Hero Honda 2
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Whenthe plantbecome s opera- tiona l in Septem ber-Octo ber 2011, thecombinedcapacityatthetwoman- ufacturingunits—theotherbeingat Manesar(Haryana)—wouldincrease byarou nd37 percentto2.2millio n unitsperannum.HMSI’sManesarfa- cility hasthecapac itytorollout1.6 millionunitsonanannualbasis. Theadditionalcapacity,thecom- panyadmits,wouldnotbesufficient tofullybridgethe gapbetwee n de- mand and supply . HMSI products, atpresent,have a wai ting peri od ranging from six weeks to six months.Thecompanytakes,forin- stance,aroundsevenmonthstode- liveraHondaActivainsouthIndia. HMSIisconsideringathirdfacility, likelytobesetupinthesouthernor theweste rnpart ofthe countr y , to speed up delivery of products. Aoya ma pointsout, “T amilNadu, Andhra Prade sh, Ke ralaand Kar- natakaaccountfor30percentofthe overalldemandfortwo-wheelersin India.Toget her , southand west In- diarepresenthalfofourbusiness.It does not makeanysenseforus to limitour presence tonorthIndi a when the business is spreading acrossthecountry.Itisanaturalde- cision to move south to ensure speedydelivery.”Thedemand-sup- plymismatchisexpectedtobelev- ele d over thenexttwoyears. Industryinsidersalsoraisecon- cern s ove r Hon da’sabil itytoput in placeadistributionnetworkthatcan takeonthemightofHeroHondaand BajajAutowhich have4,500 and 3,600 touch points respectively . Rakesh Batra, analyst, automotive pract ice,Ernst &Y oung , informs, “He ro Hond a has cult ivat ed mar- keti ng initi ative s at the grassro ots lev eloverthe last30years.T ogrow volumes,HMSIwouldhavetoreach outtocustomersinruralareas.The companyalsoneed s toputin place acost-effectivesupplychainforde- liveri ng products .” HMSIhasadistributionnetwork of800 deale rs and sub-d ealer s. The companyplanstoaddon100outlets inthe curr entfisca l andan ave rage of200newsalesstationseveryyear. Rat tansay s,“Itiseasytosetupa dea l- ernetworkbutdifficulttoensurequal- ityservices.Eachofourbusinesspart- nersisthecontrollerofmarketingac- tivitiesinhisownplace.Wehaveded- icatedpeoplewithspecificskillsand the y arenotmereinve sto rs.Oursis asmallerbutasuccessfulmodel.We averagesalesof2,000unitseveryyear fromeachoutlet.” Alsoto be addres sed approp ri- atelyareissuesrelatedtostrainedin- dustrial relat ions whic h have plag uedHMSI.Soon aft er thean- nounceme nt of thesplit withthe HeroGroup,producti on cameto a hal t atthe Manesa r fac tor y onDe- cember 17 lastyear whenworkers protestedanallegedassaultonaca- sual worker bya securi tystaf f.In 2009,HMSI had suff eredlosses of over `300croreafter wor kerswent onago-slowstrikethathadresulted inproductiondippingbyover50per centfor nearlythreemonths. Thebiggestcrisiswaswitnessed in 2005 when a violent strike by work ershad rock ed theGurgao n- Manesar bel t. “La bourprobl emsis anopenissueat HMSI andin the company’sowninterest,thematter hasto beset rig htas soon aspossi - ble,”adds an industryexpert. Above all, experts say, HMSI needstoworkonre-establishingthe uniqu enessof theHonda brandin thecountrysothatconsumerloyal- tyto HMS I does notgettransf erre d toHeroHonda. Fa st forward HMSIknowsithasitstaskcutoutand hasstartedaddressingalltheseissues. “EarlierHondawasdividedonwhat toofferHeroHondaandwhattokeep initsportfolio,”saysRattan.