Hero Honda Motors resorts to discounts to regain mart share

Two-wheeler market leader Hero Honda Motors has, since the first week of this month, started offering cash discounts and freebies worth Rs 2,021 on select models and in select but high-volume markets.

The company's market share has been witnessing minor slips in the past few months, while its closest rival Bajaj Auto's market share has been improving. In 2005-06, Hero Honda's market share in the motorcycle and step-thru segment fell to 49.75 per cent from 51.51 per cent in 2004-05.

Bajaj Auto, in the same period, improved its share by the same percentage points from 27.09 per cent in 2004-05 to 30.05 per cent in 2005-06. The company recently put in place a new marketing team, which is excepted to take on the challenge posed by Bajaj Auto.

A Hero Honda executive said the promotional schemes were for celebrating the company's crossing of the 15-million vehicles sales since its inception in 1985.

Indicating that the promotional schemes could go till mid-June, P S Sundar, general manager - marketing, said even 1 per cent market regained would mean a volume enhancement of up to 70,000 units in a month.

"An absolute number increase should balance out the benefit we pass on in the medium to long term," he said.

However, the financial cost of the discount could not be clearly ascertained, partly because a portion of the cost of such schemes is usually passed on to channel partners like dealers.

The current promotional scheme offers a cash discount of Rs 1,001, and a comprehensive insurance coverage worth Rs 1,020 on the Passion and Splendor range of motorcycles, which accounts for close to 40 per cent of its annual volumes.

Hero Honda officials said though the scheme was on only for the northern and western region, in states like Uttar Pradesh, Madhya Pradesh, Rajasthan, Punjab, Maharashtra and Gujarat, the scheme could cover other zones in the coming weeks.

Sundar said Hero Honda continued to command a dominant market share. "The gap (between us and Bajaj Auto) is not even at a striking distance. We will continue to have the market leadership for a sustained period of many years, may be five years or more," he said.