The company’s national business head Pankaj Dubey told FE that the scooters would be suitable for Indian roads and not be a replication of products available globally.
“In India, somehow we have not entered this segment (scooters). But we would definitely enter...it may take some time. But we are working on that,” Dubey added.
The subsidiary of the Japanese two-wheeler giant Yamaha has started a feasibility study and an announcement is expected shortly. Yamaha is the pioneer of gearless technology for two-wheelers. In the overseas markets, Yamaha sells more scooters than motorcycles. In fact, scooters make up almost 80% of Yamaha sales in the Asian markets.
Smooth ride - TVS TRU4 Premium
TVS Motor Company has launched TVS TRU4 Premium, a semi-synthetic 4T Engine Oil, certified by the Japanese Automotive Standards Organisation — JASO MA2 — and the American Petroleum Institute — API SL. The engine oil is supposed to improve fuel economy, enhance engine life and lower emission levels. The product is supposed to be blended with highly purified water-white, high viscosity index base oils. It uses an advanced formulation technology for extreme thermal conditions to establish superior thermal stability both at high and low temperatures. The product is available in 1 litre and 900 ml packs and is priced Rs 235 per litre.
Hero stake sale to fetch Honda $1.2bn
Japanese auto giant Honda has reached an agreement to dissolve its 26-year-old joint venture — Hero Honda — with the Hero Group by selling its entire stake in the Indian largest two-wheeler maker.
Honda Motor Co is expected to sell its entire 26 per cent stake in Hero Honda to its partner — the Munjals-promoted Hero Group. Honda will earn $1.2 billion from the sale, Kyodo reported quoting Japanese business daily Nikkei.
“Honda and Hero Group have reached the basic agreement this week to dissolve the partnership,” the daily said, adding that the two companies will seek a final approval from their respective board of directors later this month for the break-up.
The parting of ways comes 26 years after the joint venture was set up in 1984.
The Japanese firm will offload its entire stake by March next year and will no longer provide technical support to Hero Honda.
However, the two companies, which renewed the agreement for technology support from Honda to the venture in 2004, will let the pact run till its expiry in 2014, Nikkei said.
Honda proposes to focus its resources on the new wholly owned subsidiary Honda Motorcycle and Scooter India.
Hero Honda sold 4.5 million two-wheelers in the last fiscal, grabbing 48 per cent of the growing Indian two-wheeler market, which is the second biggest in the world after China.
Honda and Hero Group holds 26 per cent each in Hero Honda.
However, there has been market speculation that there is unease between the partners after the Japanese firm decided to enter the Indian two-wheeler market.
Honda Motor Co is expected to sell its entire 26 per cent stake in Hero Honda to its partner — the Munjals-promoted Hero Group. Honda will earn $1.2 billion from the sale, Kyodo reported quoting Japanese business daily Nikkei.
“Honda and Hero Group have reached the basic agreement this week to dissolve the partnership,” the daily said, adding that the two companies will seek a final approval from their respective board of directors later this month for the break-up.
The parting of ways comes 26 years after the joint venture was set up in 1984.
The Japanese firm will offload its entire stake by March next year and will no longer provide technical support to Hero Honda.
However, the two companies, which renewed the agreement for technology support from Honda to the venture in 2004, will let the pact run till its expiry in 2014, Nikkei said.
Honda proposes to focus its resources on the new wholly owned subsidiary Honda Motorcycle and Scooter India.
Hero Honda sold 4.5 million two-wheelers in the last fiscal, grabbing 48 per cent of the growing Indian two-wheeler market, which is the second biggest in the world after China.
Honda and Hero Group holds 26 per cent each in Hero Honda.
However, there has been market speculation that there is unease between the partners after the Japanese firm decided to enter the Indian two-wheeler market.
Easy loans, new launches perk up November auto sales.
Riding on the back of a resurgent economy and easier access to funds, auto sales in November remained firm, keeping in line with record numbers seen in recent months. Almost all the country's car companies posted strong sales figures for the past month on Wednesday.
Although sales were lower than in October, this did not come as a surprise to analysts. A Mumbai-based analyst said November is usually leaner after the end of festive season demand in October. He added that apart from easier availability of loans, it was the excitement over new products that pushed demand further.
