In what turned out to be a lacklustre festive season for automobile manufacturers, passenger car sales in the domestic market declined 23.8 per cent last month, the sharpest drop the industry has witnessed in over a decade.
According to data available with the Society of Indian Automobile Manufacturers (SIAM) on Wednesday, domestic passenger car sales stood at 1,38,521 units in October, compared to the 1,81,704 units sold in the same month last year.
For the fourth consecutive time, car sales have declined this financial year on the back of rising interest rates, higher fuel costs and disruption in production schedules at the country’s largest car maker Maruti Suzuki India Ltd.
Vishnu Mathur, director general, SIAM, said, “The industry was expecting to grow in the festive season but consumer sentiment continued to remain weak due to frequent increase in interest rates and fuel prices. This is the steepest decline since December 2000, when car sales in the country had dropped by 39.86 per cent.” The Reserve Bank of India raised lending rates by 25 points last month, which is the 13th rise since last March. Petrol prices, too, shot up by Rs 1.80 to Rs 68.64 per litre (in Delhi).
“Typically sales grow by 30-40 per cent during festive season. But the rate rise have deterred consumers, who have already availed of home loans, to increase their outgo in EMIs by investing in a new car,” said Arvind Saxena, senior director, marketing and sales, Hyundai Motor India Ltd. In India, as much as 70 per cent of vehicles are purchased by availing of financing solutions.
The sporadic labour agitations at Maruti Suzuki added to the woes dragging down industry sales numbers. Maruti Suzuki, which accounts for over 40 per cent of sales in the domestic market, could hawk only half the volumes it had reported in sales last October. The company sold 51,458 units last month as compared to the 107,555 units sold in the same month last year.
With three strikes crippling production at its Manesar unit since June this year, MSIL has recorded production loss to the tune of 74,500 units. Revenue losses have mounted to Rs 2,200 crore.
Last month, SIAM had significantly lowered the passenger car sales growth forecast for the current financial year to two-four per cent for the second time, after pegging it at 10-12 per cent in July, as against 16-18 per cent announced at the beginning of the financial year.
Two-wheeler sales increased by two per cent last month to 1,147,621 units from 1,125,052 units sold in October 2010. While motorcycle sales grew 0.7 per cent during the month to 879,883 units from 874,146 units in the corresponding month last year, the scooter segment witnessed a growth of 12.2 per cent at 211,360 units. Hero MotoCorp’s sales increased by 1.2 per cent to 497,105 units. Bajaj Auto posted an increase of 1.90 per cent at 244,503 units.
Sales of commercial vehicles rose by 18.53 per cent to 61,800 units from 52,138 units in the year-ago period. Light commercial vehicle sales grew by 15.34 per cent to 34,776 units from 30,151 units last year. Medium and heavy commercial vehicle sales stood at 27,024 units as against 21,987 units in October last year, up 22.91 per cent, SIAM said. Total sales of vehicles across categories registered a decline of 1.05 per cent to 14,41,594 units in October from 14,56,901 units in the same month last year.
HIPL revokes 51.2 lakh shares in Hero MotoCorp
The country's largest two-wheeler maker Hero MotoCorp on Thursday said its promoter firm Hero Investments Pvt Ltd (HIPL) has revoked 2.56 percent shares from IL&FS Trust Company.
In a filing to the BSE, the company said it has revoked a total of 51,20,000 shares in two trances from IL&FS.
Although the company has not specified how much money it paid to IL&FS for revoking the shares, it can be estimated to be around Rs 1,100 crore on the basis of Hero MotoCorp's closing price on BSE on November 1, the date of the exercise.
Post the revoke exercise, 80,000 shares are left pledged with IL&FS, comprising 0.04 percent stake in Hero MotoCorp, it added.
HIPL's stake in the company is now increased to 43.29 percent, the filing said.
In a filing to the BSE, the company said it has revoked a total of 51,20,000 shares in two trances from IL&FS.
Although the company has not specified how much money it paid to IL&FS for revoking the shares, it can be estimated to be around Rs 1,100 crore on the basis of Hero MotoCorp's closing price on BSE on November 1, the date of the exercise.
