Since the termination of the joint venture with the Hero Group, Honda Motorcycle and Scooter India (HMSI) has fast made inroads into the two-wheeler market in the country. Taking cues from consumer requirements in the domestic market, the company launched its first serious offering in the mass commuter segment ‘Dream Yuga’ earlier this fiscal. HMSI has invested over Rs 1,000 crore to expand capacity by over 40% at a third manufacturing facility in Karnataka and has set up an integrated Technical Centre to launch products faster in India. With all these initiatives in place Keita Muramatsu, chief executive officer (HMSI) tells Sharmistha Mukherjee, despite the moderation in growth in the domestic two-wheeler industry, HMSI expects to increase sales by nearly 45% in the next financial year. Edited excerpts:
The Technical Centre at Manesar is said to be a one-of-its kind initiative for Honda. How different is it from other such R&D facilities globally?
Unlike in other Honda two-wheeler R&D centres, here the engineering, the purchasing, the development is all happening at the same place inside the factory. Our vision 2020 depends on speed. From the manufacturer’s point of view we have to consider how we can develop products with speed, make decisions and arrive at conclusions immediately. If the entire R&D team is under one roof, it means that any department can make suggestions.
If there is a problem the R&D team can sort it out, the purchasing team can check quality and at the same time consider costs. All processes can be completed in minimum time as teams do not have to travel from outside to vet or change development processes. We have Technical Centres in Italy, China, Japan, Thailand, Vietnam, Indonesia, USA, Vietnam. But it is only in Manesar that we have set up such an integrated facility.
So what is the mandate for the team at the Technical Centre. Will they also pitch in to develop global products for Honda?
The focus is on the domestic market. India specific products developed at the Centre may later be exported to other countries. We want to localize our parts further. Currently, 96-97% of the components are sourced from the Indian supplier base. Around three% of components are imported. But the final goal is to have 100% localization level to be more cost competitive. It is like dealing with opposites – the product has to be cheapest but of highest quality. It has to have high technology but also be affordable. So localization is important.
HMSI’s current product range is tagged upwards of Rs 44,000. With the Technical Centre in place, will we now see low-cost products from the company as it aims to become the number one two-wheeler brand in the country by 2020?
We have started selling the Yuga. Now we have to consider how to improve the Yuga. We are investigation for low-cost bike. We have to strengthen total development, purchasing, engineering and quality procedures. Our former president Shinzo Aoyama had said that HMSI would aim at becoming the number one two-wheeler brand in India by 2020.
Across our units we would have production capacity of little less than four million two-wheelers by the end of next year. That is the plan. But it is a big challenge to expand by an additional one million units. You have to bring in a million customers. We have to work on how to give more high quality products, decrease costs and improve customer care at the dealer end.
HMSI outperformed the industry to grow volumes by 37% till December this financial year. What is the company’s sales expectation in the coming fiscal?
Last ficsla, we sold two million units growing by around 29%), this year we will sell 2.6 million in the domestic market which will be a growth of 30%. In FY14 this will increase to 3.9 million units (growth of around 45%). It is a big challenge. Both in scooters and in motorcycles we are working on improving quality and along with mileage. We will focus on capacity building, dealer network development and developing better products at our Technical Centre to grow business.
At the pace you are growing will the capacity set to come in from third unit suffice for the company?
We have to consider building more capacity. We have to investigate when we need capacity beyond our third unit for increasing our growth. The industry is slowing down and has grown by around four% so far this fiscal. So we have to carefully check the market and decide on our business structure.
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