Maruti Suzuki, the country's largest carmaker, reported sales of 1,12,554 vehicles in November, a growth of 28.18 per cent from 87,807 units sold in the year-ago period. "For the second consecutive month, the company crossed 1 lakh units sales mark in the domestic market," the company said in a statement. Maruti saw sales of 1,02,503 units for the domestic market in November, a 34.2 per cent increase from 76,359 units in November, 2009.
Second largest car maker Hyundai Motor India reported a 12 per cent jump in domestic sales for the month at 31,540 units. The company had sold 28,162 units in the domestic market in November 2009. Total sales, including exports dipped 19.4 per cent with 44,542 units sold in November this year compared with 55,241 units in the same month last year. Sales for Tata Motors in November stood at 54,662 units as against 54,108 units sold in the year-ago period. Domestic sales of the firm stood at 35,079 units, a growth of 6.55 per cent from 29,408 units sold in the same month the previous fiscal.
TVS Motor Company posted a 29 per cent growth in sales for the same period as the company said demand from all segments of its product portfolio remained robust. The company sold 1,57,041 units in November against 1,21,945 units in the same month of 2009. During the last month, two-wheeler sales of the company grew by 27 per cent, with sales of 153,882 units against 1,20,844 units registered in November 2009, it said in a statement.
Two-wheeler maker Suzuki Motorcycle India also reported a 77 per cent growth at 25,439 units sold in November compared with 14,393 units in the same month last year. "We have received very good response from the market to all our products...We are committed to continue this growth momentum in future," Suzuki Motorcycle India vice-president (sales and marketing) Atul Gupta said.
GM India recorded a 17.67 per cent jump in its sales to 8,376 units this year compared to 7,118 units in the same month last year.
Although sales were lower than in October, this did not come as a surprise to analysts. A Mumbai-based analyst said November is usually leaner after the end of festive season demand in October. He added that apart from easier availability of loans, it was the excitement over new products that pushed demand further.
Maruti Suzuki, the country's largest carmaker, reported sales of 1,12,554 vehicles in November, a growth of 28.18 per cent from 87,807 units sold in the year-ago period. "For the second consecutive month, the company crossed 1 lakh units sales mark in the domestic market," the company said in a statement. Maruti saw sales of 1,02,503 units for the domestic market in November, a 34.2 per cent increase from 76,359 units in November, 2009.
Second largest car maker Hyundai Motor India reported a 12 per cent jump in domestic sales for the month at 31,540 units. The company had sold 28,162 units in the domestic market in November 2009. Total sales, including exports dipped 19.4 per cent with 44,542 units sold in November this year compared with 55,241 units in the same month last year. Sales for Tata Motors in November stood at 54,662 units as against 54,108 units sold in the year-ago period. Domestic sales of the firm stood at 35,079 units, a growth of 6.55 per cent from 29,408 units sold in the same month the previous fiscal.
TVS Motor Company posted a 29 per cent growth in sales for the same period as the company said demand from all segments of its product portfolio remained robust. The company sold 1,57,041 units in November against 1,21,945 units in the same month of 2009. During the last month, two-wheeler sales of the company grew by 27 per cent, with sales of 153,882 units against 1,20,844 units registered in November 2009, it said in a statement.
Two-wheeler maker Suzuki Motorcycle India also reported a 77 per cent growth at 25,439 units sold in November compared with 14,393 units in the same month last year. "We have received very good response from the market to all our products...We are committed to continue this growth momentum in future," Suzuki Motorcycle India vice-president (sales and marketing) Atul Gupta said.
GM India recorded a 17.67 per cent jump in its sales to 8,376 units this year compared to 7,118 units in the same month last year.
Royalty hurdle for Hero Honda
While the business outlook appears robust, higher payments to the foreign partner till 2014 will hit earnings growth.
The Hero Honda stock fell over 7 per cent on Thursday as compared to its previous close on reports of higher royalty payments to its Japanese partner Honda Motors.
This loss comes on the back of a 3 per cent fall on Wednesday. Analysts attribute the stock’s weakness to the uncertainty on the relationship between the two partners and the November sales numbers, which were below expectations.
Higher royalty outgo
Reports suggest Hero Honda will increase royalty payments to its Japanese partner from the current 2.6 per cent of annual sales (Rs 416 crore) to about 8 per cent. At estimated FY11 sales of Rs 18,400 crore, the royalty payment would be about Rs 1,400 crore. Analysts say assuming the royalty payments double to about Rs 1,000 crore, it could knock off about 15-20 per cent of the company’s earnings.
