Honda set to fire on all cylinders in India

Honda's sales numbers in November at 1.99 lakh motorcycles and scooters did not just catapult it to the third slot in the market after Hero MotorCorp and Bajaj Auto. It is the beginning of a new India strategy which will focus on a rapid product rollout at aggressive prices.

By March next year, Honda Motorcycle & Scooter India (HMSI) will commission its second production line at the newly commissioned Rajasthan plant. Along with the Manesar unit, the company's monthly output will then go up to 2.4 lakh units or nearly three million two-wheelers annually. This number will be sustained through 2012-13 by which time work on the third facility in Karnataka will have begun.

Reports have been doing the rounds that HMSI is already scouting for a fourth plant though this may seem a bit farfetched for the moment. It could well be a reality post 2014-15 when all three facilities – Haryana, Rajasthan and Karnataka – are at optimal production levels and rolling out over four million units annually.

Sources say Honda will be keen to prove a point after its recent split with the Hero Group which has, since, taken over the two-wheeler leadership mantle. The Japanese automaker has realised that quite unlike the 1980s, when it first entered the two-wheeler market (in two separate partnerships with the Firodias and Munjals), the landscape has changed considerably.

For one thing, local competition has just got a lot stiffer. Not only will it have to contend with its former ally, the Hero Group, but Bajaj Auto has also staged a strong comeback over the last two years. TVS Motor, likewise, would be keen to get back the third slot from HMSI.

Its global CEO, Mr Takanobu Ito, had referred to this in a recent presentation. “Today, key competitors in those (emerging) markets are Chinese and Indian makers. In order for Honda to remain a market leader, it must not only maintain the high attractiveness and quality of products but also further improve cost-competitiveness to match the low prices of these competitors,” he had said.

Rivals say Honda will pull out all stops to ensure that it emerges triumphs in the pricing game. Having been associated with the Hero Group for over two decades, it is not unaware of the fact that it will have to target the Splendor and Passion motorcycles to make a difference in the leadership game.

“The only way to do this is to offer a superior product at a lower price. Honda is a global company that can leverage economies of scale to make this a reality. It can afford to take a beating on its India bottomline quite unlike other locally listed companies,” an industry veteran told Business Line.