Post the revoke exercise, 80,000 shares are left pledged with IL&FS, comprising 0.04 percent stake in Hero MotoCorp, it added.
HIPL's stake in the company is now increased to 43.29 percent, the filing said.
Mahindra 2wheelers launches special edition Rodeo scooter
Mahindra 2 Wheelers has launched new variants for the 125cc Rodeo scooter with special edition dual colours. Focussed on young professionals and college students, the Rodeo now gets the sterling black and the scarlet black colour variants. They also sport features such as telescopic suspension, 4-in-1 anti theft lock and digital speedometer. Other 125cc scooters from Mahindra include the Duro, a family scooter and the Flyte which is marketed with the woman customer in mind.
Moped sales crash as rural income dips
After resisting the demand skid that hit the car industry earlier this year for two quarters, two-wheeler demand has now come down sharply in October, down from 1.4 million units in September 2011 to 1.3 million units in October. Auto industry experts say this demand trend is an indication of an across-the-segment slowdown in the auto industry and a pointer towards rural demand losing speed.
Two wheeler demand held up nicely rising month-on-month till March 2011. But between March and August, it remained stuck in first gear, hovering around the 1.2 million units range. September bucked that trend only to see demand come crashing down in October. Says Venu Srinivasan, MD, TVS Motor Company: "There are definite signs of an early indication of a slowdown but the picture will become clearer once the sales numbers for November and December come in." TVS, he says, saw its festival demand curve moving forward to September and had a dull October when the company took a Diwali shutdown. "Although two-wheelers are not as impacted by interest rate hikes as cars because fewer numbers are bought with auto loans, inflation and the repeated hikes in petrol prices has hit demand sentiment," says Srinivasan.
That sentiment slip is also showing up in moped sales, the first indicator of rural disposable income. Moped sales have yo-yoed all year going up and down month-on-month from 53,268 units in January up to 61,403 in February, 64,484 in March then crashing to 59,536 in April, jumping back to 68,104 in May, down again to 64,493 in June, up to 67,169 in July, slipping back to 60,205 in August, back up to 68,963 in September and then skidding to 56,909 in October. Auto industry experts say there are some indications that the government may be cutting back on rural entitlement schemes which along with inflation has also squeezed disposable income.
The auto industry's downward slide is part of a larger picture of general slowdown say industry experts. "With exports and manufacturing slowing down, automobile demand has to be impacted strongly," says Rakesh Batra, head of Ernst & Young's automobile practice in India. "So far the rural economy was doing better as support prices were up but with inflation eating away disposable income could also be affected." However he says, tractor sales are still very buoyant so not all segments of the rural economy have started to stagnate.
India's problem is that it's slowdown comes bang in the middle of a global crisis. "The Euro zone is headed towards a recession and ditto for the US," says Batra. "China's auto figures have shown a slowdown so India cannot but feel the pinch." However, since November and December are traditionally slow months in terms of auto sales, the larger picture will emerge by early next year.
Two wheeler demand held up nicely rising month-on-month till March 2011. But between March and August, it remained stuck in first gear, hovering around the 1.2 million units range. September bucked that trend only to see demand come crashing down in October. Says Venu Srinivasan, MD, TVS Motor Company: "There are definite signs of an early indication of a slowdown but the picture will become clearer once the sales numbers for November and December come in." TVS, he says, saw its festival demand curve moving forward to September and had a dull October when the company took a Diwali shutdown. "Although two-wheelers are not as impacted by interest rate hikes as cars because fewer numbers are bought with auto loans, inflation and the repeated hikes in petrol prices has hit demand sentiment," says Srinivasan.
That sentiment slip is also showing up in moped sales, the first indicator of rural disposable income. Moped sales have yo-yoed all year going up and down month-on-month from 53,268 units in January up to 61,403 in February, 64,484 in March then crashing to 59,536 in April, jumping back to 68,104 in May, down again to 64,493 in June, up to 67,169 in July, slipping back to 60,205 in August, back up to 68,963 in September and then skidding to 56,909 in October. Auto industry experts say there are some indications that the government may be cutting back on rural entitlement schemes which along with inflation has also squeezed disposable income.
