Mahindra two wheelers readying segmentation strategy for growth

Mahindra Two Wheelers has indicated that it would be adopting segmentation strategy instead of trying to stuff products in motorcycle and scooter segments in a bid to establish and grow its business.

Backed by strong in-house R&D, the company intends to enhance product portfolio in motorcycle and scooter segments. The company, which has just re-entered the motorcycle segment with two new features-packed bikes, is charting at least three launches in the scooter segment during the next year. The company had withdrawn its first bike Stallio due to some technical issues.

The firm sees greater opportunities to grow and position its two-wheelers by creating sub-segments targeting specific customer experiences. The current two bike launches have also been driven by its segmentation strategy as it looks to tap the largest category — 110cc bike segment — first to create an addressable new segment targeting specific set of customers. It expects both the new bikes — Pantero and Centuro — to drive boost volumes. “In the 110 cc segment, there is a whole range of new models and each one is trying to capture different set of customers through unique positioning,” Anoop Mathur, president – two-wheeler sector, Mahindra & Mahindra told Financial Chronicle.

While the company is charting a plan to create a slew of news segments in the motorcycle category, it is also aggressively planning to push its scooter volumes, presently driven by two products — Duro and Rodeo. “While our two scooter brands Duro and Rodeo, both 125cc products, have completely different positioning targeting unique segment of customers, we will come out with more products,” he added.

The company is preparing to launch at least three products in the scooter segment during the next 12-13 months. It saw 20 per cent drop in scooter volumes at 85,101 units during the first nine months of this financial year as against 106,429 units in the same period last year. The company saw its market share falling to 4 per cent from 6 per cent in scooter market, which actually reported 18 per cent growth during first three quarters of this financial year.

“The chief contribution to the growth of scooters came entirely through new launches. There is a penchant for innovation, new technology and new products among the two wheeler customers and we are responding through new launches in the coming months,” pointed out Mathur.

Mahindra’s two-wheeler R&D centre in Pune has indigenously developed two engine platforms – 110cc and 300cc. “We will design and manufacture two-wheeler engines in house,” said Viren Popli, executive vice president — strategy and market development, Mahindra Two Wheelers, which also has the advantage of using the infrastructure of Mahindra Research Valley, group’s modern automobile R&D facility near Chennai.

Honda to launch four two-wheelers every year

Japanese two-wheeler major Honda Motorcycles and Scooters India (HMSI) on Thursday said it will launch at least four products every year in India as it looks to get the better of ex-partner Hero MotoCorp and become the largest player in the market. The company has also set up its first integrated R&D centre at Manesar, which will specifically develop two-wheelers for the country.

Within two years of its separation from the Munjals, Honda has made short work of TVS and Bajaj overtaking them in quick succession to become the second largest two-wheeler manufacturer in India.

“Our plan is to launch four products every year from this R&D centre,” said Keita Mura–matsu, president and CEO, HMSI. “As India becomes a global innovation hub for Honda, customers can look forward to new products faster.”

The new R&D centre along with HMSI technical centre currently has a strength of 200 engineers and developers. It will develop and launch both refreshed versions and new models of motorcycles and scooters from the centre. Honda is also setting up a third manufacturing facility in Karnataka, which will hire 2,000 people. To be operational from the first quarter of next fiscal year, the facility takes Honda’s overall production capacity to 4,000,000 two-wheelers per annum.

“The first of these products from this centre will hit the roads during the 2013-14 financial year,” said Yadvinder S Guleria, vice-president, (sales and marketing), HMSI.

Hero MotoCorp: Costs dent performance

 The country’s largest two-wheeler maker, Hero MotoCorp, had a disappointing quarter with operating profit and margins below analysts’ expectations. Though higher volumes and price hike undertaken earlier in the December quarter helped improve revenues, higher raw material costs and promotional expenses dented margins. Weaker operating performance pegged back net profit, which fell a steep 20 per cent.

