Honda to lose motorcycle race

Honda Motorcycle and Scooter India (HMSI) may lose market share to competitors like Hero Honda and Bajaj Auto in the domestic two-wheeler market in this financial year, as it struggles to meet surging demand, a top official said.

“Because of the production constraints, we are losing market share and even the Indian market is growing faster than expected,” said Shinji Aoyama, president and chief executive officer of HMSI, the wholly owned subsidiary of Japan’s Honda. The domestic two-wheeler market grew by over 26 per cent while HMSI grew slower at a tad over 19 per cent year-on-year (y-o-y) according to data from the society of Indian automobile manufacturers.

The Indian subsidiary of Honda Motorcycles had a 12.7 per cent market share in the domestic two-wheeler space in 2009-10. Affiliate Hero Honda, which is 26 per cent owned by Honda Motor Company is the market leader in India with over 46 per cent share of the two-wheeler market. Due to sudden surge in demand for scooters and motorcycles post rebound in the economy, HMSI produced 12.78 lakh units up 19.3 per cent y-o-y. This was almost 28,000 more than the production target for 2009-10. Despite this sales are failing to keep pace with the demand from customers for its bikes such as Unicorn and scooters such as Activa.

The company said it has a waiting period ranging from more than one month to three months on its popular models. Prospective customers have a waiting period of two-three months between booking and delivery for the country’s most popular ungeared scooter Honda Activa. For Honda Shine and Honda CB Unicorn motorcycles, the wait period is over one to two months in some parts of India.

“The demand for all these three models is high in the western and southern part of the country, which is leading to a demand supply gap,” said Aoyama. Abdul Majeed, auto practice, leader, PwC India said, “More the waiting period, more the company is likely to lose customers.”

In the present financial year, analysts forecast the two-wheeler market to accelerate its growth to 30 per cent y-o-y. “Even after adding one assembly line at Manesar in Haryana, which will up our capacity to 16 lakh units per year, we would not be able to meet the full growth in demand,” said Aoyama.

Customers in India, who are spoilt by the multitude of choice available in the market, are unlikely to wait months before a Honda product to be delivered, said industry experts. As a result they forecast that Hero Honda and Bajaj Auto the current leaders in the two wheeler market in India would take away market share from HMSI as they have invested in significant capacity to cater to the growing market, said analysts. Majeed also said that HMSI tended to flag its existing model line-up rather than constantly refreshing models which some of its competitors do. Angel Brok­ing, auto analyst, Vaishali Jajoo said, “Bajaj Auto is poised to win back some of its lost market share over the next couple of years, with multiple new launches in the motorcycle segment.”

“HMSI continued with well performing models like Unicorn and Shine for a longer period. Whereas, customers always look for a product to be improved on the key parameters of better fuel efficiency, comfort and style. This is where Hero Honda, Bajaj Auto and TVS score,” added Majeed.

“HMSI focus is also on 125cc and above models. But the majority of volumes come from below 125cc-powered motorcycles. So HMSI should focus on that segment as well in addition to expanding its dealer network across the country, especially in rural areas,” he said. HMSI is now investing Rs 500 crore to set up a second factory at Tapukara in Rajasthan. The new plant is scheduled to become operational in the second half of 2011 with annual production capacity of six lakh units.