I ndian I nstitute of IIM Calcutta, PGPEX- III 2009
Management
Honda’s Entry into the Indian 2-wheeler Market Project Report Group-8 Abhishek Kapoor (2/3) Anshuman Dikshit (6/3) Ashish Sinha (8/3) Rajul Srivastava (31/3) Suket Gandhi (46/3)
Page 1 of 25
Calcutt
1.1.1
Table of Contents 1.
2.
3.
4.
5.
6.
Indian Market: A perspective.................................. perspective......................................................... ............................................... .............................3 .....3 1.1
Share Share of different different categories categories of two-w two-wheele heelers.... rs............ ................ ................ ................ ..........................4 ..................4
1.2
Trends Trends in the industry.... industry............ ................ ................ ................ ................ ................ ................ ......................................5 ..............................5
Why Honda decided to enter on its own................................ own........................................................ ...................................... ..............6 6 2.1
Background Background of Honda...... Honda.............. ................ ................ ................ ................ ................ ................ ................. ................. ....................6 ............6
2.2
History History of of Honda Honda in India. India......... ................ ................ ................ ................ ................ ................ ................ .............................6 .....................6
2.2.1
Kinetic Kinetic Honda........ Honda................ ................ ................ ................ ................ ................ ................ ................ ................................6 ........................6
2.2.2
Hero Honda...... Honda.............. ................ ................ ................ ................ ................ ................ ................ .....................................7 .............................7
2.3
Governme Government nt Policies... Policies........... ................ ................ ................ ................ ................ ................ .........................................7 .................................7
2.4
What are Honda’s Honda’s options.... options............ ................ ................. ................. ................ ................ ................ ...............................8 .......................8
2.5
Why did Honda enter the market... market........... ................. ................. ................ ................ ................ .............................8 .....................8
Target Customers & Offerings............................... Offerings....................................................... ............................................ .......................... ........10 ..10 3.1
Scooter Scooter Market Market Segmentat Segmentation ion and Targeting.. Targeting.......... ................ ................ ................. ...........................10 ..................10
3.2
Product Product Positioni Positioning ng and and Promotio Promotion....... n............... ................ ................ ................. ................. ................ .....................1 .............11 1
Why and how Honda was successful in this segment.................................. segment.............................................. ..............12 ..12 4.1
Define Define success success – Criteria, Criteria, Segment, Segment, Period...... Period.............. ................ ................ ..................................12 ..........................12
4.2
Facts..... Facts............. ................ ................ ................ ................ ................ ................ ................ ................ ................ .....................................12 .............................12
4.3
Reasons Reasons for success.. success.......... ................ ................ ................ ................ ................ ................ ................ .................................1 .........................13 3
Challenges Challenges Ahead... Ahead............ ................. ................ ................ ................ ................ ................ ................ .........................................13 .................................13 5.1
HMSI Brings Life to Scoot Scooters.. ers.......... ................ ................ ................ ................. ................. ................ ................ ................ ............13 ....13
5.2
HMSI targeting targeting complete complete motorcycl motorcycle e market.... market............ ................ ................ .................................14 .........................14
5.3
Can HMSI differenti differentiate ate itself itself from from Hero-Hond Hero-Honda a in 100cc 100cc segmen segment?....................14 t?....................14
5.4
HMSI’s HMSI’s Current Current Strategy.... Strategy............ ................ ................ ................ ................ ................ ................ ................ .........................16 .................16
Appendix.... Appendix............ ................ ................ ................ ................ ................ ................ ................ ................ ................ ................. ................. ......................18 ..............18 6.1
Exhibit Exhibit 1............ 1.................... ................ ................ ................. ................. ................ ................ ................ ................ ................ ........................18 ................18