The auto industry's downward slide is part of a larger picture of general slowdown say industry experts. "With exports and manufacturing slowing down, automobile demand has to be impacted strongly," says Rakesh Batra, head of Ernst & Young's automobile practice in India. "So far the rural economy was doing better as support prices were up but with inflation eating away disposable income could also be affected." However he says, tractor sales are still very buoyant so not all segments of the rural economy have started to stagnate.
India's problem is that it's slowdown comes bang in the middle of a global crisis. "The Euro zone is headed towards a recession and ditto for the US," says Batra. "China's auto figures have shown a slowdown so India cannot but feel the pinch." However, since November and December are traditionally slow months in terms of auto sales, the larger picture will emerge by early next year.
Announcement on Yamaha Motor’s third plant in two months
Two-wheeler maker India Yamaha Motor will announce location of its third plant in the next couple of months as it plans to corner significant share in the motorcycle market.
“We are discussing possible locations for the third plant and decision on the same is possible in the next couple of months,” said India Yamaha Motor National Business Head (Sales) Roy Kurian while talking to The Pioneer.
“We will go for the State, which gives us maximum benefit on tax count and is strategically located for our operations,” he added.
Currently the company has two plants— Surajpur in Uttar Pradesh and Faridabad in Haryana having a capacity of 6 lakh production per annum, which can be expanded up to a million unit.
Yamaha sold around 250,000 motorcycles last year and is now eyeing a share of 10 per cent in the domestic motorcycle market over a period of four years.
The third plant will not only expand Yamaha’s market share in India but will also facilitate exports to neighbouring markets in Nepal, Bangladesh and Sri Lanka.
When asked about sales target for the year, Kurian said: “We plan to sell 3.3 lakh bikes in domestic market and export 1.7 lakh to other countries,” adding, “we are exporting engines to countries like Indonesia and others.”
Yamaha currently has 400 dealers and over 1200 touchpoints. The company is going very aggressive on this to realise its dream of having a significant share in Indian motorcycle market.
“The company currently has 1,200 touchpoints and we plan to expand that to 2000 ones by 2014. By then we will reach every possible locations,” added Kurian.
The company is also planning to foray into the scooter segment and announcement on the same is also likely in the next couple of months.
“Scooter segment is growing fast and, therefore, there is much potential. We will launch scooter for ladies and girls and announcement on the same will happen in the next couple of months,” added Kurian.
Talking in detail about the scooter Kurian said that it would be a gearless one having unmatched performance most suitable for a family.
Kurian also clarified on media reports that the company is planning any strategic tie up with Mahindra Two-wheelers.
“It could have been possible in the very beginning when Yamaha re-entered India. But after Yamaha products already a great brand name we don’t need any. This a complete rumour devoid of any substance,” said Kurian.
After receiving a terrific response from the recently launched YZF-R15 Version 2.0 coupled with the seasonal festivities, India Yamaha Motor clocked a growth of 26.8 per cent in motorcycle sales during October 2011 as compared to the corresponding period last year.
The company sold 47,240 units in October 2011 as against 37,251 units sold in October 2010. In domestic markets, the company sold 38,229 units in October 2011 as compared to 31,791 units sold in the same month last year, a growth of 20.3 per cent. The export figures stood at 9,011 units in October 2011 while 5,460 motorcycles were exported in October 2010, a growth of 65 per cent.
“We are discussing possible locations for the third plant and decision on the same is possible in the next couple of months,” said India Yamaha Motor National Business Head (Sales) Roy Kurian while talking to The Pioneer.
“We will go for the State, which gives us maximum benefit on tax count and is strategically located for our operations,” he added.
Currently the company has two plants— Surajpur in Uttar Pradesh and Faridabad in Haryana having a capacity of 6 lakh production per annum, which can be expanded up to a million unit.
