Hero eating into Honda's share in scooter market

Hero expands share to 21% in December; Honda, while still having 51%, is facing capacity constraints that is impacting dispatch to dealers

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Is scooter market leader Honda losing share to former partner Hero MotoCorp? A look at the company-wise scooter market data for the past six months points to the rising market share of Hero and a somewhat corresponding dip in Honda’s market share. From a low double-digit market share around mid-2015, Delhi-based Hero has touched 21 per cent in December. In doing so, it has also replaced Chennai-headquartered TVS Motor as the second-largest seller last month.

In September last year, Hero expanded its scooter offering with the launch of two products — Duet and Maestro Edge. Until then, the country’s largest two-wheeler maker had two scooters to offer: Pleasure and Maestro. Launching the company’s first in-house developed scooters, chairman and managing director and chief executive Pawan Munjal had said in September that the company’s aim was to ‘gun for leadership in scooters’. “I know it is not going to happen overnight,” he had said.

In October, Hero saw a 74 per cent surge (over same month in 2014) in wholesale scooter dispatch to dealers, helped by the twin launches. Sales grew six per cent in November and 11 per cent in December. The growth from scooters is critical for Hero as it has faced a rough ride in sales of motorcycles owing to a weakness in demand from rural markets. In December alone, it saw a nine per cent dip in motorcycle sales.

“Both our new scooters, Maestro Edge and Duet - the first of the products to have been developed by our own in-house R&D, have been received well by consumers,” said Ashok Bhasin, head of sales, marketing & customer care at Hero MotoCorp.

Hero is yet to go national with the two new scooters. “Our phased launch approach for these scooters has helped us gain market share in several key markets. With upcoming national rollout of both these launches, we expect the growth trajectory to continue in the coming months,” said Bhasin.

Honda, the undisputed market leader in scooters, has a 51 per cent market share. The company says it is facing a capacity constraint and has lost a few production days in November and December, impacting the dispatch to dealers. “For another one month or so there will be a decline in market share”, said Y S Guleria, senior vice-president (sales and marketing), Honda Motorcycle and Scooter India. “Competitors came up with new offerings and we had a capacity issue. Still, about 30,000 customers who booked with us preferred to wait for a delivery,” said Guleria.

Honda is inaugurating a scooter-only plant in Gujarat next month, which will initially have a monthly capacity of 50,000, to be doubled around middle of the year. With the Gujarat plant, Honda will have a total scooter capacity of 4.2 million units in a market where annual demand stood at 4.9 million units (January-December 2015).

The encouraging factor is that scooter sales grew 13 per cent in 2015 against a 3.42 per cent dip in motorcycles. Scooters formed 30 per cent of the 16 million unit two-wheeler market in 2015, against 27 per cent in 2014.

Players such as Honda, Hero and TVS will compete against each other in near future to increase their share in the expanding scooter market.