6.2
Exhibit Exhibit 2............ 2.................... ................ ................ ................. ................. ................ ................ ................ ................ ................ ........................19 ................19
6.3
Exhibit Exhibit 3............ 3.................... ................ ................ ................. ................. ................ ................ ................ ................ ................ ........................20 ................20
6.4
Exhibit Exhibit 4............ 4.................... ................ ................ ................. ................. ................ ................ ................ ................ ................ ........................21 ................21
6.5
Exhibit Exhibit 5............ 5.................... ................ ................ ................. ................. ................ ................ ................ ................ ................ ........................22 ................22
6.6
Exhibit Exhibit 6............ 6.................... ................ ................ ................. ................. ................ ................ ................ ................ ................ ........................22 ................22
6.7
Exhibit Exhibit 7............ 7.................... ................ ................ ................. ................. ................ ................ ................ ................ ................ ........................23 ................23
6.8
Exhibit Exhibit 8............ 8.................... ................ ................ ................. ................. ................ ................ ................ ................ ................ ........................25 ................25
6.9
Reference References...... s.............. ................ ................ ................ ................ ................ ................ ................ ................ ...................................2 ...........................26 6
References Page 2 of 25
1. India Indian n Mark Market: et: A persp perspective ective Automobile industry, as has been the case in the global economy, has been one of the largest industries in the Indian market too. It has been recognized as one of the key economic drivers. The industry has been in existence in India since 1955. According to the SIAM figures for 2003-04 of all the automotive industry, the 2-wheelers account for roug roughl hly y 80% 80% of the the sale sales. s. In the the init initial ial year years, s, entr entry y of the the firms firms,, capa capaci city ty,, expansion, choice of products & technology were all regulated by the government policies. Cert Certai ain n lacu lacuna nae e in the the polic policie ies s resu resulte lted d in the the intr introd oduc uctio tion n of fres fresh h poli policy cy regulations in the late sixties. Notable among those were the Monopolies and Restri Restricti ctive ve Trade Trade Practi Practices ces (MRTP) (MRTP) and Foreig Foreign n Exchan Exchange ge Regula Regulatio tion n Act (FERA). This resulted in the following implications for the industry: •
Operations at below minimum level of efficiency
•
Operations at below production function
•
Usage of outdated technology, minimal budget allocation for Research and Development
The Indian economy faced a major crisis in 1991. This resulted in the industrial policy shift from a regulatory regime to a more open and liberalized market. Abolition of licences and liberalization in policies helped realize the sector’s full potent potential ial.. These These polic policies ies had certai certain n disce discernib rnible le influe influence nces s on the indust industry, ry, namely: •
Increase in competition as foreign players started entering the market on their own
•
Exposure and absorption of new technologies, both in the products and the processes
•
Southward pressure on the costs
•
Driving out of the weaker players from the arena
1 Shar Share e of differ different ent categ categories ories of two-wh two-wheelers eelers The two-wheeler industry is divided into the following categories: Page 3 of 25
1. Moto Motorc rcy ycles cles 2. Scooters 3. Mopeds The category shares of the three categories, from 1993 to 2000 are given below:
Year
Category distribution in numbers (% of market share) Scooter Motorcycle Moped
Total
1993
799094
48%
430973
26%
451348
27%
1681415
1994
984697
47%
606884
29%
502738
24%
2094319
1995
1177153
46%
776465
30%
603695
24%
2557313
1996
1301434
45%
933561
32%
684583
23%
2919578
1997
1276832
42%
1083919
36%
646983
22%
3007734
1998
1291356
40%
1302788
40%
668765
20%
3262909
1999
1281285
35%
1662692
46%
702258
19%
3646235
2000
1013737
26%
2122489
55%
731548
19%
3867774
(Also refer to Exhibit 8)
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1.1 Tren Trends ds in the the industr industry y The composition of the two wheeler industry had witnessed a great change since 1991. In 1991, the share of scooters scooters was 48% of the total market. Whereas, in the the same year the share of motorcycle was 26% with the remaining share going to the moped moped category. category. Since then, the motorcycle motorcycle segment segment has been growing at a faster faster pace than the whole segment. For the scooter and the moped categories the rate of growth has always been less than that of the whole industry. Moreover, since 1998 the moped category has shown signs of steadying but the scooter category registered a negative growth rate in the years 1997, 1999 and 2000. In the year 1998 growth rate of scooter market was a dismal 1%. It is against this backdrop that we shall analyse why Honda’s rational in entering the Indian scooter market. The manufacturer manufacturer and the category wise distribution during the same period, 1993 to 2000 are represented in the following tables:
