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Market Wary As Honda Gets Ready To Go Solo In India
Dec 18,2010 Surajeet Das Gupta Read News PRINT
Dec 18,2010 Surajeet Das Gupta Read News
Can Honda use its technological edge to break into a market dominated by the big three automakers — Hero Honda (which will now be renamed), Bajaj Auto and TVS — which together control over 80 per cent of the market? Especially as it is knocking at the doorsteps as the fourth largest two-wheeler company with an over 12.5 per cent market share, just a few points behind TVS.
Indian two-wheeler companies concede that competition will increase and there might be a price war in some segments, but say Honda has not made any substantial dent despite its operations through its 100 per cent subsidiary (Honda Motorcycles and Scooters India) for the last six years.
And while its JV with the Munjals limited its ability to get into the mass market 100cc segment in a big way, its attempts to tap both the 100cc market and make a dent in the 125cc and above the segment have not paid rich dividends.
He says that competition from Honda should not be exaggerated. "After 25 years of benefiting from the best of Honda and Hero it has not made a major impression even in the 125cc plus space and of bigger and sportier bikes, that is still dominated by Bajaj's Pulsar and Discover. So, while we are not overconfident, we have no reason for undue concern."
Bajaj Auto executives also concede that prices might go down in the mass segment as a result of the war. Says the managing director of a leading two-wheeler company, who prefers to speak off the record, "We will now have four player as Honda would surely like to increase its market share substantially, which it could not as its hands were tied by the Munjals."
Sources who deal with TVS, the third largest two-wheeler company in the country, for instance, say the company has been preparing its R&D and product development based on the fact that Honda might come on its own.
It has also carefully hedged its bets on just mobikes by having a substantial volume of its sales coming from scooters. For instance, it sells two million two-wheelers annually, of which, about one fourth comes from scooters and mopeds. Next year, it is looking at selling three million two-wheelers, of which about 0.75 million will be non mobikes.
Analysts point out that Honda has already started making aggressive moves to enter the low-cost bike market. It has been quietly building its R&D capability in Shanghai to make low-cost bikes for the Asian market and India is surely one of the key markets. It has already announced its plans to launch a $600, 100cc bike, which surely will be the cheapest in India.
It is also ready to meet enhanced need for more capacity in its plants in India. It is investing Rs 500 crore to put up a second plant in Rajasthan with a capacity to make 600,000 bikes annually, which can be doubled. The new capacity will be up and running by the second half of 2011 when the company will have a total capacity to make 2.2 million two-wheelers. This will reduce the capacity gap, that it currently has with Hero Honda (5.2 million) or Bajaj Auto (4.98 million by March 2011).
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