Yamaha sold around 250,000 motorcycles last year and is now eyeing a share of 10 per cent in the domestic motorcycle market over a period of four years.
The third plant will not only expand Yamaha’s market share in India but will also facilitate exports to neighbouring markets in Nepal, Bangladesh and Sri Lanka.
When asked about sales target for the year, Kurian said: “We plan to sell 3.3 lakh bikes in domestic market and export 1.7 lakh to other countries,” adding, “we are exporting engines to countries like Indonesia and others.”
Yamaha currently has 400 dealers and over 1200 touchpoints. The company is going very aggressive on this to realise its dream of having a significant share in Indian motorcycle market.
“The company currently has 1,200 touchpoints and we plan to expand that to 2000 ones by 2014. By then we will reach every possible locations,” added Kurian.
The company is also planning to foray into the scooter segment and announcement on the same is also likely in the next couple of months.
“Scooter segment is growing fast and, therefore, there is much potential. We will launch scooter for ladies and girls and announcement on the same will happen in the next couple of months,” added Kurian.
Talking in detail about the scooter Kurian said that it would be a gearless one having unmatched performance most suitable for a family.
Kurian also clarified on media reports that the company is planning any strategic tie up with Mahindra Two-wheelers.
“It could have been possible in the very beginning when Yamaha re-entered India. But after Yamaha products already a great brand name we don’t need any. This a complete rumour devoid of any substance,” said Kurian.
After receiving a terrific response from the recently launched YZF-R15 Version 2.0 coupled with the seasonal festivities, India Yamaha Motor clocked a growth of 26.8 per cent in motorcycle sales during October 2011 as compared to the corresponding period last year.
The company sold 47,240 units in October 2011 as against 37,251 units sold in October 2010. In domestic markets, the company sold 38,229 units in October 2011 as compared to 31,791 units sold in the same month last year, a growth of 20.3 per cent. The export figures stood at 9,011 units in October 2011 while 5,460 motorcycles were exported in October 2010, a growth of 65 per cent.
TVS Motor to invest in demerged co of Mahabharat Motors
Permission has been granted by the West Bengal Industrial Development Corporation Ltd for the demerger of the two-wheeler business of Mahabharat Motors Manufacturing Co into a separate company through the court process of demerger.
The Commerce and Industry Minister of the West Bengal Government, Mr Partha Chaterjee, on Saturday handed over to TVS Motor Company and Mahabharat Motors Manufacturing Company the in-principle permission.
After the demerger, TVS Motor Company will invest in this new venture subject to approval that may be required by law and government regulations.
TVS Motor Company, which had entered into a memorandum of understanding with Mahabharat Motors Manufacturing Co, West Bengal in 2008, will now take a larger role in the demerged company and facilitate stronger presence in the eastern region of the Indian market.
As per the MOU signed in 2008, TVS Motor Co was to provide technical support for the manufacturing facility. In addition, the company was to train personnel as per the quality procedures and standards followed at other assembly plants. The manufacturing facility was created in accordance with the MoU and commercial production commenced in September 2010.
TVS Motor will retain the existing staff and workers of Mahabharat Motors Manufacturing Co. It expects to initially manufacture around 1,000 motorcycles per month. TVS Motor will also use this facility as a hub to service West Bengal and North-East markets.
TVS Motor currently has three manufacturing facilities in Tamil Nadu, Karnataka and Himachal Pradesh to manufacture two and three-wheelers.
The Commerce and Industry Minister of the West Bengal Government, Mr Partha Chaterjee, on Saturday handed over to TVS Motor Company and Mahabharat Motors Manufacturing Company the in-principle permission.
After the demerger, TVS Motor Company will invest in this new venture subject to approval that may be required by law and government regulations.
TVS Motor Company, which had entered into a memorandum of understanding with Mahabharat Motors Manufacturing Co, West Bengal in 2008, will now take a larger role in the demerged company and facilitate stronger presence in the eastern region of the Indian market.
As per the MOU signed in 2008, TVS Motor Co was to provide technical support for the manufacturing facility. In addition, the company was to train personnel as per the quality procedures and standards followed at other assembly plants. The manufacturing facility was created in accordance with the MoU and commercial production commenced in September 2010.
