 "Riding on blue ocean strategy")
Late last month, Honda Motorcycle and Scooter India (HMSI) reported its flagship automatic scooter, Activa 3G, ended a 17-year-old record of motorcycles topping the sales charts. Activa 3G dominated the two-wheeler sales chart for seven consecutive months (January-July 2016). A decade and a half ago, its launch came at a time when consumers in India had been veering more towards motorcycles. While the success story of brand Activa shows how the company seized an opportunity with the right strategy, a longer road lies ahead for the Honda subsidiary to dominate the motorcycle segment.
Yadvinder Singh Guleria, senior vice-president, sales and marketing, HMSI, says that in spite of increasing competition the company has close to 18,000 back orders, which speaks of the consumer trust and confidence it has built. In 2001, there was much apprehension because of a declining scooter market. “We have done several surveys to find out the needs of the users or intenders as well as the customers who were moving away from scooters and how do we get them back to consider scooter for their commuting needs.”
The company decided that its first scooter should have a large base that could attract men and women. A unisex appeal was built into the basic design element. It also prioritised the “three basic hygiene”, as Guleria says, for any two-wheeler buyer in India — pricing, mileage and maintenance. When it was launched, Activa was giving mileage of 45-50km per litre, while existing 100cc motorcycles were offering around 65km, he adds. Also, scooters then were mostly with kick-start and thus inconvenient for the elderly and women. Activa included four-stroke technology and tuff up tube — a double-layered tube with a sealant.
All of this, Guleria says, made the scooter business a “blue ocean” (creation of an uncontested market space) for Honda, even as Activa evolved over the years with innovations such as the company’s eco technology in 2012 that further enhanced mileage and nearly bridged the gap with 100cc motorcycles. The country’s economic growth also opened up a market of women users. With education and empowerment of more women, they stopped being dependent on men. This added to the “scooterisation” of the country.
In rural areas, poor roads have for long tended to favour the sturdier motorcycles. But, with increased motorisation and more metalled roads, Guleria says there are signs of greater acceptance of scooters. “Another positive change is the acceptance of working women, many of whom are employed in the health and education sectors and have their own commuting needs.”
Honda is the second largest player in India’s two-wheeler market. It has 28 per cent share, behind Hero MotoCorp (37 per cent). In the scooter segment, Honda boasts 59 per cent share, and 14 per cent in the motorcycle market.
Guleria points to poor monsoons in the last two years as reason for the falling sales, as the two-wheeler market is largely dependent on rural India, but expects a revival after a positive monsoon this year.
Honda has launched models across motorcycle segments, including 150-180cc, in recent years. “Motorcycles are becoming younger in appeal, in terms of style and show-off as a character of the users, because they are mainly men. Yes, Honda was a little behind in terms of connecting with youths through our product portfolio in the motorcycle market. But in the last one and a half year we have really worked on that.”
Honda flagged off motorcycles in October 2004, as after terminating its joint venture with what is now Hero MotoCorp Honda India operations couldn’t have any motorcycles for three years. It became a full-fledged player catering to all segments of motorcycle with the launch of Dream Yuga in 2012. “We started working aggressively on creating a unique identity of Honda motorcycles with the wing mark (its logo),” says Guleria. It was then that Honda roped in a brand ambassador, actor Akshay Kumar, for the first time.
Another challenge emerged from the new network the company had created. “We found that customers need some time to connect with those doing business in rural areas. So, it is relationship which matters a lot,” says Guleria. A campaign, à la political parties, tried to build connect with the slogan “Pankh ka nishaan, Honda ki pehchaan”.
“We were making almost 1,000 touch points during 2013-14. We came up with our zonal offices’ expansion. Before that we were only having the head office and five regional offices. But 2012 onwards, we began zonal offices that operate under the regional offices primarily covering state capitals. Our zonal offices are equipped with state-of-the-art training centres,” says Guleria. Honda added 200-odd mobile service vans. Each of the vans includes an LED and classroom of vehicles to train mechanics and take care of last-mile connectivity in areas where Honda is not physically present.
Experts point to how the leading companies have cashed in on the growth in the two-wheeler market in the hinterland. Rajeev Singh, partner and head of automotive sector, KPMG India, cites how two-wheeler advertisements are not confined to the metros. He reckons electric two-wheelers may pick up in India. “It may become a little more cost-effective earlier than the passenger vehicles do so. And from a running cost perspective, there are far fewer wear and tear parts if you don’t have a combustion engine. So, I am sure some of the existing companies may be picking that particular trend in the next five years.”
Scooter gripped imagination
The Indian market has rediscovered scooters. They are scooters which are more trendy and futuristic. It appears they are somewhere between the ones that appeared in the late 90s and early 2000s’ bikes. That is what catches the imagination of people. Also, the number of women drivers has significantly gone up in the last five-10 years.
From a daily commute perspective two-wheeler in the form of these scooters have become very handy for them. The second is in terms of safety, as public transportation has not kept pace with the times. The growth of Tier-II and Tier-III cities in the last few years is the third aspect that has helped increase scooter demand.
Rajeev Singh
Partner and head of automotive sector, KPMG India
Partner and head of automotive sector, KPMG India
