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Hero weathers Honda's rise better than others

Retains over 50% share despite its lacklustre show in premium segment

Swaraj Baggonkar  |  Mumbai 

The board meeting held on a wintry December afternoon in New Delhi by Hero Honda was anything but regular. One of world's most fruitful manufacturing joint ventures spanning nearly three decades - Hero Honda - was due to end.

The Munjals, Hero's promoters, were set to acquire all of Honda's stake in Hero Honda Motors, go independent in operating the company and end its reliance on the Japanese company for technology and branding.

Shareholders and analysts who tracked the company feared Hero MotoCorp, which started by making bicycles, would struggle to survive without Honda, a brand which it helped make a household name after introducing it in India.

Albeit, Honda's stellar growth, punctuated with a flurry of launches backed by solid engineering, has helped it grab share from rivals. However, three years after the Hero-Honda split, a look at market share movements of the last three financial years and eight months of this year (please see table), reveals that Hero's loss in share is the least when compared to its peers like Bajaj Auto and TVS Motors in the motorcycle segment.

Honda which sells the Shine, Twister, Unicorn, has doubled its share to little more than 15 per cent by the end of November.

Hero has seen an erosion of 6 per cent in market share to 51.39 per cent by the end of November. That is less than the steep erosions seen by Bajaj and TVS of 22 per cent and 18 per cent, respectively.

Despite an aggressive entry of Honda in the less-than-110cc, which is the bread and butter segment of Hero generating 82 per cent of its total volumes, Hero has held on to its 50 per cent market share. Every second motorcycle sold is one by Hero.

Anil Dua, senior vice-president - sales, & customer care, Hero MotoCorp, says, "We worked out the post-transition period. We rebranded the company. We built our own R&D and made new investments. Honda has grown rapidly in the scooter segment but we have entered that recently and seen good traction in. We have defended our motorcycle market quite well."

The rebranding was completed in mid-2011 when the 'Honda' name was dropped from all products and dealershipsand a changed font marked the Hero brand. It did not have a major negative impact on the company, as feared earlier.

What has helped Hero hold ground, say analysts, is its unparalleled reach and distribution. Hero's market penetration is more than double the size of Honda and generates about half its sales from the rural areas.

Honda has three models in the economy segment with prices starting from Rs 46,191 for the Dream Neo that is pitted against the Hero Splendor at Rs 44,814. Splendor remains the largest-selling two-wheeler brand in India.

While Hero's focus on the Splendor and the Passion, two of the largest-selling bikes, has helped it arrest a drastic slippage in market share, the company has lost traction in the 125-250cc segment. Despite several launches, Hero has not been able to replicate the entry-level's success in the premium segment.

Hero has more number of models in this segment than competition but has a share of just 10.6 per cent, as per the Society of Indian Automobile Manufacturers (SIAM). Four models, the Acheiver, Hunk, Xtreme and the Impulse in the 150cc category and the Karizma and Karizma ZMR make up Hero's premium segment.

Bajaj, the second-largest two-wheeler producer in the country saw its market share fall to 18 per cent in the April-November period this year as against 20 per cent recorded in the same period last year in the entry level segment. Nearly 55 per cent of Bajaj's sales come from the entry level and it has recently launched three models under the Discover brand.

The Chennai-based TVS attempted to gain lost ground with the launch of Jive, a motorcycle without a clutch, but met with a dull response. The company was forced to phase the bike out in less than three years after its launch.

"The motorcycle segment is a fiercely contested one. Despite the slowdown, the segment logged growth of 3.3 per cent this year at 7 million unit sales. Hero has done well to protect its share and Honda has done even better to gain share", says a Mumbai-based analyst.

First Published: Thu, December 19 2013. 21:30 IST