Honda two-wheeler share increases after on-board norms compliance

Sales gap with Hero narrows to 45,000 units in June

The battle for the top spot seems to be intensifying in the two-wheeler segment, as Honda Motorcycle and Scooter India (HMSI) is fast narrowing the gap with Hero MotoCorp in retail sales.

HMSI has managed to claw back market share after hitting a historic low of 18 per cent in May 2023. 

Now, the retail market shares of Hero MotoCorp and HMSI are 28.86 per cent and 25.54 per cent, respectively. In May 2023, it stood at 35.54 per cent and 18.05 per cent respectively.

The gap was reduced to only 45,607 units in June, 2024.

According to industry experts, one of the key reasons for Honda’s dip in sales last year was non-compliance with OBD-2 (On-board diagnostics) norms.

While Honda Activa’s certain models were updated, other products in the mass market segment were not on track on April 1 last year, when the new norms were introduced. 

“While the industry transitioned to OBD-2 norms last April, Honda was not prepared. They were not able to ratchet up production. Hero took that advantage and was able to retain higher numbers and a higher market share as well,” said Manish Raj Singhania, president, the Federation of Automobile Dealers Associations (FADA).

Simply put, OBD is a computer system on the vehicle that monitors and regulates its operation. The computer on-board the vehicle receives data from sensors across the vehicle and alerts the user in case of any improper functioning. It also helps service technicians to view information on what may be going wrong with the vehicle and serve as a diagnostic tool.

Speaking to Business Standard, Yogesh Mathur, director, sales and marketing, HMSI said that as of April 1, 2023 all the models in their inventory were not compliant with OBD2.

“The production came online in the second quarter and by August-September we had 100 per cent models that were OBD2 compliant,” Mathur said.

HMSI claimed that lack of clarity on the transition led to the delay, and after the government notification, they pooled in all resources to ensure compliance. This took 4-5 months.

“The festival season last year was thus challenging for us as dealers wanted stock and we did not have it. We slowly made it available across India in a uniform manner,” Mathur said.

Hero did not respond to questions from Business Standard. 

Singhania, meanwhile, felt that this window of opportunity is over for Hero.

“Honda has ramped up production,” he said.

However, Hero still has an advantage in terms of existing stock and has 45–50 days of feeder stock, versus 10-12 days of feeder stock by HMSI, based on FADA estimates. 

“One particular quarter or month in isolation does not reveal the true story. If you look at the last financial year, Hero market share was 32 per cent and Honda’s was 25 per cent in ICE segment. This has only changed to 31 per cent and 26 per cent respectively, during the first quarter of the current fiscal year. Hence, the change is not drastic in longer terms,” said an industry source.

In June 2024, Hero sold 397,029 units, compared to 351,422 units by HMSI. This was against 427,203 units by Hero and 283,398 units by Honda in the month of June 2023. Last year in June, Hero had a market share of 33 per cent while HMSI had 23 per cent.

In April, immediately after the new norms were introduced, HMSI market share was 20 per cent. And it dipped further to 18 per cent in May.

Mathur said that products like Shine 100 are doing well for them and is helping them gain market share both in rural and urban geographies.

“In rural areas, our presence is a little low,” he said. Moreover, there is room to grow in the 100 cc segment where HMSI has a 10 per cent share now.

The two-wheeler industry is expected to sustain a steady volume growth rate of around 7-9 per cent in FY25, which would be slightly lower than 9.8 per cent growth achieved in FY24, a recent CareEdge report said.

The analysts said that in H1FY24, growth was restricted due to increase in vehicle prices post implementation of phase 2 of BS VI emission norms as well as higher interest rates, and stressed rural incomes.

However, the sales revived in H2FY24 on the back of festive season demand and uptick in rural sentiments. Sales grew at a robust double-digit pace in each of the two quarters ended March 2024 quarter (Y-o-Y basis).

This double-digit volume growth on a Y-o-Y basis continued during the months of April and May 2024 as well.