Honda snapping at Hero’s heels as gap narrows

The new fiscal could not have started on a better note for Honda Motorcycle and Scooter India (HMSI).

With sales of nearly 5.79 lakh two-wheelers in April, the company ended up just 12,000 units behind market leader and former partner, Hero MotoCorp. The two had parted ways in December 2010 after being together for 25 years.

This was the time the then Hero Honda had made a mark for itself in motorcycles and dethroned Bajaj Auto, which had ruled the geared scooter space for decades. It was also during this partnership that Honda launched its own subsidiary, which has since evolved as HMSI and is now snapping at Hero’s heels.

So will this year see the Japanese entity overtake the Munjals-promoted company, which is in no mood to give up its leadership position in a hurry? After all, sceptics were quick to write off Hero after the split with Honda happened over six years ago. The company forced them to eat their words and has held on to its Numero Uno mantle even while Honda has been pulling out all stops to get to the top.

Yet, there is no denying the fact that the Japanese brand has more than created an impact in the Indian two-wheeler space. Since the time it called it quits with Hero, it has been on overdrive in setting up new plants and enhancing capacity.

What was 1.6 million units annually from a single unit at Manesar in Haryana has since grown rapidly to 5.8 million motorcycles and scooters from additional facilities in Rajasthan, Karnataka and Haryana. This will grow further to 6.4 million units during the course of this fiscal as the Karnataka plant increases capacity by another six lakh units to 2.4 million units.

This is a staggering scale of achievement in just six years and Honda has never attempted anything on this scale (within a similar timeframe) anywhere else in the world. Clearly, it has been fuelled by an intent at achieving market leadership coupled with an acknowledgement of India’s potential as the world’s largest two-wheeler market.

In the process, Honda knows too well that growth is comparatively slow and even flat in its traditional ASEAN region. Big markets like Indonesia are unable to cope with the momentum seen in India, which is expected to see production of nearly 25 million two-wheelers by the end of this decade.

Today, Honda is the clear number two in this part of the world and is well ahead of TVS Motor Company and Bajaj Auto while Hero continues to be ahead in the leadership stakes. Yet, the April showing is a clear indication that the gap is narrowing down even while Honda knows well that it would be unrealistic to expect an encore in the coming months.

After all, there were strong tailwinds to support this growth like the marriage season but there is still no denying the fact that it is remarkable especially in the aftermath of the pressure on clearing BS III stocks. Like other two-wheeler makers, Honda had to discount heavily in order to liquidate its inventories in rapid time with the result that its supply pipeline was virtually empty.

Suppliers were also caught unawares by the Supreme Court verdict with the result that some critical BS IV engine spares were not easily available. Despite this, April turned out to be a bumper month for sales with an order backlog of nearly 30,000 scooters.

It is perhaps more realistic to expect May and June to report slightly lower numbers after this huge deluge but there is no telling what will happen thereafter. “Honda is an aggressive player and is not going to let go of this momentum,” says an industry observer.

The fact that scooter sales accounted for nearly 3.7 lakh units in April is also a clear indication of two-wheeler buying preferences in the country. Since the time the Activa entered the market over 15 years ago, it has grown from strength to strength.

Where the former Hero Honda ushered in the motorcycle revolution, the scooter wave was unleashed by HMSI and prompted other players to follow suit even while Bajaj Auto steered clear of this space.

The scooter component in the overall two-wheeler pie is perhaps a third today and is tipped to grow even stronger in the coming years fuelled by the realities of urbanisation and crowded roads.

What was largely seen as the best alternative for women is also ensnaring men who have no qualms about riding a scooter. Motorcycles continue to lead the race and even Honda would ideally like to grow its presence in this product space even more rapidly in the coming years.

Hero is also stepping on the gas with expansion plans proposed in new locations such as Andhra Pradesh and Gujarat. If this means reaching a figure of 10 million units by 2020, the company will still be the monarch of all it surveys.

Not everyone is wiling to support this optimistic outlook even as the same set of people had predicted something equally dismal at the time of the Hero-Honda divorce in 2010. However, given the pace of Honda’s relentless expansion since then and the reality of its global competencies, it is only a matter of time before it gets to the top slot.

For the moment, though, there are bigger issues to deal with, especially on the BS VI emissions deadline, which come into effect in April 2020. Honda will need to strike the balance between growth and the realities of a huge technological challenge, which is looming large. Till then, the tug-of-war with Hero will make interesting news.

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