<p>By next month, Hero MotoCorp Ltd, India’s biggest two-wheeler manufacturer, would complete the re-branding exercise of its entire product line-up, a full year after breaking ties with Honda, but more than 20 months before the set deadline.
The company over the past few months launched three new models with one under its new brand, announced new investment plans aggregating Rs 2,575 crore towards two new facilities and integrated research and development (R&D) centre and expansions.
Little surprise then as Brijmohan Lall Munjal, HeroMotoCorp’s 88-year-old chairman, stated in the company’s annual report: “Caged birds accept each other; but flight is what they crave for. When Pawan (Munjal) and I sat down to draft this communique last year, there was a feeling of being unfettered and free. And rightly so, as we are about to take off on our first solo flight”.
From a total of 14 motorcycles and a scooter, Hero has rapidly expanded its tally to 16 bikes and two scooters after dissolution of the joint venture (JV) company Hero Honda Motors, which lasted for 26 years, thus making it one of the most successful JVs in India.
The Munjal-family led company has assured shareholders of more launches in the future, targeted at encompassing the entire spectrum of sub-segments ranging from economy bikes to power belting premium bikes to to hybrid and petrol driven scooters.
New production capacities are slated to take the company’s annual production to 9 million units in the next two-to-three years from 6.6 million units currently, an increase of 36 per cent. The company is also injecting funds to push its R&D activities to take competition right to the door steps of Honda Motor Co.
“The level and intensity of competition from Hero MotoCorp’s erstwhile partner is expected to shoot up by many notches. Product launches pitted against Hero MotoCorp’s strongest brands can exert some pressure on market share, but the company is adequately prepared to defend and consolidate its strong turf,” Hero’s annual report added.
A year into the open battle, the pressure is clearly visible. Hero MotoCorp’s sales growth in the domestic market was in the red last month, a first in 26 months. Despite new launches, from a monthly average of 505,000-unit domestic sales last year, Hero’s sales declined to about 473,000 units in July.
Sales of motorcycles of Hero having engine of more than 125cc have fallen 37 per cent this year (April-July) to 71,850 units against 114,323 units sold in the corresponding period last year. The company sells five models in this space.
Hero’s fall in sales has come at the backdrop of a stellar rise in demand for Honda two-wheelers. India sales of Honda Motorcycle and Scooter India (HMSI), the subsidiary company of Honda, grew 61 per cent last month despite having only 11 mass-produced models in the market.
From fourth spot little more than a year back, HMSI climbed to the second spot in the list of India’s biggest two-wheeler makers, pushing the Chennai-based TVS Motors and Pune-based Bajaj Auto to the third and second spot, respectively. While Hero has assured it will remain at the top, Honda has set itself a target to become number one by 2020.
While the domestic two-wheeler industry has grown by nine per cent in the first four months of this year, HMSI posted a rise of 55 per cent in the same period, according to figures provided by the Society of Indian Automobile Manufacturers. Hero still commands a lion’s share of the market at 44 per cent with total domestic sales of 6.06 million units, a growth of 15 per cent.
Hero’s key models Splendor and Passion have come under attack from not just new models of Honda but also from Bajaj Auto. Honda, which opened pan-India bookings of the Dream Yuga, an economy bike, in July, has so far sold more than 54,000 units of it.
Though Honda aims to sell 300,000 units of the Yuga by March (nine months since launch) it pales in comparison to the Splendor which sells more than 1 million units a year. Honda, however, will make arrangements for further production if demand exceeds that target.
“Based on the market demand, we have an option available to produce this model (Dream Yuga) in our upcoming plant,” said a HMSI spokesperson. Honda is awaiting the completion of its new plant coming up in Karnataka, which will bring 1.2 million units capacity.
Last year, Honda sold 1.99 million units domestically, a growth of 28 per cent over the previous year. Honda’s top-selling model Activa presently sells more than 100,000 units every month.
However, Hero has acknowledged the void in its R&D space and has thus taken a few steps to plug it. The company has joined hands with the US-based Eric Buel Racing (EBR) and Austria-based AVL to source technology for building products and engines of different categories.
Where Hero does not have independent technology of its own as most of it comes from Honda, the company is setting up a Rs 400 crore integrated R&D centre in Jaipur, which includes labs for components, engine, vehicle testing, design studio and test tracks. Built over an area of 250 acres, Hero claims this centre will be the largest in India among two-wheeler makers.