Honda Motorcycles and Scooter India (HMSI) now commands an enviable 59% share of the scooters market way ahead of Hero MotoCorp’s 17% and TVS Motors’ 14 %. The Japanese auto major reported scooter volumes of 7.97 lakh units in the three months to June quarter, up 28% year-on-year; it exited 2015-16 with 2.78 million scooters, an increase of around 11.5% over the previous year.
Owing to a shortage in manufacturing capacity, the firm had lost some ground with the share falling to 51% in December, 2015. But the new plant at Sanand is now running at around 50% and by December, the company can tap a capacity of nearly six million units across four plants in Karnataka, Mannesar and Gujarat. Sanand, built at a cost of Rs 2,500 crore, can offer Honda 1.2 million units of capacity.
What has helped HMSI stay ahead of the pack is its top -selling model: the Activa 125cc model which competes with Hero's Duet and TVS's Jupiter. In April and May, volumes of the Activa jumped 30% y-o-y to 4.71 lakh units; in comparison the Duet sold 72,575 units while TVS's Jupiter sold 87,123 units.
Earlier this year, the Activa toppled the Hero Splendour to become the top selling two-wheeler in India; it has now outsold the Splendour for six months in a row. Splendour had been the top-selling two-wheeler for 17 years. Honda's Aviator hit the 20,000 sales mark recently and the Dio ic clocking volumes of just above 30,000. The product development process is faster at HMSI, according to analysts.
“While the overall vehicle development time stood at 24-42 months for Honda, it was much higher at three to four years for HeroMoto as most processes were outsourced,” analysts at Nomura wrote in a report on the sector.
To boost sales the company is adding 800 new touch-points to its network which will cross the 5,300 mark by March 2017 taking Honda deeper into hinterland, Y S Guleria, Senior Vice President, HMSI told FE. "We are looking to sell close to 5.4 million two-wheelers this fiscal and cash in on the festive demand," Guleria said. Sridhar V, Partner, Grant Thorton, says the reach of the dealerships beyond the urban markets would help. Kumar Kandaswamy, Partner, Deloitte LLP, points out that the increase in salaries of government officials following the implementation of the 7th pay commission could result in some fillip to sales. "Scooters are primarily an urban product and B and C class government employees are stationed in the semi-urban and rural areas so the boost could be smaller than that for motorcycles." Kandaswamy said.
An assessment by Nomura puts the contribution of scooters to the total two wheeler space at 45% by 2019-20 from 34% in 2015-16, implying a volume growth annually of 20-21% in the next five year. The volume of sooters sold in 2015-16 was 5.03 million units and by March end this is expected to be 6.05 million units.