TVS Motor will retain the existing staff and workers of Mahabharat Motors Manufacturing Co. It expects to initially manufacture around 1,000 motorcycles per month. TVS Motor will also use this facility as a hub to service West Bengal and North-East markets.
TVS Motor currently has three manufacturing facilities in Tamil Nadu, Karnataka and Himachal Pradesh to manufacture two and three-wheelers.
The New Hero
Hero MotoCorp, the new avatar of Hero Honda, announced that its dealers sold a record 650,000 motorcycles and scooters in October. Farmers had harvested their crops, and salaried people had got Diwali bonuses; the company had no reason to complain. Some days before that, it had declared its financial results for the quarter ended September 2011, the first full quarter without Honda as a shareholder, which showed that sale as well as profit had hit at an all-time high. For several years, the Munjals, the promoters of the company, have been known as sharp businessmen but their success was always credited to technology and innovation from Honda. The ride without Honda was the real test of their skills.
The Munjals and Honda had formed Hero Honda, a 26-26 joint venture, in the late-1980s. The first sign of discord became visible over ten years ago when Honda set up a 100 per cent arm, Honda Motorcycles and Scooters India. Finally, on December 16 last year, Hero Honda informed the stock markets that the partnership was over and Honda would soon exit the company.
In the days that preceded the announcement, the Munjals had formed a core team of three people to assess if life was possible without Honda. The team, which was kept under wraps from the rest of the world, could not go out for consumer research because that would have let the secret out. It had to rely on gut feel. What may have played on this team’s mind was Honda Motorcycles and Scooters India’s performance in the motorcycle market and Hero Honda’s performance in the scooter market. Both had entered these markets in 2006; while Honda had got 7 per cent of the motorcycle market, Hero Honda had grabbed over 17 per cent of the scooter market which was dominated by the Honda Activa. Technology, the team concluded, was equal for all, and what really mattered to Indians was the total cost of ownership — low price tags, high fuel economy, inexpensive spares and high resale value.
On December 16, immediately after it had informed the stock markets that Honda will exit the company and before answering calls from anxious analysts and inquisitive journalists, Hero Honda Managing Director & CEO Pawan Munjal did a live webcast to all employees, vendors and dealers. The dealers were the real strength of the Munjals. Chairman and family patriarch Brijmohan Lall was on first-name terms with each of his 450 dealers, and he had made it a practice to interview all prospective dealers. The next day, the key hundred or so dealers were brought to Delhi, and the father-son duo apprised them of the situation. Within ten days, each one of the 100,000 or so mechanics and salesmen of the dealerships and the 4,000-odd touch points (service centres et cetera) were given dockets on the subject, and their questions were answered by the company's employees. Close to a year later, Hero MotoCorp claims not a single dealer left it, in spite of the doomsday projections. And when the Munjals launched the new company name and brand identity at the O2 arena in London on August 7, the presence of the army of dealers wasn’t missed by observers. Somebody who was there says there were at least 1,000 of them. Obviously, many dealers didn’t travel alone.
* * *
With the dealers reassured, another core team of five was formed under Pawan Munjal to give the company a new name and a new brand identity. Though the Munjals had the option to use the Hero Honda brand till June 2014, they decided to replace it as early as possible. As it involved renewal, the project was codenamed Yajna. The team gathered about ten case studies of companies that had gone through such rebranding. There were some international cases in the lot, though the majority was Indian. Some were success stories, others were not. The job from here was to find the right specialist to rename the company and design a new brand, and then find an advertising agency that could convey the makeover in an effective way.
In the days that followed, the Munjals sent out feelers to brand specialists from across the world. One of the go-betweens contacted Charles Wright of Wolff Ollins, an Omnicom company. Wright perhaps knew that this was no small opportunity: Hero Honda (as it was called then) was the largest Indian maker of two-wheelers. The very next day, he was in the Hero Honda office in a cramped south Delhi market (the Munjals don’t move out of the market apparently because they consider it lucky for them) to meet Munjal and his brother, Sunil. The two explained the situation to Wright - the reasons for the separation with Honda and the roadmap ahead. Many more conversations followed. What seems to have swung the deal in Wolff Ollins’s favour (there were at least three other consultants in the fray) was its work for Tata DoCoMo.