Year 1993 1994 1995 1996 1997 1998 1999 2000
Production of Scooters by Manufacturers in India (Calendar Year - 1993 to 2002) BAL HSL KHML LML MSL SIL TVS 483342 611520 686672 762127 620546 636708 580135 439397
-
68384 84330 109133 114288 115826 97914 109031 130642
126927 182135 236750 262981 313680 325181 294946 199796
105167 105817 117516 148536 140859 154525 140182 114675
676 121 156 181 -
19844 54605 67379 94256 123590 150459
Total 784496 983923 1170071 1342718 1258290 1308584 1247884 1034969
Source: http://www.indiaeconomic http://www.indiaeconomicstat.com/industries/18/indu stat.com/industries/18/industrialsectors/107700/automobiles strialsectors/107700/automobiles/52/stats.aspx /52/stats.aspx
1. Why Honda Honda decided decided to enter on its its own 2.1 2. 1 Ba Back ckgr grou ound nd of Ho Hond nda a The history of Honda Honda Motorcycle Motorcycle Corporation Corporation Limited (HMCL) dates back to 1946, 1946, when Soichiro Honda, a mechanic mechanical al engineer, engineer, establishe established d the ‘Honda ‘Honda Technical Technical Resear Research ch Instit Institute ute’’ in Hamam Hamamats atsu, u, Japan. Japan. The idea idea was to develo develop p and later later produce small two-cycle motorbike engines. Honda’s first product, an A-type 50cc bicycle engine, was produced in 1947. Page 5 of 25
In 1948 1948,, HMCL HMCL was was inco incorp rpor orat ated ed with with a capi capita tall of one one milli million on yen. yen. Soon Soon,, the the company started to design and produce lightweight motorcycles. Honda’s first motor cycl cycle, e, D-ty D-type pe two two stro stroke ke 98cc 98cc,, was was prod produc uced ed in 1949 1949.. In the the early early fift fifties ies,, the the headqu headquart arters ers of the compan company y was shifte shifted d from from Hamam Hamamats atsu u to Tokyo Tokyo and the company got listed on the Tokyo Stock Exchange. In 1959, the American Honda Motor Company Inc. was established in Los Angeles. The American venture started modestly with a staff of six and sales figure barely touching 200 motorcycles. In 1963, American Honda launched the “You meet the nicest nicest people people on a Honda Honda”” advert advertisi ising ng campa campaign ign,, which which revolu revolutio tioniz nized ed the US motorcycl motorcycle e industry. industry. A few years later, Honda established established motorcycle motorcycle assembly assembly plants in Germany and Belgium. During During the 1960s, 1960s, HMCL HMCL expan expanded ded its produc productt line line by introd introduci ucing ng light light trucks trucks,, compac compactt cars, cars, out board board motors motors,, power power genera generator tors s and severa severall new new models models of motorcycles and motor scooters. New production units were started in Thailand, UK, Malaysia and cumulative motorcycle production reached 10 million units by 1968. During the 1970s, HMCL entered the Philippines, Indonesia and Brazil. In 1972, HMCL introduced the higher-priced and more powerful car – Honda Accord. By the mid 1980s, Honda had emerged as the third largest largest Japanese Japanese automaker automaker behind Toyota and Nissan.
2.2 2. 2 Hi Hist stor ory y of Hon Honda da in Ind India ia 2.2.1 Kine Kinetic tic Honda Kinetic, founded by H.K. Firodia in 1972 was primarily in the Moped Market. Its Luna became a huge success with the middle class sector in India.
In 1985 Honda and Kinetic tied up to form Kinetic Honda Motors Ltd. The company’s primary business was to manufacture scooters. The “KH-100”, the first gearless, self start and auto choke scooter in i n India was a huge success.
2.2.2 Hero Honda Honda The other joint venture agreement between HMCL and the Hero Group resulted in formation of Hero Honda Motors Limited (HHML) in 1984. HMCL held a 23 per cent equity stake in the joint venture. The Indian motorcycle market was very sluggish at Page 6 of 25
that time. Many Indian consumers were of the opinion that scooters were much safer than motorcycles. In 1985, HHML launched the Hero Honda CD-100 motorcycles, the first four-stroke bike bike in India. India. Its unique unique featur features es such such as a four-s four-stro troke ke engine engine,, fuel fuel efficie efficiency ncy (approximately 80 km/l) and low emission made the model a runaway success with Indian customers.
2.3 2. 3 Go Gove vern rnme ment nt Po Poli lici cies es Under the regulated regime (1940-1990), foreign companies were not allowed to operate in India and imports were strictly controlled. It was a sellers market with the waiting period for getting a Bajaj scooter being as long as 12 years. The motorcycle segment was no different, with only three manufacturers – Enfield, Ideal Jawa and Escort Escorts. s. The motorc motorcycl ycle e segme segment nt was initia initially lly domina dominated ted by the Enfiel Enfield d 350cc 350cc motorcycle and Escorts 175cc motorcycle. The scenar scenario io began began to chang change e in the mid-1 mid-1980 980s s when when the Indian Indian Govern Governmen mentt starte started d permit permittin ting g foreig foreign n compan companies ies to enter enter the market market throug through h minorit minority y joint joint ventures. The then market leaders – Escorts and Enfield – were caught unawares by the onslaught of 100cc bikes from four Indo-Japanese joint ventures – Hero Honda, TVS Suzuki, Bajaj Kawasaki and Kinetic Honda. With the availability of fuel efficient low power bikes, demand swelled, resulting in Hero Honda – then the only producer of four stroke bikes (100cc category) – gaining the top slot.
