Do we have a new Hero?

The two-wheeler business is turning into a steeplechase, with one company trying to outperform the other, and all facing common obstacles As far as initial results for two-wheeler companies, especially in terms of volumes, for the annual as well as the financial year show, good times for bike and scooter makers are yet to begin. And as far as January-March quarter earnings go, while India’s leading player Hero MotoCorp saw a 20% rise in net profits, which was below expectations, the country’s second-largest bike maker Bajaj Auto’s net profits were down 45%. TVS Motor, too, didn’t see very exciting results for the same period. Overall, two-wheeler sales remained stable with most companies reporting single-digit year-on-year growth in sales. In fact, if there was some good news on the two-wheeler front, it came from Honda Motorcycles and Scooters India (HMSI). The company not only beat Bajaj in terms of volume sales in the month of March, it also posed a brief threat to Hero. HMSI saw close to 50% rise in sales in the month of March this year as compared to March 2011. At the same time, Mahindra and Mahindra, which is a relatively new entrant to the two-wheeler industry, is rejigging its two-wheeler business. Still, as we had mentioned earlier, this year promises to be quite an exciting one for two-wheeler makers. While Hero is doing what Bajaj and TVS did after they separated from Kawasaki and Suzuki, respectively, which is upping its R&D ante, HMSI has taken a new approach towards the Indian market. HMSI had unveiled as many as seven products at the Auto Expo in Delhi earlier this year, and with the launch of the smallest bike Honda has ever made—the Dream Yuga—last month, the company now boasts of an enviable inventory. In fact, the company is now India’s third-largest player, having overtaken TVS Motor. YS Guleria, vice-president, sales & marketing, HMSI, says, “We aim to become the largest two-wheeler company in India by 2020.” This is the year when HMSI embarks on its journey of being the ‘only’ Honda in India. “That’s why we are carrying forward Honda’s global slogan—The Power of Dreams—in the Indian two-wheeler market,” he says. HMSI has taken a three-pronged approach towards the Indian market in order to better connect with the consumer. “One is our new communication strategy, and this slogan, which is being translated into various regional languages, forms a part of it. Then we have taken the celebrity route to emotionally connect with the consumer—Akshay Kumar is the brand ambassador for the Dream Yuga. And then there is the rational approach, which is through our world-class products,” Guleria adds. On network expansion, Guleria says that last financial year HMSI had 1,500 touch points and this year the company aims to have 2,000 touch points. Last year was eventful for Hero MotoCorp; the company not only went solo quite successfully, but also unveiled a new brand identity, followed by the Hum Main Hai Hero campaign. The company recently launched its second scooter—the 110cc masculine Hero Maestro—and will soon be coming up with the 125cc Ignitor and the 110cc Passion XPro motorbikes. Anil Dua, senior V-P, marketing & sales, Hero MotoCorp, says, “Marking its 10th consecutive month of over 5 lakh sales, Hero sold 5,56,644 two-wheelers in May, a growth of 11.3% over the corresponding month last year when the company had sold 5,00,234 units. The company’s sales in May this year surpassed its previous highest of 5,51,557, recorded only last month.” The company, no doubt, has been setting industry benchmarks. Dua attributes this to the trust the company’s customers have put in Hero. “Notwithstanding the slowdown in the overall economy and the prevailing sentiment in the country, we are cautiously optimistic that a normal monsoon and the consequent good harvest should perk up the mood in the coming months,” he says. Hero has been ramping up capacity and soon will be taking its installed capacity to 7 million units. Hero, which has 5,000 touch points currently, aims to add another 400 touch points to its network. The company’s 46% sales come from the rural markets and Dua says, “We have covered more than a lakh villages under our Har Gaon Har Aangan umbrella platform and now with the Service Har Jagah initiative we are also providing service to customers’ bikes in their respective villages. We have taken up our share in the domestic motorcycle market from 54% a year ago to over 55% at present.” For Bajaj Auto, the challenge to hold on to the second position was probably never this difficult; the company was briefly pushed to the third spot by HMSI in March this year before Bajaj regained its position on the back of its strong network and product line up. Bikes, it must be noted, is the only two-wheeler segment where Bajaj is present—in 2009, the company made a total exit from the scooter market, a segment that is beginning to show growth of late. Bajaj, too, is looking at new motorbike launches to strengthen its position. Earlier this year, the company had brought in the KTM 200 Duke and also launched the new Pulsar 200NS—which were liked by performance bike aficionados. Then, with the 125cc Discover ST, the company now has a focused approach of being a motorcycle specialist. K Srinivas, president, motorcycle business, Bajaj Auto, says, “We will continue with our focused approach as a motorcycle specialist. This is what has enabled us to become the second-largest bike maker in India and the third-largest globally,” adding, “While we are indifferent to the sale of scooters and mopeds of other manufacturers, we would like to place on record that for the month of April we continue to be the second-largest two-wheeler manufacturer in India and have a significant lead over the third-largest one.” The company, on the back of new launches, is confident of outpacing industry growth in 2012-13. TVS Motor, which recently came up with the refreshed versions of its RTR160 and RTR180, has planned a series of new product launches in FY13, along with upgrades of existing products. HS Goindi, president, marketing, TVS Motor, says, “Our 2012 edition of the Apache series RTR has been accepted well by the consumers. We will be launching one new executive segment motorcycle in August 2012, with plans to launch another new motorcycle as well as a new scooter in the last quarter of this financial year.” On the growth front, Goindi adds that while the industry is expected to grow at around 10% in 2012-13, with these launches, TVS expects to grow ahead of the industry. Mahindra 2 Wheelers Ltd, which saw decent growth in April, is riding high on its ‘romba solid’ Duro—and the scooter’s smart marketing—which has given the company the much-required visibility. The company is also getting its R&D act together, especially after last year when its only motorcycle, the 100cc Stallio, faced some technical issues. Sarosh Shetty, V-P, marketing, Mahindra 2 Wheelers, says, “We are pleased with the fact that the Duro DZ is receiving great response. The scooter showcases our strategy to build advanced R&D technology capabilities to offer high performance products that address the specific needs of Indian consumers in Indian conditions, including small towns.” He adds that the company will invest in building differentiated products and brands over time. In fact, Mahindra 2 Wheelers has plans to launch a range of scooters and motorcycles, each targeting distinct consumer segments and needs. “We will invest in building distinctive brands and in expanding distribution in line with needs of the relevant consumer segment. So, by the end of this financial year, we will offer a full range of scooters and motorcycles,” says Shetty. In the two-wheeler business we have one company trying to outperform the other, and all are facing common obstacle in the form of slowing sales, primarily due to worsening macroeconomic indicators. So although the sales might remain subdued in the coming months, the companies are making efforts to win over prospective consumers. The entry-level segment, which now accounts for over 70% of the motorcycle market, has once again emerged as a promising segment. The year will also tell us if we are ready for a scooter revolution. In the process, while Hero is relatively in a strong leading position, Bajaj and TVS are facing stiff competition from HMSI, which, in turn, is showing signs to turn into the new hero, and companies such as Mahindra are carving a niche for themselves in the two-wheeler market.