Though industry volumes are expected to be lower in single digits for FY13 and volumes in Q1FY14 are likely to be muted, Hero MotoCorp’s management believes that recent launches and rural demand should help it sustain steady volumes, going ahead. The December quarter notwithstanding, analysts believe that the risk reward is getting favourable for the company and suggest an entry, especially if the stock corrects in response to the poor quarter numbers. “A 15 per cent FY14 P/E discount to Bajaj Auto could narrow as margins are expected to improve on stabilising raw material costs, gains from yen depreciation and volume growth, going ahead,” says an analyst.

Margins muted
Earnings before interest, tax, depreciation and amortisation (Ebitda) margins came in at 12.6 per cent, 305 basis points (bps) lower year-on-year (y-o-y) due to higher raw material costs as well as higher other expenses. The management said higher raw material cost was both due to new launches ( Ignitor/ Maestro) as well as reintroduction of Hunk. New launches increase metal costs, according to the company. And the product mix thus was adverse, according to the management. While raw materials to sales for the quarter stood at 74 per cent, management expects it to stabilise at 72-73 per cent levels, going ahead. Other expenses were up due to brand building activities as the company spent money on publicity and advertising campaign around the launches / refreshes of Maestro, Ignitor, Extreme and Glamour. Hero expects sales and promotion costs as a percentage of sales to be around the two per cent mark. With raw material costs and volumes stabilising and most of the promotions already done in December quarter, analysts expect Ebitda margins for the company at the end of the year to perk up to 14 per cent for FY13. While Bajaj Auto continues to be ahead of its larger peer by consistently posting 20 per cent Ebitda margins, profitability of Hero would improve once the royalty payments cease post-FY14.

Domestic sales push Bajaj to record profit

Bajaj Auto Q3 result: Riding on good domestic sales and growth in other income, Bajaj Auto today reported its highest ever standalone net profit at Rs 818.74 crore for the quarter ended December 31, witnessing a rise of 2.96 per cent.

The company had posted a net profit of Rs 795.19 crore in the corresponding quarter in last fiscal, Bajaj Auto Ltd (BAL) said in a statement.

The standalone net sales during the period under review stood at Rs 5,307.20 crore as against Rs 4,839.95 crore in the year-ago period, up 9.65 per cent, it added.

The company said it has posted "highest ever profit after tax" and "highest ever turnover" during the third quarter of the current financial year.

In terms of sales volume, 11,27,741 units were sold during the quarter as against 10,75,441 units in the same quarter last fiscal, up 4.86 per cent.

In the domestic market, Bajaj Auto's motorcycle sales increased by 7 per cent to 6,87,351 units from 6,42,395 units in the year-ago period.

The company's three-wheeler sales also went up by 23.08 per cent in the domestic market to 64,168 units in last quarter from 52,134 units in the same period last fiscal.

The total exports, however, fell by 1.23 per cent to 3,76,222 units from 3,80,912 units in October-December quarter of 2011-12 financial year, the statement said.

During the three-month period, BAL's other income rose by 20.89 per cent to Rs 203.19 crore from Rs 168.08 crore in the year-ago period, it added.

Hero Workers Seek up to Rs 18k Hike in Monthly Wage

Workers at two-wheeler major Hero MotoCorp Gurgaon plant have demanded a hike in monthly wages of up to Rs 18,000 over a three-year period, which is nearly three times higher than what the company is offering as part of a wage settlement agreement.

The nearly 1,200 permanent workers, under the aegis of Hero MotoCorp Workers Union (HMCWU), are observing silent protest by wearing black badges and not taking tea and snacks provided by the company to press for their demand. They have, however, ruled out going for any strike or slowdown in production in immediate future as negotiations with the company management is going on since August 2012.

