Splendor feels the heat from Activa

A new leader might emerge with Honda's scooter giving Hero's bike a run for its money

Hero Splendor’s long streak of market dominance looks likely to be challenged by Honda’s biggest seller Activa, as it steps on the pedal to get the top spot in the two-wheeler space.

Splendor is one of India’s oldest and largest selling motorcycles; Activa is the country’s largest selling scooter. Honda shrunk the gap with the Hero bestseller after Splendor sales declined last year, while that of Activa grew in double digits.

From a gap of nearly 339,000 units in the financial year 2014-15, or FY15, Splendor’s lead over Activa was down to under 20,000 units in 2015-16 or FY16, according to Society of Indian Automobile Manufacturers’ data.

Last year (FY16), Hero sold 2.48 million Splendors; in FY15, it had sold 2.51 million units. It was a drop of 1.2 per cent.

Activa’s sale grew 13.2 per cent in FY16 to 2.46 million units as compared to 2.17 million units sold in FY15.

In seven of the 12 months last year, Activa was racing ahead of Splendor; it held on to its leading position in the January-March quarter.

Since first racing ahead of Splendor in September 2013, the Japanese scooter model has often sold more units than the Indian motorcycle.

Hero has managed to hold on to a slim lead but what could upset the ranking is Honda’s new manufacturing capacity. It recently inaugurated the largest scooter-only plant in the world, in Gujarat in February. Now, it can make 1.2 million scooters every year.

Activa’s growth has eaten into the economy bikes (1,000-cc engine) market. In urban area, scooters are preferred over bikes because it is easier to ride them through congested roads.

According to a Credit Suisse report, “Past five years, the share of scooters has increased from around 20 per cent to around 30 per cent and in the same period the share of lower executive bikes (around Rs 50,000 price, same as scooters) has shrunk from around 35 per cent to around 25 per cent. In more developed states, scooter share has already crossed 40 per cent and is still increasing. We expect the share of scooters to reach around 40 per cent by FY20, which should be the most positive for Honda, which completely dominates the space.”

Last year, scooter sales grew nearly 12 per cent to 5.03 million units, against 4.5 million units sold in FY15. Motorcycle sales reported a fall of 0.24 per cent last year to close at 10.70 million, against 10.72 million clocked in FY15.  

Honda’s growing presence in the rural areas will help in rapidly taking scooters to the villages.

At present, only about 15 per cent of Honda’s scooter sales come from the rural markets. Its dealership reach is less than half of the market leader.

Hero has over 6,000 dealerships and service points.