In return for the higher royalty payments, which will continue till 2014, Honda is likely to supply technology for three new products. In addition, Honda is likely to bring down its stake (from 26 per cent currently) by 6 percentage points initially and sell the remaining 20 per cent to the Munjals at a discount to the market price. While on one side an agreement for new products should put to rest the technology transfer part of the relationship, the markets are more cued in to news on the split and the timeline of the same. The relationship thus far has been a profitable one for both companies. Hero Honda continues to dominate the executive motorcycles segment, with over 70 per cent market share. Honda got revenues to the tune of Rs 1,000 crore through royalty, technical fees and dividends in FY10.
Can it go alone?
Credit Suisse analysts believe Hero Honda’s cash cows Splendor, Passion and CD-Dawn have acquired strength on their own and can sustain themselves independent of the corporate entity backing them. The brands, which have been in the Indian market for over a decade now, command good resale value and are also backed by a strong distribution and service network. Analysts say like its peers Bajaj Auto and TVS Motors, Hero Honda can build its own technology over the next three to four years when its agreement with Honda comes to an end. Further, Hero Honda will also be able to tap the two-wheeler export market growing at over 15 per cent per annum. Currently, it can’t enter that market due to the joint venture agreement with Honda.
Auto sales
Hero Honda’s November sales, which grew a moderate 10 per cent year-on-year on a higher base, were lower than the 13.5 per cent sales growth it achieved year-to-date this financial year. Sequentially, sales fell a sharp 17 per cent as October’s volumes included inventory that was liquidated for the festive season. While this could be an aberration due to seasonal factors, the next few months could give a better picture.
SHORT-TERM PAIN
in Rs cr FY11E FY12E
Sales 18,4000 21,500
% change 16.7 16.8
Ebita (%) 13.0 15.0
change bps - 400 200.0
Net profit 2,188 2,509.0
% change -1.9 14.6
P/E (x) 16.3 14.3
E: Estimates, % change is y-o-y
Source: Bloomberg, analyst reports
For now, the company is facing intense competition from established players like Bajaj Auto, TVS Motors and Honda Motors. Edelweiss Securities estimates that for the period between April and October this year, the market leader has seen a 510 basis points drop (100 basis points is one percentage point) in market share to 53.4 per cent in the domestic motorcycle segment.
Analysts believe Hero Honda’s market share is likely to stabilise as its key brands continue to do well in smaller towns. A stronger rural economy is likely to boost volumes, which are expected to post an estimated 15 per cent year-on-year jump in FY11 to 5.2 million units.
Outlook
Hero Honda’s operating profit margins have been falling over the last few quarters due to higher commodity costs as well as product costs (to meet emission norms) and the fact that the company has not been able to fully pass on the costs despite price increases. Credit Suisse analysts believe the company is likely to recover its margins by passing on a part of the cost inflation. Though the stock has fallen 11 per cent over the last two days and could see some downward pressure in the short term, analysts don’t see much downside from these levels. However, given the lack of clarity over its JV with Honda, their top pick in the two-wheeler space continues to be Bajaj Auto.
The Hero Honda stock fell over 7 per cent on Thursday as compared to its previous close on reports of higher royalty payments to its Japanese partner Honda Motors.
This loss comes on the back of a 3 per cent fall on Wednesday. Analysts attribute the stock’s weakness to the uncertainty on the relationship between the two partners and the November sales numbers, which were below expectations.
Higher royalty outgo
Reports suggest Hero Honda will increase royalty payments to its Japanese partner from the current 2.6 per cent of annual sales (Rs 416 crore) to about 8 per cent. At estimated FY11 sales of Rs 18,400 crore, the royalty payment would be about Rs 1,400 crore. Analysts say assuming the royalty payments double to about Rs 1,000 crore, it could knock off about 15-20 per cent of the company’s earnings.
In return for the higher royalty payments, which will continue till 2014, Honda is likely to supply technology for three new products. In addition, Honda is likely to bring down its stake (from 26 per cent currently) by 6 percentage points initially and sell the remaining 20 per cent to the Munjals at a discount to the market price. While on one side an agreement for new products should put to rest the technology transfer part of the relationship, the markets are more cued in to news on the split and the timeline of the same. The relationship thus far has been a profitable one for both companies. Hero Honda continues to dominate the executive motorcycles segment, with over 70 per cent market share. Honda got revenues to the tune of Rs 1,000 crore through royalty, technical fees and dividends in FY10.