“Thehori- zonwillopenupnow;somecoreprod- uctswillbedevelopedforIndia.When CBShinewas intr oduc ed ther e was no125ccmarket.OvertheyearsShine hasbecome a self-st yledcore prod- uct.”More offer ingswould event u- allycomeupinthe110ccand150cc segm entboth ofwhichare showing healthygrowthnumbers. For India, HMSI will bring in productsthatwillhelpexpanditsre- spectivecategories,saysRattan.The HondaCBStunner,for instance,wasthefirst affordablesportsbike aimedatthecountry’s youthand itopened upa newcateg oryall byitself.Peopleinse- mi-urbanandruralar- eastoday,saysRattan, areaspir ingfor prod - ucts originallytarget- edatyoungstersinur- banmarkets. HMSI may also consider a step- thro ugh forthe Indi - an mark et. Aoy amainforms, “We haveproduct s inEurope andViet- namwit h fl atfloors andlarg er 16- inc h whe elsthat arebettersuite d forIndianroadconditions.Thecon- ceptcanbetriedoutinIndia,though but we do not have any specific plan s at themoment. ” The$600(`27,000)bikethatisbe- ingdevel ope d byHMC inChinais, howev er,unlikel y to findits wayto theIndianmarket.Aoyamaexplains, “Themodelis notsuitedto mark et requirementshereandisbeingbuilt largely for sale in Africa. The re- quirementsintheAfricanmarketare ver y ba sicwhi chis notsoin Ind ia. Tillrecently even headlig hts with- outviso rs wer e notaccep tedin th markethere.” HMSIhasalsofirmedupplanst launchthe250ccCBR250RinApri thisyear. F ollowi ng this,two/thre models,includingpossibleupgrade willbe intro duce d everyyearin th cou ntr y . Als o onthe card s isan au tomaticscoote r whic h woul d be in troducedin 2011-12. Infac t,ithas nopla nsto ta keit eyesoffthescootermarket.Aoyam says,“Peopleusedtobelievetherun ningcostof scoo tersis moretha thatofmotorcycles.Theconceptio haschanged—thecurrentmileag ofscoote rs iscompar abl e tothat o mot orcycles . Theweightof auto maticscootershasin crease d fro m 12pe centto25percenti the o ve ra ll t wo wheelermarket ove the last four years Weigh t of automati scooterswillnowbe comebiggerin over alltwowheel ersale in the country. W wil l continueto ac tively focus on th segment.” Lastyear,thecom pany sold 7.5 lak scoo tersand 5.2lakh mot orcy cles whichithopeswouldincreaseto8. lakhunitsand7.4lakhunitsrespec tivelythisfiscalintandemwithcat egorygrowth.Accordingtodataavail ablefromSIAM,1.9millionscooter hav e bee nsoldin thecou ntr y inth fir st11 mon thsof thecurre ntfisca whichisanincreaseof46.58percen as comp aredto thecorrespondin perio d lastyear . Moto rcycl e salesi theperi odhaverisenby 23. 57pe centto7.4millionunits. The goal is clear for Aoyama “Hondaisthenumberonetwo-wheel erbrandwor ldwid e andwewantt bethenumberoneplayerinIndiaa well,”hesays. NEW C O UR S E CONTINUED FROM PAGE 1 HMSI NEED S TO WO RK ON RE - EST ABLIS HING THE UNI QUE NES S OF THE HO NDA BRAND IN THE COU NTRY SO THA T CONS UMER LOY AL TY DOES NOT GET TRAN SFERR ED TO HE RO HO ND A 200 1-02 200 2-0 3 200 3-0 4 2004-05 200 5-06 200 6-07 2007-08 200 8-09 200 9-1 0 2010-11* Sc oo te rs 55 ,5 00 166, 30 0 341,40 0 486, 15 0 49 9,900 546,70 0 629, 09 0 666,450 751, 90 0 790,57 2 Motorcycles 0 0 0 64,950 100,700 168,600 278,110 403,750 52 0,000 759,428 T ot al 55 ,5 00 166,30 0 341, 40 0 551,100 600,600 715, 30 0 90 7,20 0 1,070,200 1, 27 1,90 0 1 ,5 50,0 00 Industry sales 4,321,0 00 5,053,000 7,948,0 00 6,576,0 00 7,580,0 00 8,482,0 00 8,087,000 8,481,0 00 10,569,000 11,000,000 Mark et share(in%) 1 3 4 8 8 8 11 12 13 14 Source: Honda Motorcycle & Scooter India * Forecast BY THE NUMBERS How HMSI figures (domestic & export) compare with the overall industry sales SANJAY K SHARMA
