If petrol costs go up 10%, so should our mileage

Though the share of entry-level bikes (100-110cc) in India has come down to 50 per cent from the historical highs of 80 per cent a few years ago, it still sees sales of 6-6.5 million units every year. Honda Motorcycle and Scooter India (HMSI), the country’s third-biggest two-wheeler seller, is trying to penetrate this segment with the new Dream Yuga, a 110-cc bike aimed mostly at the rural market. Keita Muramatsu, president and chief executive officer of HMSI, is targeting market share to increase to nearly a fifth of the local market, riding high on the Yuga, priced at Rs 48,028 (ex-showroom, Mumbai). On the sidelines of the Dream Yuga’s launch in Mumbai today, he talked about the company’s future plans. Edited excerpts: Are you looking at developing more India-specific models like Dream Yuga? Honda Research and Develop-ment India (HRDI) is already located near Manesar, very close to our factory. We want to develop new bikes using Indian materials and technology. Already, the R&D (division) is using such materials. The Dream Yuga has nearly 100 per cent localisation; only some components are imported. With the R&D facility growing, do you think you can have a bike entirely developed in India? From the beginning, we have tried to develop a bike made from Indian materials, designed for Indian specifications. We have to check how we can make high quality, low-cost products like the Dream Yuga, which has high performance and high mileage. How are you expanding sales network? We are expanding our sales touch points to 2,000 this year from 1,500 last financial year. India is very vast and we would require more (sales points) in the future. The Dream Yuga is targeted at the rural market more than the urban market, because the Yuga returns the highest mileage in the Honda line-up world-wide. What is the split between motorcycles and scooters? The Activa scooter has strong demand, and is the largest seller in India. The split is about 50:50 now, but it could move slightly in favour of motorcycles with the launch of the Yuga. This could be 52:48 in favour of motorcycles. You had a market share of around 15 per cent last financial year. How much will that grow this year with the Yuga in the market? This financial year, we will have a total production capacity of 2.7 million. We could grow our market share to 17-18 per cent in the next 12 months. What is the target for this year in terms of sales? We have a target of selling 2.75 million units this year, of which the Dream Yuga will be 300,000 units. The two-wheeler industry is expected to grow at 12 per cent this year, but Honda has already grown by more than 50 per cent so far this year. What effect do you see on demand with the rise in petrol costs? The impact is felt on the four-wheeler segment more. In the two-wheeler segment, the customer may prolong his next buy, or change to a new motorcycle. But, if petrol costs go up by 10 per cent, then our mileage should also go up by 10 per cent. This is the challenge for Honda.