Honda challenges Bajaj with low-cost, 110 cc motorcycle

New Delhi: Japan’s Honda Motor Co. Ltd, which ended a 26-year partnership with India’s Hero Group last year, has introduced the low-cost Dream Yuga in India to overtake local sales of the nation’s second-largest two-wheeler maker Bajaj Auto Ltd. Honda Motorcycles and Scooters India (HMSI), which introduced the 110cc Dream Yuga on Tuesday, expects its two-wheeler sales to rise 30% to 2.75 million units in the current fiscal, said Yadvinder Singh Guleria, operating head of sales and marketing at HMSI. “This kind of growth will be achieved by our new offering in the mass segment and other successful models.” In India, Bajaj Auto sold 2.56 million motorcycles in the year ended 31 March, registering a growth of 6.3% from a year earlier. Including exports, it sold 3.8 million units. The Indian two-wheeler industry is expected to grow at 11% in the current fiscal, according to Society of Indian Automobile Manufacturers’ forecast. At this rate, the Pune-based company will increase local sales to 2.85 million units. Bajaj Auto only sells motorcycles while more than 60% of HMSI sales come from scooters. “With Dream Yuga, the ratio of motorcycles versus scooters will be 50:50,” said Keita Muramatsu, president and chief executive of HMSI. “Honda is developing a low-cost motorcycle for the African market. But the product is not suited for introduction in India as customers here look for added features in motorcycles. We are working on introducing another product in the mass segment.” This would be the third motorcycle in the 100-110 cc segment in addition to the newly launched Dream Yuga and the existing CB Twister. The showroom price of the new motorcycle is Rs.44,642. “We don’t want to be in the rat race. That’s the reason why we stopped making some successful models. We don’t make cheap 100cc bike. We are in the volume game but not at any cost,” said Rajiv Bajaj, managing director, Bajaj Auto, on Honda Motorcycle’s new mass-segment bike. HMSI has a 13% market share in India. It trails behind Hero MotoCorp, which dominates the two-wheeler market with a 45% share, and Bajaj Auto Ltd, which has a 20% share. While Hero MotoCorp has the capacity to produce 6.4 million units a year, Bajaj’s capacity is 5.5 million units. The cumulative production capacity at HMSI’s three plants in India will reach four million units by the first half of next year. HMSI’s ambitious plans come at a time when inventory has piled up at its dealers and the company is offering discounts on it highest-selling model Activa, said an industry expert familiar with company’s plans. The expert did not want to be identified. Two HMSI dealers, present at the conference, also confirmed the inventory build-up and added that the dealers are offering a discount of as much as Rs.1,500. None of the dealers wanted to be identified. Guleria of HMSI agreed there is inventory at company’s dealerships. “But that is lower than the industry average,” he said. “As far as discounts are concerned, that might be happening at the dealer end. The company has nothing to do with that.” Guleria said that the company’s long-term target is to be the No.1 in India by 2020. HMSI aims to increase its contribution to its parent’s revenue from two-wheeler sales to 30% by 2020 from 13% in the last fiscal. “We have our capacity in place and have a wide range of products to offer,” Guleria said. “What we need to do is to increase our reach in the Indian market and connect with customers. That’s why we are launching a new brand campaign with a brand ambassador.” Mint reported this on 26 March. The company on Tuesday hired Bollywood actor Akshay Kumar as the brand ambassador for the company for the first time in the country. Targeted at the rural market, Honda’s campaign will be aired in all regional Indian languages with the company adopting its global tagline—Power of Dreams—for the first time in the Indian market. Currently, it uses this tagline for its car business in India. “We will be very aggressive in print and digital media,” said Guleria. “Besides, we will be taking the number of total dealerships to 2,000 in the future.” HMSI’s chief executive Muramatsu said that there is a systematic expansion plan in place, which will ultimately make India an export hub for Honda. “India will be the most important market and will continue to be in the focus for the next 10 years. We plan to manufacture most of the Honda products in India, not only for India but for the world,” Muramatsu said.