Hero Honda gung ho on sales growth till FY08

Unfazed by competition and high base effect, bike market leader Hero Honda has said sales would grow by "double digit" this quarter and the next fiscal on the back of new product launches and overall robust demand for motorcycles.

"We are confident of achieving a good double digit growth this quarter and also in the next fiscal, despite a high base," Anil Dua, V-P (marketing & sales) Hero Honda, said here.

The company, which is engaged in a fierce battle with Pune-based Bajaj Auto to maintain market leadership, has seen sales rise 12% in the ten months of this fiscal at 27.78 lakh units.

However, a worrying factor for Hero Honda is the way Bajaj has been increasing its dominance in the market. Bajaj's bike sales till January this fiscal have grown 31% as the company sold 20.39 lakh units, narrowing the gap with Hero Honda.

The company's margins have come under severe pressure as it sells a large number of low-margin entry level bikes and increases spend on advertising and discounts to thwart competition.

Dua, however, discounted the theory that Hero Honda was in a tight spot due to lower margins, which give the company less elbow space to engage in a price war with Bajaj, that enjoys relatively higher margins.

"The low margins are not a Hero Honda phenomenon alone but rather an industry phenomenon, and the pressure is due to increase in input material costs. Our profitability is as good as any other two-wheeler manufacturer though we are taking steps to increase it," he said.