Honda Motorcycle and Scooter India (HMSI), which enjoys a dominant position in the western and southern two-wheeler markets in the country, has now set its sights on making inroads into the large northern market, a territory over which industry leader Hero Motocorp has held its sway for decades. The northern market is predominantly agrarian and motorcycles have been the preferred two-wheeler choice there. On the pan-India basis, HMSI was able to corner 30% of the market share in April-November of the current fiscal as against 36% for Hero MotoCorp, making the former a close second in the Indian two-wheeler market where the competition has intensified.
HMSI, while having a notable presence in motorcycles, has mainly penetrated markets with its urban-centric automatic scooters, a segment it dominates with a 60% market share in the country. It is now looking to replicate its success in the south and west, based on a scooter-led strategy, in the north as well. YS Guleria, senior vice-president – sales and marketing, HMSI, said: “There is a shift that is happening towards scooters even in the hardcore motorcycle markets. Scooters is one big opportunity for us that lies in markets like Uttar Pradesh, Bihar, Orissa and Rajasthan.” To penetrate these key agrarian states, HMSI is not only trying to expand its product line but is also broadening its network. “Considering the geographical spread of India, in two-three years, we may be able to sufficiently cover the country,” Guleria said. Not one to be caught off-guard, Hero MotoCorp has drawn up its own strategy to not just counter HMSI’s offensive, but even invade the former joint venture partner’s bastion. According to an industry source, Hero Motocorp is planning to unveil two or more scooters as early as the upcoming auto expo in February. There is also a buzz that Hero will bring out its first scooter in the 125cc segment keeping in mind the metro cities. About 9% of HMSI’s scooter volumes come from the 125cc segment; the rest comes from the 110cc models.
Hero MotoCorp, known for its strong brand recall and countrywide distribution network, sells almost 55-60% of its two-wheelers in rural markets. In contrast, 70% of HMSI’s sales are in urban areas. Hero’s plans to launch new scooter models comes at a time when it is losing significant market share in the segment, which is growing at a breakneck pace. While scooters have grown at a rate of between 11% and 23% over the past five financial years, motorcycles have only managed a 0.1-4% annual growth in the period (barring a dip of 0.24% in FY16). Seven years back, one in every five two-wheelers sold in India was a scooter. Now, it is one in every three. Hero, which was at the number two position in the scooter segment since 2013, lost its position to TVS Motor in fiscal year 2017. TVS Motor has ridden on the success of its popular scooter brand, Jupiter, to wrest the second spot. Sales of TVS scooters have risen 33% in the year, against a paltry 2% increase for Hero. HMSI is at present the number one two-wheeler brand in 15 states and two Union Territories, which together account for a massive 52% of all two-wheelers sold in India. Minoru Kato, president and CEO, HMSI, said: “We have invested with speed and aggression to meet demand for quality Honda products. In just six years, Honda has expanded from one to four plants, launched new exciting models and tripled its network reach.” According to Edelweiss Securities, Hero MotoCorp’s leadership is being challenged due to rising share of scooters and premium motorcycles, a trend that has helped HMSI. “It is interesting to note that demand has shifted to scooters despite lower fuel economy and premium pricing compared to corresponding commuter motorcycles. The ease of driving and convenience has spearheaded surge in demand for scooters. Scooter penetration has jumped sharply in recent years, with their share in two-wheeler volumes catapulting to 32% in FY17 from 17% in FY11. In the commuter space, the share of scooters rose from 22% in FY11 to 40% in FY17.”