"We are asking for a hike of about Rs 15,000-18,000 per month spread over a period of three years as cost of living in NCR is very high. However, the management is offering us around Rs 6,500, which was the hike for Dharuhera plant's workers during the three-year agreement signed in 2011," HMCWU President Kawalpreet Singh told PTI. The union had submitted its demand in August last year and its representatives have been holding negotiations with the management since then, he added.

When asked if the workers would resort to strike, Singh said: "At present we are protesting very peacefully and silently by wearing a black badge while coming to work and we are not accepting company's tea and snacks. We do not have any plan to go for strike or slowing the output in near future." He, however, said if the company does not pay heed to workers' demand, the union will decide its future course of action accordingly. When contacted, a Hero MotoCorp spokesperson said: "We have been holding talks with members of the Union at our Gurgaon plant in an amicable and friendly atmosphere... Hero MotoCorp has always given top priority to the overall welfare and well-being of all our workers."

The company spokesperson, however, declined to share specific details with regard to the ongoing talks until both parties reach an amicable conclusion. "In keeping with our impeccable past record and our leadership status in the industry, we will take prudent, well-deliberated and sensible decision for the mutual satisfaction of everyone concerned and indeed for the larger good of the industrial environment in the region," he said.
Although the spokesperson declined to share details of current salaries of the workers, industry sources said the average gross salary of a worker at Hero MotoCorp's Gurgaon plant stands at around Rs 46,000 per month.

FIR against MD of Hero MotoCorp

A case of cheating, forgery and criminal conspiracy has been lodged against Hero Motocorp and its senior officials on a Delhi court order for allegedly colluding with each other to wrongfully terminate a contract with a firm providing labour to the two-wheeler manufacturer.

The court passed the order saying that "prima facie" the offences appear to be made out against 11 persons, including the company's Managing Director Pawan Munjal.

"From the facts of the case, prima facie cognisable offences appears to be made out against the accused persons and police investigation is required to determine the genuineness of the allegations levelled.

"Accordingly, Station House Officer of Police Station Shakarpur is directed to register an FIR and conduct proper investigation of this case. However, the investigating officer is not bound to arrest the accused persons until some credible evidence is found against them," Metropolitan Magistrate A K Aggarwal said.

The magistrate's order came on the plea of a Delhi-based businessman whose firm, Brains Logistics Pvt Ltd, had a contract with Hero Motocorp to provide it manpower and to manage warehousing operations of its spare parts division.

The businessman, Roop Darshan Pandey, in his plea had sought lodging of an FIR against Munjal and others for allegedly colluding with each other to wrongfully end his contract and accused them of usurping around 550 of his employees.

The other accused include the owner and manager of another firm, who allegedly colluded with the Hero Motocorp officials in this regard.

In its status report, the police had said no offence, as alleged by Pandey, had been committed and the matter was purely civil in nature.

Hero MotoCorp begins work on Rajasthan Plant

Two-wheeler manufacturer Hero MotoCorp (HMCL) on Monday said it has commenced construction of its fourth manufacturing plant and a new Global Parts Centre (GPC) at Neemrana in Rajasthan.

The company will invest Rs 550 crore in setting up this plant and the GPC and both the facilities are expected to be operational towards the end of financial year 2013-14, it said.

“The commencement of work on the new plant is indicative of our intention and strategy for the future. We foresee a revival in market sentiment sooner than later, and when it happens, we will be ready to meet the upsurge in demand,” Pawan Munjal, Managing Director and Chief Executive Officer, HMCL, said.

The Neemrana plant, spread over 47 acres, will provide direct employment to over 1000 people, and have an installed capacity of 7.50 lakh units per annum.

“At the same time, we will be setting up a modern GPC spread over 35 acres at Neemrana,” he said.

The GPC is expected to be operational in the third quarter of the next financial year (2013-14) and will initially employ 400 people.

The GPC will have an automated storage and retrieval system, automated packaging and sorting systems, on-line tracking of parts using a warehouse management system, lean manufacturing systems and, importantly, the green building concept, Munjal added.