Honda bets big on BS VI for 2-wheeler supremacy

When Honda parted ways with the Hero group six years ago, its two-wheeler manufacturing capacity in India was 1.6 million units.

These were largely scooter models, which rolled out of the Manesar plant in Haryana. Since then, new facilities have been commissioned in Rajasthan, Karnakata and Gujarat at a breathtaking pace and capacity has grown four times as much.

On Wednesday, Honda Motorcycle & Scooter India (HMSI) inaugurated the fourth assembly line at its Narsapura plant in Karnataka, which will now result in an output of 2.4 million units annually. Consequently, it is the Japanese automaker’s single largest plant across the world.

India has also emerged the Numero Uno two-wheeler producing base for Honda after recently overtaking Indonesia. The next obvious priority would be to take over the top slot from Hero in the domestic market except that the latter is in no mood to give this up in a hurry. The gap between the two has been narrowing down in recent times with the Activa playing a big role in catapulting Honda’s presence in scooters.

Shinji Aoyama, Chief Officer, Regional Operations (Asia and Oceania), Honda Motor Company, would much rather look at the bigger picture. He headed the company’s operations here during the Hero partnership and beyond when the two decided to split. To that extent, Aoyama is no stranger to India and keeps a close watch on what is happening here.

From his point of view, the No 1 position is the result of what Honda achieves in terms of customer satisfaction and delivering top-class products. “The bigger issue for HMSI is meeting the BS VI norms in India,” he says.

This clearly means that Honda will need to introduce fuel injection technology. The challenge here is that there is really no industry reference/basis for fuel injection to handle such huge volumes at this moment.

Aoyama says the exercise is already underway with a couple of suppliers for this task that could perhaps lead to an appreciable hike in costs. This obviously will have to be passed on to the customer, which in turn becomes a challenge in this price-sensitive market.

“Customers will have to pay more and that means the entire two-wheeler market in India could be affected in volumes but it is not possible to say how much,” he says. It is also difficult at this point in time to quantify the price increase with BS VI still sometime away in 2020 but the challenge for Honda would be to keep costs in check.

“We are very confident of doing better than competitors,” says Aoyama. “The total market in India may decrease in 2020 and as a result Honda could take the leading position.” It is clear that the No 1 perception/status could go beyond numbers to meeting the challenge of a transition to BS VI. This is where Honda is expected to pull out all stops and establish its supremacy.

Minoru Kato, President & CEO of HMSI, is equally confident about the road ahead. “We have good R&D skills in Japan and India and with new regulations like ABS/CBS coming in next year, we have a chance to improve our cost-competitiveness,” he says.

While the BS VI regime could slow down the overall two-wheeler market (with customers expected to resist the price hikes), Kato believes that the role of India will grow even further after 2020. “In the future, India’s responsibilities will increase especially after BS VI when exports will happen to developed countries such as Europe, Japan and the US,” he says. There was a time when the ASEAN region was surging ahead in two-wheelers, especially Indonesia, which has traditionally been a happy hunting ground for Honda. However, with India now ahead of the pack and slated to grow even further, Aoyama believes that it would be unrealistic to expect ASEAN to stage a comeback.

“Actually, countries such as Vietnam, Indonesia and Thailand are mature markets. In this situation, we cannot expect more first time buyers and we, therefore, will focus on the Indian market,” he says. Now with BS VI, the country will also become a benchmark of sorts in emissions and Honda will bank on the cost-efficiencies created in the fuel injection space to meet the needs of the ASEAN region. “Some years ago, India followed ASEAN but this time it is vice-versa with these countries following India norms,” adds Aoyama.

From Kato’s point of view, the years beyond BS VI also augur well thanks to the “huge potential” in two-wheeler volumes here. Honda already is the clear leader in scooters and the job on hand is to replicate this in motorcycles too. “We have to compete in rural areas and expand sales and service,” he says.

What gives him the confidence is that smaller towns are seeing better road connectivity and higher disposable incomes, which means that “scooterisation will come soon to better our position”. With scooters having closed the gap in the commuter space, Honda will logically turn its attention to premium bikes, which are gradually gaining ground in India. While the Activa has clearly increased the pace of scooterisation, there is a school of thought that believes motorcycles will still remain priority.

With four plants and a total capacity of 6.4 million units, Honda is unlikely to go in for any expansion at least till 2020 when the BS VI regime sets in. A lot of things will change then in terms of customer affluence and higher two-wheeler prices. All these inputs will be important to Honda as it goes about increasing its presence in India through a new facility, in all likelihood, after 2020.

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