The Munjals wanted the new company name and brand to reflect change with continuity as it would be unwise to let go off Hero Honda’s brand equity. The brief given to Wolff Ollins was that the new name and brand should highlight Indian engineering, and signal that the company now plans to go global (earlier it could sell only in those countries where Honda was absent) and branch into new segments of the automobile market — three-wheelers, for instance. All primary data that the company had collected over the years on brand health and consumer psychographics were put at the disposal of Wright and his team of 20 drawn from the firm’s offices in London, New York and Dubai. This team, which of course included some Indians, flew to India to and interacted with the company’s promoters, employees, dealers, vendors and customers to get a feel of the brand. “The research,” says Wright, “showed the affection the brand has long enjoyed in the hearts of Indians and how this strong bond is born of the way a two-wheeler transforms the economic and social circumstances of the common man.”
* * *
By mid-year, Wolff Ollins gave its output. The name, it said, should be Hero MotoCorp — Hero to signal continuity and MotoCorp to indicate mobility, modernity and technology. It kept the door open for the company to get into segments other than two-wheelers. So far as the brand was concerned, Wolff Ollins stuck to the black and white of Hero Honda for continuity but gave it the shape of an “engineered” H: a red parallelogram with a black triangle and trapezium. The Hero next to it was in red, to signify warmth and friendliness, and all the letters were of the same size. There were no sharp edges in the letters, which, says Hero MotoCorp Senior Vice-president (marketing and sales) Anil Dua, reflects the Indian feel. “Together, the two stand for Indian engineering.”
In March, the Munjals had appointed Law & Kenneth to devise the communication strategy for the new identity. Its people were made to work with the Wolff Ollins team to (1) create ownership and reduce friction, and (2) cut the go-to-market time. The baton was now passed to it. Law & Kenneth came out with the punch line, hum main hai hero (there’s a hero inside us). The Munjals liked it. They knew it had universal appeal. Everybody likes to feel that he has it in him to reach his full potential, and thus there are better times to come.
The line was then passed on to lyricist Irshad Kamil to write an anthem around it. Kamil had made a name for himself with his lyrics in films like Chameli, Love Aaj Kal, Jab We Met and Ajab Prem Ki Gajab Kahani. Once the anthem was ready, A R Rahman was contracted to set it to music and sing it as well. Rahman was in Los Angeles where he composed the tune. An anxious Munjal went over every stanza and line with him on Skype. Once Rahman had done his job, film maker Anurag Kashyap (Dev D, Gulaal, Black Friday, That Girl in Yellow Boots et cetera) was brought on board to make a film around it. The storyboard was the achievements of ordinary people — a girl from Jharkhand who wins a medal at a gymnastics championship, a young boy who wins a dance contest et cetera. The celebrities on the company’s rolls — film stars like Hrithik Roshan and cricketers like Virender Sehwag — were kept out of it, perhaps because the Munjals didn’t want the message to get lost. Kashyap shot the film at various locations in India, except the shots of Rahman which were done in Los Angeles. The Munjals were now ready to roll.
* * *
They chose to unveil the new identity in London on August 7. This was done, of course, to signal that the company would now go global; according to Dua, London was also chosen because it is a good blend of history and modernity — just the thought that the Munjals wanted to convey about their company.
On August 15, Independence Day, 30 television channels were flooded with the new campaign, front page slots were bought on leading newspapers, and leading websites were roadblocked. In the days that followed, the campaign was put on 200 radio stations and 4,000 cinema halls in Tier 2 & 3 cities, and signages were changed in all the 4,500 consumer contact points like dealerships and service centres. Cleverly, the company had gone cold on all marketing and media spend for the last month and a half; this helped it conserve cash when this campaign broke. As a result, says Dua, the advertising expenditure has stayed within the average of 2-2.5 per cent for the July-September quarter.
