Honda Motorcycles and Scooters India (HMSI) has made it clear that it doesn’t intend to be a bit player in the Indian motorcycle market. The Japanese major plans to be right out there in the middle, and over the next few years motorcycles, it says, will bring in as much as scooters. The game plan: to be where the action is, making 100 cc bikes in what is popularly called the entry segment. That, incidentally, is the space that Rajiv Bajaj, chief at Bajaj Auto, said he’d rather not be in because it wasn’t as profitable as making bigger 125 cc and 135 cc bikes. Fair enough. But it’s a fact that Hero Honda has managed to ride out the current recession on the back of the small bikes that it sold. And it’s also a fact that small bikes count for a lot since they make up nearly two-thirds of the nearly six-million bike market in the country. It’s possible that bigger bikes will become more popular but there are still plenty of people waiting to ride their first bikes and they’re in for a treat.
It’s not just HMSI that’s trying to get a grip on the Indian motorcycle market. The other Japanese major Suzuki, which parted ways with TVS Motor way back in 2002, has just launched the GS150. The clash between the GS150 and TVS Motor’s bestselling Apache 160 cc, which does a run rate of close to 10,000 a month, will be interesting to watch. Of course, the GS150 will also be up against the very popular Pulsar 150cc, possibly Bajaj Auto’s biggest success story and its reason for being the market leader in the premium segment. Will these models withstand the competition? Bajaj Auto has had a great run in the premium space — HMSI’s Unicorn didn’t exactly set the market on fire and although Hero Honda has made some inroads into the space with the Hunk, it hasn’t been what you would call a runaway success.
But that’s just one part of the story. Bajaj Auto’s motorcycle sales have skidded in the ten months to January 2009 with volumes down 24 per cent. For sure, it hasn’t been an easy time but even before the downturn really set in, the 125 cc XCD failed to take off. The new XCD 135 cc has got off to a great start selling 20,000 units in the first month but it should be remembered that both the Discover and the Platina showed promise but faltered somewhere along the way. So for Bajaj Auto to win back share, new launches need to deliver volumes consistently.
As for TVS, even in a market without Suzuki or Honda, the company has only been losing market share. Apart from the Victor, which was launched in 2001, it hasn’t come up with a model in the 110-125 cc segment, that sold substantial volumes over any length of time. On an already small base, the company’s volumes were lower by about 8 per cent between April 2008 and January 2009 and in the December 2008 quarter, TVS actually posted a loss. With such numbers, where is it going to find the money for research and development? And for marketing and selling its products? One wonders what the game plan at TVS is; how does the company plan to take on the Japanese majors when it can barely fend off the challenge from local heavyweights? With the benefit of hindsight, it would now seem that TVS should have stuck it out with Suzuki.
Look at where Hero Honda is today. Even if HMSI does take away share from Hero Honda in the 100 cc segment or even in other segments — or even if the Japanese firm becomes the market leader — Hero Honda can always be a strong number two. Take the case of scooters, a market where the two have been co-existing: HMSI resurrected the market that was abandoned by Bajaj Auto, which at one time made the Chetak the largest selling scooter in the world. But Hero Honda hasn’t done badly selling nearly 14,000 scooters a month to HMSI’s 54,000 and is actually nudging TVS Motors’ 17,000. It’s true that a good part of Hero Honda’s 56 per cent share of the motorcycle market in the country comes from its stranglehold on the entry segment. Also, technology from Honda is what has helped it remain the market leader for so many years. It’s possible that Hero Honda may not always have access to Honda technology but that apprehension has been around for years now without it coming true. That’s not to say it won’t happen.
In the meanwhile, it’s making the most of its association — after all technology is key to a product and Hero Honda has backed it up with a service and vendor network. It’s not going to be easy to compete with the Japanese who are just warming up; the motorcycle landscape may not be completely altered over the next few years but there could be some significant changes.
