore, the Splendor should not really be in a vulnerable position.
There are, however, different headwinds this time around. Hero parted ways with Honda last year and took with it over three million units (annually) of Splendor and Passion motorcycles. Its former Japanese ally is clearly itching to even the score and has made it known that it is going to aggressively focus on the 100cc mass-commuter-bike space.
The recently launched Dream Yuga is the first part of this journey which will see similar offerings at extremely competitive prices. It is no secret that each of these bikes is targeted at the Splendor and the Passion.
Two, Honda has also made it clear that India will be its largest two-wheeler market globally over the next three to four years, ahead of Indonesia and Vietnam. By 2020, the company is targeting 10 million bikes and scooters in India, which will contribute to at least 30 per cent of its worldwide numbers.
Hero without honda
Three, there is a growing perception in the market that Hero sans Honda is not as formidable a brand, quite unlike the 26 years of this partnership. Observers reckon that customers may not be too kicked about bikes which do not sport the Honda logo though this is still debatable. Reports have been doing the rounds that Hero’s CD bike series (which do impressive numbers of over 70,000 units a month) is due for rechristening in the coming months. “It will be interesting to see if Hero still manages to attract customers without Honda’s famous CD badge,” an analyst said.
Four, Bajaj Auto is now pulling out all stops with the Discover brand, which has been its most reliable mascot in the commuter category. The company believes that beginning November, the real big numbers will start coming in, thanks to the recently launched Discover. December will then see the launch of the all-new 100cc bike clearly targeted at Hero’s Passion. Bajaj is convinced that today’s young buyer has gone beyond the decades-old Splendor and now wants the best in mileage and power. However, what may have really worked against Hero is the fact that it is grappling with huge stocks at its dealerships, something that its top management has also acknowledged. This, in large measure, explains why the Splendor numbers have declined so rapidly in recent months. Clearly, the company cannot afford to produce more bikes and allow inventories to pile up at its dealerships.
Rivals believe that it will take Hero at least another three to four months to get its stock levels to a ‘position of some sanity’. Till then, Splendor numbers could just continue to hover at around 1.4 lakh units because the inventories will have to get cleared first. Going by this logic, January will ideally see Hero all charged up to unleash the bike’s true potential (of 2.5 lakh units a month) except that competition will continue to be fierce from both Honda and Bajaj.
So far, so good
For a company that clocked over five million two-wheelers last fiscal, it would be right in scoffing at any theory of losing out to competition in a hurry, especially when it has a comfortable lead. Hero is also determined to prove that it can hold its own in the market without Honda. So far, it has managed to do this without too much of a fuss.
However, the Splendor’s sharp fall is cause for concern, because it clearly shows that customers are looking for other options, even while this could be partially attributed to inventory correction.
Honda is also a dangerous adversary, simply because it is an established global giant which will leverage economies of scale to go flat out in India. An aggressive Bajaj, likewise, knows what it feels like to have a strong base knocked off overnight when the Chetak went into nothingness over a decade ago. There could be some lessons in this for the Splendor.