Can it go alone?
Credit Suisse analysts believe Hero Honda’s cash cows Splendor, Passion and CD-Dawn have acquired strength on their own and can sustain themselves independent of the corporate entity backing them. The brands, which have been in the Indian market for over a decade now, command good resale value and are also backed by a strong distribution and service network. Analysts say like its peers Bajaj Auto and TVS Motors, Hero Honda can build its own technology over the next three to four years when its agreement with Honda comes to an end. Further, Hero Honda will also be able to tap the two-wheeler export market growing at over 15 per cent per annum. Currently, it can’t enter that market due to the joint venture agreement with Honda.
Auto sales
Hero Honda’s November sales, which grew a moderate 10 per cent year-on-year on a higher base, were lower than the 13.5 per cent sales growth it achieved year-to-date this financial year. Sequentially, sales fell a sharp 17 per cent as October’s volumes included inventory that was liquidated for the festive season. While this could be an aberration due to seasonal factors, the next few months could give a better picture.
SHORT-TERM PAIN
in Rs cr FY11E FY12E
Sales 18,4000 21,500
% change 16.7 16.8
Ebita (%) 13.0 15.0
change bps - 400 200.0
Net profit 2,188 2,509.0
% change -1.9 14.6
P/E (x) 16.3 14.3
E: Estimates, % change is y-o-y
Source: Bloomberg, analyst reports
For now, the company is facing intense competition from established players like Bajaj Auto, TVS Motors and Honda Motors. Edelweiss Securities estimates that for the period between April and October this year, the market leader has seen a 510 basis points drop (100 basis points is one percentage point) in market share to 53.4 per cent in the domestic motorcycle segment.
Analysts believe Hero Honda’s market share is likely to stabilise as its key brands continue to do well in smaller towns. A stronger rural economy is likely to boost volumes, which are expected to post an estimated 15 per cent year-on-year jump in FY11 to 5.2 million units.
Outlook
Hero Honda’s operating profit margins have been falling over the last few quarters due to higher commodity costs as well as product costs (to meet emission norms) and the fact that the company has not been able to fully pass on the costs despite price increases. Credit Suisse analysts believe the company is likely to recover its margins by passing on a part of the cost inflation. Though the stock has fallen 11 per cent over the last two days and could see some downward pressure in the short term, analysts don’t see much downside from these levels. However, given the lack of clarity over its JV with Honda, their top pick in the two-wheeler space continues to be Bajaj Auto.
TVS sales increase 29%
Logging growth across all segments, the TVS Motor Company registered a 29 percent increase in sales in November this year compared to the corresponding period last year.
The company sold 157,041 units last month as against 121,945 units sold in November 2009.
The cumulative sales for the April-November period this year stands at 1,341,106 units.
TVS Motor sold 153,882 two wheelers (domestic 139,541 units, exports 14,341 units) last month as against 120,844 units (domestic 106,836 units, exports 14,008 units) in November 2009.
The company sold 157,041 units last month as against 121,945 units sold in November 2009.
The cumulative sales for the April-November period this year stands at 1,341,106 units.
TVS Motor sold 153,882 two wheelers (domestic 139,541 units, exports 14,341 units) last month as against 120,844 units (domestic 106,836 units, exports 14,008 units) in November 2009.
Bajaj motorcycle sales jump 19%
The country''s second largest two-wheeler maker Bajaj Auto today reported 19 per cent jump in motorcycle sales at 2,65,036 units in November. The company had sold 2,42,390 units in November last year, Bajaj Auto Ltd (BAL) said in a statement.
In October this year, the company had reported its highest ever motorcycle sales in a month at 3,29,776 units. BAL''s exports dipped eight per cent during November at 90,869 units as compared to 98,521 units in the same month last year.
"In the three-wheeler category, BAL reported flat growth during November at 34,195 units as compared to 34,111 units.
In October this year, the company had reported its highest ever motorcycle sales in a month at 3,29,776 units. BAL''s exports dipped eight per cent during November at 90,869 units as compared to 98,521 units in the same month last year.
"In the three-wheeler category, BAL reported flat growth during November at 34,195 units as compared to 34,111 units.