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Whenthe plantbecomes opera-tional in September-October 2011,thecombinedcapacityatthetwoman-ufacturingunits—theotherbeingatManesar(Haryana)—wouldincreasebyaround37 percentto2.2million
unitsperannum.HMSI’sManesarfa-cility hasthecapacitytorollout1.6
millionunitsonanannualbasis.Theadditionalcapacity,thecom-
panyadmits,wouldnotbesufficienttofullybridgethe gapbetween de-mand and supply. HMSI products,atpresent,have a waiting periodranging from six weeks to sixmonths.Thecompanytakes,forin-stance,aroundsevenmonthstode-liveraHondaActivainsouthIndia.HMSIisconsideringathirdfacility,likelytobesetupinthesouthernorthewesternpart ofthe country, tospeed up delivery of products.Aoyama pointsout, “TamilNadu,Andhra Pradesh, Keralaand Kar-natakaaccountfor30percentofthe
overalldemandfortwo-wheelersinIndia.Together, southand west In-diarepresenthalfofourbusiness.Itdoes not makeanysenseforus tolimitour presence tonorthIndiawhen the business is spreadingacrossthecountry.Itisanaturalde-
cision to move south to ensurespeedydelivery.”Thedemand-sup-plymismatchisexpectedtobelev-eled over thenexttwoyears.
Industryinsidersalsoraisecon-cerns over Honda’sabilitytoput inplaceadistributionnetworkthatcantakeonthemightofHeroHondaand
BajajAutowhich have4,500 and3,600 touch points respectively.Rakesh Batra, analyst, automotivepractice,Ernst &Young, informs,“Hero Honda has cultivated mar-keting initiatives at the grassrootsleveloverthe last30years.Togrowvolumes,HMSIwouldhavetoreachouttocustomersinruralareas.Thecompanyalsoneeds toputin placeacost-effectivesupplychainforde-livering products.”
HMSIhasadistributionnetworkof800 dealers and sub-dealers. Thecompanyplanstoaddon100outletsinthe currentfiscal andan averageof200newsalesstationseveryyear.
Rattansays,“Itiseasytosetupa deal-ernetworkbutdifficulttoensurequal-ityservices.Eachofourbusinesspart-nersisthecontrollerofmarketingac-tivitiesinhisownplace.Wehaveded-icatedpeoplewithspecificskillsandthey arenotmereinvestors.Oursis
asmallerbutasuccessfulmodel.Weaveragesalesof2,000unitseveryyearfromeachoutlet.”
Alsoto be addressed appropri-atelyareissuesrelatedtostrainedin-dustrial relations which haveplaguedHMSI.Soon after thean-nouncement of thesplit withthe
HeroGroup,production cameto ahalt atthe Manesar factory onDe-cember 17 lastyear whenworkers
protestedanallegedassaultonaca-sual worker bya securitystaff.In2009,HMSI had sufferedlosses of over `300croreafter workerswentonago-slowstrikethathadresultedinproductiondippingbyover50percentfor nearlythreemonths.
Thebiggestcrisiswaswitnessedin 2005 when a violent strike byworkershad rocked theGurgaon-Manesar belt. “Labourproblemsisanopenissueat HMSI andin thecompany’sowninterest,thematterhasto beset rightas soon aspossi-
ble,”adds an industryexpert.Above all, experts say, HMSIneedstoworkonre-establishingtheuniquenessof theHonda brandinthecountrysothatconsumerloyal-tyto HMSI does notgettransferredtoHeroHonda.