The results, Dua claims, have been better than expected. “Our market share in motorcycles has improved from 54.5 per cent to 55.5 per cent in the last one year, and our mindshare has gone up by four percentage points after the campaign.” Spontaneous brand awareness, where people are asked to name two or three motorcycle brands, Dua says, has improved from 99 per cent in the Hero Honda era to 100 per cent in the Hero MotoCorp days. These are still early days; the challenge is to sustain it in the future.
The Munjals and Honda had formed Hero Honda, a 26-26 joint venture, in the late-1980s. The first sign of discord became visible over ten years ago when Honda set up a 100 per cent arm, Honda Motorcycles and Scooters India. Finally, on December 16 last year, Hero Honda informed the stock markets that the partnership was over and Honda would soon exit the company.
In the days that preceded the announcement, the Munjals had formed a core team of three people to assess if life was possible without Honda. The team, which was kept under wraps from the rest of the world, could not go out for consumer research because that would have let the secret out. It had to rely on gut feel. What may have played on this team’s mind was Honda Motorcycles and Scooters India’s performance in the motorcycle market and Hero Honda’s performance in the scooter market. Both had entered these markets in 2006; while Honda had got 7 per cent of the motorcycle market, Hero Honda had grabbed over 17 per cent of the scooter market which was dominated by the Honda Activa. Technology, the team concluded, was equal for all, and what really mattered to Indians was the total cost of ownership — low price tags, high fuel economy, inexpensive spares and high resale value.
On December 16, immediately after it had informed the stock markets that Honda will exit the company and before answering calls from anxious analysts and inquisitive journalists, Hero Honda Managing Director & CEO Pawan Munjal did a live webcast to all employees, vendors and dealers. The dealers were the real strength of the Munjals. Chairman and family patriarch Brijmohan Lall was on first-name terms with each of his 450 dealers, and he had made it a practice to interview all prospective dealers. The next day, the key hundred or so dealers were brought to Delhi, and the father-son duo apprised them of the situation. Within ten days, each one of the 100,000 or so mechanics and salesmen of the dealerships and the 4,000-odd touch points (service centres et cetera) were given dockets on the subject, and their questions were answered by the company's employees. Close to a year later, Hero MotoCorp claims not a single dealer left it, in spite of the doomsday projections. And when the Munjals launched the new company name and brand identity at the O2 arena in London on August 7, the presence of the army of dealers wasn’t missed by observers. Somebody who was there says there were at least 1,000 of them. Obviously, many dealers didn’t travel alone.
* * *
With the dealers reassured, another core team of five was formed under Pawan Munjal to give the company a new name and a new brand identity. Though the Munjals had the option to use the Hero Honda brand till June 2014, they decided to replace it as early as possible. As it involved renewal, the project was codenamed Yajna. The team gathered about ten case studies of companies that had gone through such rebranding. There were some international cases in the lot, though the majority was Indian. Some were success stories, others were not. The job from here was to find the right specialist to rename the company and design a new brand, and then find an advertising agency that could convey the makeover in an effective way.
In the days that followed, the Munjals sent out feelers to brand specialists from across the world. One of the go-betweens contacted Charles Wright of Wolff Ollins, an Omnicom company. Wright perhaps knew that this was no small opportunity: Hero Honda (as it was called then) was the largest Indian maker of two-wheelers. The very next day, he was in the Hero Honda office in a cramped south Delhi market (the Munjals don’t move out of the market apparently because they consider it lucky for them) to meet Munjal and his brother, Sunil. The two explained the situation to Wright - the reasons for the separation with Honda and the roadmap ahead. Many more conversations followed. What seems to have swung the deal in Wolff Ollins’s favour (there were at least three other consultants in the fray) was its work for Tata DoCoMo.
