Honda Takes a Bike Ride to Boost Sales of its Cars

Co to har­ness dis­tri­bu­tion net­work and cus­tomer base of two-wheeler unit to ex­pand car sales units

The Economic Times - - Brands: Creating Desire - Sharmistha.M @times­group.com

New Delhi: Honda Mo­tor is look­ing at har­ness­ing the dis­tri­bu­tion net­work and cus­tomer base of its two-wheeler busi­ness to push car sales in In­dia, as the Ja­panese com­pany seeks to dou­ble its share in an au­to­mo­bile mar­ket dom­i­nated by Maruti Suzuki and Hyundai Mo­tor.

In ma­jor mar­kets glob­ally, the Ja­panese au­tomaker man­ages two- and four-wheeler busi­nesses un­der one com­pany. In In­dia, where Honda en­tered in as­so­ci­a­tion with dif­fer­ent part­ners — SIEL for cars and the Hero Group for twowheel­ers — it has sep­a­rate units to han­dle the two. Shinji Aoyama, who held the reins at Honda Mo­tor­cy­cle & Scooter In­dia (HMSI) at the time when Honda and Hero ended their joint ven­ture in 2010, is cur­rently the chief of­fi­cer (Asia & Ocea­nia) at the par­ent and the man be­hind the lat­est move.

The aim is to reach the dou­bledigit mark in the In­dian mar­ket share in the next five years, Aoyama told ET. In the April-June quar­ter, Honda’s share was a mere 5.3% in the In­dian pas­sen­ger car mar­ket, where Maruti sold one in ev­ery two units. It was the fifth largest man­u­fac­turer dur­ing the three-month pe­riod, be­hind Maruti, Hyundai, Mahin­dra & Mahin­dra and Tata Motors.

With two-wheeler op­er­a­tions in In­dia bring­ing in strong growth, the em­pha­sis for Honda is to turn around the au­to­mo­bile busi­ness, Aoyama said. Col­lab­o­rat­ing with two-wheeler dealer part­ners, the com­pany ex­pects, will help it ex­pand quickly to ru­ral

Honda is look­ing at col­lab­o­ra­tion be­tween the two-wheeler and pas­sen­ger car sub­sidiaries for the first time mar­kets, which bring in nearly a third of vol­umes for Maruti.

“I think we can col­lab­o­rate more as far as dealer net­work is con­cerned. HMSI deal­ers (who) sell with profit can rein­vest in Honda’s au­to­mo­bile busi­ness. This is (al­ready) hap­pen­ing. We will ac­cel­er­ate this mo­men­tum,” Aoyama said. “For au­to­mo­biles, per­son­ally, I have to fo­cus more on the busi­ness … our po­si­tion is still (in) a sin­gle-digit. I want to make it dou­ble-digit … it is a very dif­fi­cult task. In five years’ time, I want to re­alise this to 10%.” HMSI has been rapidly grow­ing its dis­tri­bu­tion net­work, and has a to­tal of 5,379 dealer out­lets, branches and sub-branches. Honda Cars has 348 sales out­lets in 233 cities. For Honda, the twowheeler arm in In­dia has been a ma­jor suc­cess. In the seven years since Honda sep­a­rated from the Hero Group, it has be­come the largest scooter man­u­fac­turer and the sec­ond largest mo­tor­cy­cle brand in the coun­try. HMSI com­mands a 30% share in the lo­cal two-wheeler mar­ket.

Work is also in progress to ex­am­ine the pos­si­bil­i­ties of tap­ping into the two-wheeler cus­tomer base to buoy car sales. “That can be a pos­si­bil­ity, a col­lab­o­ra­tion be­tween the sub­sidiary of two-wheel­ers and the sub­sidiary of au­to­mo­biles.”

Con­cep­tu­ally, it is a great strat­egy to lever­age the two-wheeler dis­tri­bu­tion net­work to ex­pand the reach of the four-wheeler busi­ness, said VG Ra­makr­ish­nan, man­ag­ing part­ner at con­sul­tancy firm Avan­teum Part­ners. He added that it would be trick­ier for Honda to tap into the two-wheeler cus­tomer base to bring in in­cre­men­tal vol­umes.

April-June quar­ter, its share was a mere in the In­dian pas­sen­ger car mar­ket

“Suzuki could not repli­cate Maruti Suzuki’s suc­cess in its two-wheeler arm as oth­ers like Hero and Honda were al­ready of­fer­ing prod­ucts with strong value propo­si­tion. Given the strength of the Honda brand, the com­pany would be able to bring in in­cre­men­tal vol­umes. It can be com­ple­men­tary, but not a core strat­egy for dou­bling mar­ket share,” he said.

Two-wheeler sales at HMSI in­creased 10.3% to 4.73 mil­lion units in FY17. The tar­get is to add a mil­lion cus­tomers in FY18. Honda Cars’ vol­umes, de­clined 18% to 1,57,313 units in FY17. It rose 21% to 38,562 units be­tween April-June 2017. With sales of 57,984 units, flag­ship City ac­counted for more than two-thirds of the sales last fis­cal. Com­pact cars Jazz, Amaze and WR-V brought in an­other 72,305 units.

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