2.4 2. 4 Wh What at are are Hon Honda da’s ’s opt optio ions ns In 1991, after the economic liberalization Honda did not have any obligation to operate in India through partners. Honda was the proven leader in two wheeler industry. Through joint ventures Honda’s brand name was firmly established in India. It did not needed much brand building in India. Besides it had gained sufficient experience and understanding of the Indian market by now. At this point, Honda had three options: •
Continue with the existing partners – This no longer being a regulatory
requirement was not the best option at this point. Honda had enough expertise, experience and brand image to go independently in India. I ndia.
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•
Buy Stakes of the Partner – Partner – One option was for Honda to buy the stakes in
their partner. Honda did this with their partner Sriram. Honda tried to buy stakes in Kinetic Honda but it did not work out. •
Sell Stakes and Start on its own – Honda could sell its stakes in the existing
JVs and enter the market on its own.
2.5 2. 5 Wh Why y did did Hond Honda a ente enter r the the mar marke kett In the above above scenario, Honda sold its stakes stakes in Kinetic-Ho Kinetic-Honda nda JV and decided to enter the market on its own as Honda Motorcycles and Scooters India (HMSI) Pvt Ltd. India is the largest 2-wheelers market - at 38.67 lakh units in 2000, and growing rapidly, it was too lucrative a market to share with anybody. Contractual obligations in Hero-Honda JV prevented Honda to launch motor-cycles until 2004. However, Honda Honda was free to enter the scooter market subsequen subsequentt to termination termination of KineticKineticHonda JV. Scooter demand was sluggish in late 90’s and had dropped to 10 lakh units in 2000. Entering the 2-wheeler market with scooters, Honda ran the risk of entering a dying market. However, Honda saw an opportunity to grow the scooter segment. Firstly, India’s GDP was rising and so was the per capita income. Along with young male male workin working g profes professio sional nals, s, number number of workin working g women women was increa increasin sing g steadi steadily ly (Exhibit 3). Honda saw a huge potential market for its scooters. Declining as it may be, scooter demand still stood at 10 lakh units in 2000. Market environment was changing rapidly and so were the pollution norms. Scooters until 2000 predominantly had a 2-stroke engine and geared transmission. 2-stroke engine was unable to meet the increasingly stringent pollution norms. Geared transmission was falling out of favour favour with the customers. customers. In the declining declining scooter market, market, two companies with rising sales were TVS and Kinetic Honda, both riding on the success of their gearless scooters. Honda had a globally established product line of gearless 4-stroke scooters, which were high on style, comfort, ease of use /maintenance, and mileage. Honda was thus well poised to enter the scooter market in India. Situation Situation Analysis Analysis as Honda Honda prepared to enter the Indian 2 wheeler wheeler on its own is outlined below. Page 8 of 25
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1. Targe Targett Customers Customers & Offerings Offerings This This sectio section n analys analyses es needs needs of differe different nt target target custom customers ers vis-àvis-à-vis vis featur features es offered by various Honda products. Subsequently, details and positioning of each product is explained.