The Munjals wanted the new company name and brand to reflect change with continuity as it would be unwise to let go off Hero Honda’s brand equity. The brief given to Wolff Ollins was that the new name and brand should highlight Indian engineering, and signal that the company now plans to go global (earlier it could sell only in those countries where Honda was absent) and branch into new segments of the automobile market — three-wheelers, for instance. All primary data that the company had collected over the years on brand health and consumer psychographics were put at the disposal of Wright and his team of 20 drawn from the firm’s offices in London, New York and Dubai. This team, which of course included some Indians, flew to India to and interacted with the company’s promoters, employees, dealers, vendors and customers to get a feel of the brand. “The research,” says Wright, “showed the affection the brand has long enjoyed in the hearts of Indians and how this strong bond is born of the way a two-wheeler transforms the economic and social circumstances of the common man.”
* * *
By mid-year, Wolff Ollins gave its output. The name, it said, should be Hero MotoCorp — Hero to signal continuity and MotoCorp to indicate mobility, modernity and technology. It kept the door open for the company to get into segments other than two-wheelers. So far as the brand was concerned, Wolff Ollins stuck to the black and white of Hero Honda for continuity but gave it the shape of an “engineered” H: a red parallelogram with a black triangle and trapezium. The Hero next to it was in red, to signify warmth and friendliness, and all the letters were of the same size. There were no sharp edges in the letters, which, says Hero MotoCorp Senior Vice-president (marketing and sales) Anil Dua, reflects the Indian feel. “Together, the two stand for Indian engineering.”
In March, the Munjals had appointed Law & Kenneth to devise the communication strategy for the new identity. Its people were made to work with the Wolff Ollins team to (1) create ownership and reduce friction, and (2) cut the go-to-market time. The baton was now passed to it. Law & Kenneth came out with the punch line, hum main hai hero (there’s a hero inside us). The Munjals liked it. They knew it had universal appeal. Everybody likes to feel that he has it in him to reach his full potential, and thus there are better times to come.
The line was then passed on to lyricist Irshad Kamil to write an anthem around it. Kamil had made a name for himself with his lyrics in films like Chameli, Love Aaj Kal, Jab We Met and Ajab Prem Ki Gajab Kahani. Once the anthem was ready, A R Rahman was contracted to set it to music and sing it as well. Rahman was in Los Angeles where he composed the tune. An anxious Munjal went over every stanza and line with him on Skype. Once Rahman had done his job, film maker Anurag Kashyap (Dev D, Gulaal, Black Friday, That Girl in Yellow Boots et cetera) was brought on board to make a film around it. The storyboard was the achievements of ordinary people — a girl from Jharkhand who wins a medal at a gymnastics championship, a young boy who wins a dance contest et cetera. The celebrities on the company’s rolls — film stars like Hrithik Roshan and cricketers like Virender Sehwag — were kept out of it, perhaps because the Munjals didn’t want the message to get lost. Kashyap shot the film at various locations in India, except the shots of Rahman which were done in Los Angeles. The Munjals were now ready to roll.
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They chose to unveil the new identity in London on August 7. This was done, of course, to signal that the company would now go global; according to Dua, London was also chosen because it is a good blend of history and modernity — just the thought that the Munjals wanted to convey about their company.
On August 15, Independence Day, 30 television channels were flooded with the new campaign, front page slots were bought on leading newspapers, and leading websites were roadblocked. In the days that followed, the campaign was put on 200 radio stations and 4,000 cinema halls in Tier 2 & 3 cities, and signages were changed in all the 4,500 consumer contact points like dealerships and service centres. Cleverly, the company had gone cold on all marketing and media spend for the last month and a half; this helped it conserve cash when this campaign broke. As a result, says Dua, the advertising expenditure has stayed within the average of 2-2.5 per cent for the July-September quarter.
The results, Dua claims, have been better than expected. “Our market share in motorcycles has improved from 54.5 per cent to 55.5 per cent in the last one year, and our mindshare has gone up by four percentage points after the campaign.” Spontaneous brand awareness, where people are asked to name two or three motorcycle brands, Dua says, has improved from 99 per cent in the Hero Honda era to 100 per cent in the Hero MotoCorp days. These are still early days; the challenge is to sustain it in the future.