Over the last six months of 2015 Honda, which has dominated the Indian scooter market ever since it split from Hero, has witnessed the sharpest fall in market shares. From nearly 60 per cent in July, Honda Motorcycle and Scooter India’s (HMSI) share slumped to 51.3 per cent by the end of December, according to the Society of Indian Automobile Manufacturers (SIAM). Although Honda is still the market leader, the company is pushing back, promising to cut down on the waiting period for Activa and aggressively wooing consumers in small towns and non-metros. For January 2016, it has managed to increase Activa’s share to 54 per cent and push Hero MotoCorp back to below the 20 per cent mark.
Activa is the market leader and Honda’s best-selling scooter. A dent in its dominion is particularly hard for Honda because, the bulk (65 per cent) of the company’s domestic sales volumes is from scooters. Worse still, the challenger is none other than former ally Hero; the two split in 2010 ending a partnership of over two decades.
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Honda believes the figures are a reflection of its inability to push out enough Activas and not that of slackening demand. Guleria sees it as a missed opportunity to sell which will soon be addressed. “The market share loss was an issue of demand-supply gap which we will fill,” he adds.
Hero, meanwhile, is losing no time and Chairman and Managing Director Pawan Munjal recently declared his ambitions to be the leader in the scooter market just like, he said, his company dominates the motorcycle segment.
Allies turned rivals
Activa is the volume churner for Honda. It generates 88 per cent of Honda’s scooter sales, while outselling nearest competitor Hero Maestro by nearly three times. To beat Honda, Hero knows it has to topple Activa and that is what it aims to do with newly launched Duet and Maestro Edge, both priced marginally lower and available ‘off-the-shelf’. Hero has been helped by Honda’s production handicap. Although plants are running to full capacity, demand for Activa continues to outstrip supply.
Analysts believe that Honda need not be unduly worried. It is normal for market leaders to lose some market share. Both Maruti Suzuki (in cars) and Mahindra & Mahindra (in utility vehicles) have ceded shares to rivals. But Honda, perhaps true to the legendary Japanese fighting spirit, is not willing to let go. Last month it kick-started the fourth two-wheeler plant in Gujarat to boost production. The new plant is expected to generate 1.2 million scooters annually and shrink the waiting period for Activa.
The next step will be to get into the non-urban areas, the heart of Hero’s market. More than 40 per cent of Hero’s motorcycles sales volumes come from tier-II and III towns where buyers prefer bikes over scooters. “We see a big opportunity once we expand our network to these areas. The ratio of scooter to motorcycle is 1:9 in these areas. But from the day we opened our dealerships, within six months, the ratio changed to 2:8, which even we were not expecting. The same sub-dealers are now asking for more scooters for what is basically a motorcycle market,” adds Guleria. Honda says its network penetration presently stands at 4,200 whereas that of Hero is estimated at 6,500.
Keeping with the times
The Activa was introduced with a 100cc engine in 2001, it moved to 110cc and then 125cc. The three models — Activa 125, Activa 3G and Activa I — have helped Honda stay on top. Guleria says that the company is open to introducing and reintroducing old models if the market so demands. When asked if Activa’s natural progression would be to hit the 150cc category given that it already has the engine in motorcycles, Guleria did not deny the possibility of having a more powerful model.
He believes that the Activa customer has never really complained about the scooter being underpowered, not even when the engine was 100cc. “But we decided to upgrade the customer,” he adds, indicating perhaps the company may well look at doing so again. For, as he says, it is all about creating new demand and guarding one’s turf.