1.1 Sco Scoote oter r Marke Markett Segmen Segmentat tation ion and and Targe Targetin ting g Target Family
Needs Comfort
Features
Offerings
– Self Start – Less Less Nois Noise e & Vibr Vibrat atio ion n
Activa
– Long Seat – Large Storage Low and Easy – Meta Metall pan panel els s ins inste tead ad of Maintenance
plastic panels – Conv Conve enien nientt Lif Liftt up up Independent Cover
– Tyre Tyres s wit with h tuf tuff-u f-up p tec techn hnolo ology gy Better Mileage – 50 kms per litre
Youth
Easy to
– Ligh Lightt-we weig ight ht gear gearle less ss
Handle
– Cent Centra rally lly balan balance ced d engi engine ne
Style
– Futuristic design
Dio
– Vibr Vibran antt body body col colou ours rs wit with h Better Mileage
attractive graffiti art – 50 kms per litre
Comfort
– Self Start – Less Less Nois Noise e & Vibr Vibrat atio ion n
– Long Seat Low and Easy – Conv Conve enien nientt Lif Liftt up up Maintenance
Independent Cover
Easy to
– Tyre Tyres s wit with h tuf tuff-u f-up p tec techn hnolo ology gy – Ligh Lightt-we weig ight ht gear gearle less ss
Handle
– Cent Centra rally lly balan balance ced d engi engine ne
Working
Elegance
– Revo Revolu luti tion onar ary y des desig ign n
class
Safety
– Disc Disc bra brake ke impr improv oves es safe safety ty Page 10 of 25
Aviator
Target
Needs Strength
Features
Offerings
– Contemporary telescopic front suspension – 12-i 12-inc nch h allo alloy y whee wheels ls –
Body is combination of metal and high impact resistant ABS parts
Full Size
Power
– Othe Otherr stan standa dard rd fea featu ture res s – 150cc
scooters
Mileage
– 60 kms per lit litre
efficiency
– Wate Waterr-pr proo ooff elec electr tric ical al
Rugged
Eterno
components and stainless steel tuff-up cable – One One dire direct ctio ion n gear gear sys syste tem m – Large storage
Comfort
– Othe Otherr stan standa dard rd fea featu ture res s
1.1 1. 1 Pr Prod oduc uctt Posit Positio ionin ning g and Pro Promo moti tion on Activa Activa was the first scooter launched by Honda in 2001. It revitalised the scooter mark market et sinc since e its its laun launc ch in 2001 2001.. Acti Activa va was was desi design gned ed keep keepin ing g in view view the the preferences of Indian consumers who felt that the conventional Indian scooter was too big and difficult to handle. Promotion: Promotion: The print (Exhibit 7) and TV advertisements reinforced the message that Activa is the ideal mode of communication for the family. The advertisements also emphasized the ‘easy to handle’ features, ‘speed and pick up’ and low maintenance of Activa. Dio Dio is India’s first motoscooter. DIO was meant to add passion and excitement with its stunning looks and performance, by incorporating the latest world trends that made it a scooter that is much ahead of its time. Promotion: Promotion: Page 11 of 25
•
A print promotion (Exhibit 7) showed the scooter and a fashionably dressed young man carrying expensive glasses. The promo had the caption - ‘you and Dio complete the design’
•
Other advertisements emphasized style & comfort
Aviator Hond Honda a Avia Aviato torr scoo scoote terr pres presen ente ted d an amal amalga gam m of new new styl stylin ing, g, comf comfor ortt and and perf perfor orma manc nce. e.
The The inte intern rnat atio iona nall desi design gn and and styl stylin ing g of Avia Aviato torr made made it look look
sophis sophistic ticate ated d & luxuri luxurious ous.. Its lightw lightweig eight ht 12-inc 12-inch-a h-allo lloy y wheels wheels are a first first for the scooter industry in India. Eterno Honda entered the geared scooter segment of India with this 4-stroke 150cc scooter called Eterno. This model derives its name from the word eternal that represents the reliab reliable le techno technolog logy y prowes prowess s of Honda Honda brand. brand. Honda Honda Eterno Eterno is a power power packed packed machine with robust design and trendy looks.
1. Why and how how Honda was was successful in this segment 4.1 Def Define ine succ success ess – Crite Criteria ria,, Segme Segment, nt, Per Period iod HMSIL being a private private limited company company is not mandated mandated to make public its financial statements. Hence, success of the company is measured in terms of its annual production, exports and market share.
4.2 Facts Total scooter production fell from 10,13,737 units in 2001 to 9,07,895 units in 2003. 2003. Howeve Howeverr by 2008, 2008, produc productio tion n was back back to 11,22, 11,22,575 575 units. units. Scoote Scooter r sales are rising steadily since 2006 while motorcycle sales are declining in the same period (Exhibit 7). In 2008, HMSI has 59% market share of total domestic scooter market with 6,64,459 units sold. It exported 10,543 units to account for 40% of scooter exports. In the same period, HMSI sold 3,22,452 motorcycle units to account for 5% of the domestic market. It exported 36,269 units to account for 10% of B3 segment (Motorcycles with engine capacity ranging from 125cc to 250 cc) and 4% of total motorcycle exports. Page 12 of 25
4.3 4. 3 Re Reas ason ons s fo for r su succ cces ess s Main reasons for Honda’s success are : ○
Ability to identify the right opportunities and shape the market In a declining market, Honda was able to identify opportunities of growth.
