Hero No 1

Updated: Jan 21 2002, 05:30am hrs
It is now official. India’s motorcycle manufacturer, Hero Honda, has become the world’s largest two-wheeler company. This distinction was based on the company’s sales of 1.3 million units in 2001, which has taken it past a particular Chinese firm which split into two companies as part of a restructuring drive. But make no mistake about this. For all the celebrations regarding Hero Honda’s leadership, the dragon’s output of 11.3 million odd motorcycles in 1999 still accounts for one-half of the world’s known motorcycle production. The roughly comparable figure in India was 1.79 million in 1999-2000. For every Hero Honda or Bajaj Auto Ltd, there are as many as 21 Chinese firms which produce 100,000 units each and 13 others with 200,000 units a piece. Clearly, India’s two-wheeler manufacturers need to have a China plan to cope with the competition. The preconditions for doing so happen to be good at present. As India is one of the largest two-wheeler markets, other Indian manufacturers also can acquire critical mass to become global players. And indeed they might well be doing so. Those like the TVS Motor Company are even thinking of setting up overseas plants in Asia.

Hero Honda’s new position, however, deserves closer attention. Record sales volumes have gone hand in hand with robust financials. In the first nine months of this fiscal, its operating profit margin rose to 13.34 per cent. Few of its rivals can match such a performance. The company has been a leader in introducing fuel efficient models, thanks to the support from its joint venture partner, Honda Motor Company of Japan. The company intends to produce 1.4 million two-wheelers this fiscal and is targeting $1 billion in sales by 2002-2003. That should be no problem, considering its healthy bottomline. It is also a zero-debt company and can aggressively add to production volumes. Indeed, there are plans to set up a third plant which will take its capacity beyond two million units. The Indian market is bound to grow with faster GDP growth. Two-wheelers per 1,000 people in India currently are only 27, rather low in a larger Asian context where the comparable figures for countries like Malaysia and Thailand are much higher at 224 and 174 respectively. That indeed indicates the vast upside potential as more Indian two-wheeler giants acquire global scales.