Fast forwardHMSIknowsithasitstaskcutoutandhasstartedaddressingalltheseissues.“EarlierHondawasdividedonwhattoofferHeroHondaandwhattokeepinitsportfolio,”saysRattan.“Thehori-zonwillopenupnow;somecoreprod-uctswillbedevelopedforIndia.WhenCBShinewas introduced there wasno125ccmarket.OvertheyearsShinehasbecome a self-styledcore prod-uct.”More offeringswould eventu-
allycomeupinthe110ccand150ccsegmentboth ofwhichare showing
healthygrowthnumbers.For India, HMSI will bring in
productsthatwillhelpexpanditsre-spectivecategories,saysRattan.TheHondaCBStunner,forinstance,wasthefirstaffordablesportsbikeaimedatthecountry’syouthand itopenedupa newcategoryallbyitself.Peopleinse-mi-urbanandruralar-eastoday,saysRattan,areaspiringfor prod-uctsoriginallytarget-edatyoungstersinur-banmarkets.
HMSI may alsoconsi der a step-through forthe Indi-an market. Aoyamainforms, “Wehaveproducts inEurope andViet-namwith flatfloors andlarger 16-inch wheelsthat arebettersuitedforIndianroadconditions.Thecon-ceptcanbetriedoutinIndia,though
but we do not have any specificplans at themoment.”
The$600(`27,000)bikethatisbe-ingdeveloped byHMC inChinais,however,unlikely to findits waytotheIndianmarket.Aoyamaexplains,“Themodelis notsuitedto marketrequirementshereandisbeingbuiltlargely for sale in Africa. The re-
quirementsintheAfricanmarketarevery basicwhichis notsoin India.Tillrecently even headlights with-
outvisors were notacceptemarkethere.”
HMSIhasalsofirmeduplaunchthe250ccCBR250Rthisyear. Following this,twmodels,includingpossibleuwillbe introduced everyyecountry. Also onthe cardstomaticscooter which woutroducedin 2011-12.
Infact,ithas noplanstoeyesoffthescootermarket.
says,“Peopleusedtobelieveningcostof scootersis mo
thatofmotorcycles.Theconhaschanged—thecurrentmofscooters iscomparable tmotorcycles. Theweight
maticscootercreased fromcentto25pethe overalwheelermarthe last fouWeight of auscooterswillcomebiggeralltwowheein the counwill continutively focus
segment.”Lastyear,pany sold 7
scootersand 5.2lakh motowhichithopeswouldincrelakhunitsand7.4lakhunitstivelythisfiscalintandemwegorygrowth.AccordingtodaablefromSIAM,1.9millionhave beensoldin thecount
first11 monthsof thecurrewhichisanincreaseof46.58as comparedto thecorrespperiod lastyear. Motorcycletheperiodhaverisenby 2centto7.4millionunits.
The goal is clear for A“Hondaisthenumberonetwo
erbrandworldwide andwebethenumberoneplayerinwell,”hesays.
NEWCOURSE
CONTINUED FROM PAGE 1
HMSINEEDS TO
WORKONRE-
ESTABLISHINGTHE
UNIQUENESS OFTHE
HONDA BRAND IN
THECOUNTRY SO
THAT CONSUMER
LOYALTYDOESNOT
GET TRANSFERRED
TOHEROHONDA
2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11*
Scooters 55,500 166,300 341,400 486,150 499,900 546,700 629,090 666,450 751,900 790,572
Motorcycles 0 0 0 64,950 100,700 168,600 278,110 403,750 5 20,000 759,428
Total 55,500 166,300 341,400 551,100 600,600 715,300 907,200 1,070,200 1,271,900 1,550,000
Industry sales 4,321,000 5,053,000 7,948,000 6,576,000 7,580,000 8,482,000 8,087,000 8,481,000 10,569,000 11,000,000
Market share(in%) 1 3 4 8 8 8 11 12 13 14
Source: Honda Motorcycle & Scooter India * Forecast
BY THE NUMBERSHow HMSI figures (domestic & export) compare with the overall industry sales
SANJAY K S
