Honda bikes aim at middle segment
Two-wheeler major looks to enter high growth category by bringing in right product from global portfolio
The two-wheeler major looks to enter high-growth category by bringing in right product from global portfolio.
writes
Two-wheeler major Honda has decided to take on competition by aiming to bring its overseas products to India at a time domestic players are partnering with global players to cater to the middle segment (vehicles with 250-800cc engines) in India. Honda, which has set a target to become the market leader by 2020, says its focus would be mass market which is critical in terms of volume and economy of scale. And to achieve its vision it plans to focus on rural areas, a space dominated by market leader Hero MotoCorp.
According to M Kato, president and CEO, Honda Motorcycle & Scooter India (HMSI), the company is planning to enter the highgrowth 250cc-plus market with the right product and competitive price.
Yadvinder Singh Guleria, senior vice-president, sales and marketing, HMSI, points out that for Honda the thrust would be on growing in existing categories to gain volume. “We have a big vacuum to bridge the gaps in the current line-ups. We are good in 150cc and 160cc segments with three products of Hornet and Unicorn. The maximum volume for the industry is in the middle segment,” he says, while arguing that the motorcycle has to play a bigger role in Honda’s overall sales volume with focus on this segment.
Globally, Honda has products ranging from 50cc to 1800cc. It sells Gold Wing, the 1800cc vehicle, in India. The Africa Twin, which was launched recently, is the flagship adventure-tourer motorcycle from its global line-up, and is the first 1000cc “Make in India” model from the HMSI stable. “Any global product from any segment can be launched (in India). The question is whether it can get the volume given the price points and the economy of scale that is needed but not available in India at present,” says Guleria. Notably, TVS Motor has formed a strategic partnership with BMW Motorrad to develop and manufacture sub500cc bikes for domestic and global markets, while recently Bajaj tied up with UK brand Triumph to jointly develop and manufacture mid-capacity bikes for these markets.
Honda came up with its first motorcycle in 2004, a 150cc seen as an urban product. After the demerger, Honda launched Dream Yuga (110cc) in 2012
Honda has presence in over 130 countries and has four plants in India, and to utilise them fully the company needs volumes. As it eyes a bigger market share, rural will be a key battleground. Hero MotoCorp has been riding on the motorcycle demand in this market.
Guleria agrees Honda is a late entrant in rural, and during its joint venture with Hero earlier the strategy committee had decided to focus on scooters with urban models. Honda came up with its first motorcycle in 2004, a 150cc that was viewed as an urban product. After the demerger, Honda launched Dream Yuga (110cc) in 2012. It was the first time the company came out with a mass market product in motorcycles. Now, it has three motorcycles for rural markets and two scooters.
The second focus has been on dealerships. Till 2011, most of them had an urban or semi-urban focus. When it decided to expand to rural markets after the demerger, Honda was careful in choosing partners. “Our representative goes to the field to assess the potential and most importantly the relationship of the partner with the locals, as it matters a lot in rural markets,” says Guleria.
The company has a separate vertical for rural, and has adopted a 4E strategy — experience yourself (a representative experiencing the market); extend the experience to the network and internal team; engage the local community; and expand the business.
Although Honda has 5,300plus touch points, they cover only 80 per cent of what its peers do. “We have a long way to go and need to work on strengthening rural focus,” admits Guleria.
The company plans to add 500 networks in 2017-18, around 70 per cent of which will be in rural areas. Honda is also optimistic that scooterisation is improving in rural markets with better road infrastructure, co-usage in families and more women entering the workforce.
In the two-wheeler industry, the gap between motorcycles and automatic scooters was 30 per cent in 2010-11, which has now reduced to three per cent. Motorcycles contributed around 49 per cent of sales in 2010-11, and scooters 19 per cent. At present, year-to-date till July scooter sales comprised 34 per cent, while motorcycles contributed 37 per cent.
Honda claims that its rural network, which used to have one scooter and nine motorcycles, has now changed to three scooters and seven motorcycles. Now with the new automatic scooter Cliq, developed for upcountry customers, the company hopes it will be a disruptor in the 100-110cc segment. The vehicle is priced less than ~45,000, which, according to Guleria, could be reached due to economy of scale.
With all these developments, Honda hopes that its total rural contribution will increase to 35 per cent from the current 28-30 per cent. For fiscal 2017-18, the company has set an overall sales target of six million units in India.