○
By providing products that satisfied customer needs It had a repertoire of products that fit the customer needs. It spotted the trend, and provided a gearless scooter across various segments.
○
Through leadership in design and technology, Honda has core strength in 4-stroke small engine technology. Besides it had superior products with contemporary styling, high comfort, ease of use, use, and fuel fuel efficie efficiency ncy.. Honda Honda introdu introduced ced new featur features es like like punctu puncture re resistant tyres, and mono-shock in its products.
○
Backed by a globally trusted corporate identity. Honda is known for its product reliability and innovation. It is market leader in 2-wheelers in the Americas, and globally. Honda is a respected name in passenger cars, known for its reliability and value for money.
1. Challe Challenges nges Ahead 4
4.1 4. 1 HM HMSI SI Br Bring ings s Life Life to Sc Scoo oote ters rs The waiting waiting list in scooter market market has made a comeback. comeback. Scooters, Scooters, which which almost disappeared, are making a comeback. The waiting period for new Activa 100cc is one month which used to be just 10 days 6 months back. During 2006, only 12% of the 2 wheelers sold in India used to be scooters. The percentage is expected to be 20% this year. Additionally, the scooter market grew in double digits last fiscal, outperforming the two-wheeler market, which grew 2.6 per cent in the same period. Naresh Naresh Rattan Rattan,, HMSI’s HMSI’s divisi divisiona onall head head (sales (sales and marke marketin ting), g), said said many many urban urban mark market ets s in Indi India a were were seei seeing ng a tran transi siti tion on from from moto motorc rcyc ycle les s to scoo scoote ters rs.. “An “An increasing number of people are opting for scooters over bikes because they are hassle-free and very convenient, with mileage almost on a par with motorcycles. We do not think that a growth of 15 per cent year-on-year is difficult to achieve,” he said. Page 13 of 25
4.2 HMS HMSII targe targetin ting g complet complete e motor motorcyc cycle le mark market et As the non-compete agreement between Hero Honda and HMSI had ended, HMSI is ready to take on its own long-time partner in India, Hero Honda (in which Honda has a 26 per cent stake), and in the latter’s key area of dominance, the 100cc motorcycle market. Hero Honda commands 80 per cent market share in the 100cc segment (60 per cent of its sales), far ahead of its i ts nearest competitor, Bajaj Auto. HMSI is working on entering the same segment, with a sporty bike, in 2010. It hopes to sell a few lakh of these a year, to begin with. “The 100cc motorcycle that we plan to launch in India will be a totally new offering. It’ll not be a basic version and will be the sporty type,” says Shinji Aoyoma, president & CEO of HMSI. (Exhibits 4,5 and 6) Aoyoma is also planning to ensure that in the next few years, motorcycles make up for half of total sales. This would be a big change from its current mix, where scooters comprise 65 per cent of all sales. And he is clear that he hopes to do so by entering the 100cc bike segment, which is two-thirds of the 5.7 million per year motorcycles market. The 100cc motorcycle market is currently divided into two basic segments, entry and deluxe. The sales, too, are equally divided. The entry-level motorcycle segment is pegged between Rs.30,000–35,000, while deluxe models are priced at Rs.37,000–45,000. Industry experts say it is in the upper end of this price band that Honda is planning to position its 100cc bike.
4.3 Can HMSI HMSI diff differe erenti ntiate ate itse itself lf from from HeroHero-Hon Honda da in 100cc segment? To highlight highlight the product product differentia differentiating ting features, Anil Dua, senior vice-presid vice-president, ent, sales & marketing, Hero Honda says, “When a customer buys a motorcycle from the Hero Honda stable, he buys a package, which includes the brand, design, the valuefor-money promise, and the largest servicing network in the country. We field six brands in the 100cc segment, where each brand is uniquely positioned without cannibalising the other. The same will happen when Honda enters the segment”. Dua says there is a large untapped market in the 100cc segment as 70 per cent of the urban population and 90 per cent of the rural one have not bought their first motorcycle. “There’s room for everyone,” says Dua. HMSI further reinforces the same argument and notes that the 100cc market has many segments and it will operate in areas where its partners do not. “If you divide Page 14 of 25
the 100cc motorcycle segment into 10, starting from the entry to the deluxe level, there’s potential in every segment. So, our entry into the top end of the motorcycle segment does not mean we are taking on our partner, Hero Honda. We don’t sell our brands based on engine cc classification or pricing. We cater to a particular segment of customers who value the brand Honda,” says NK Rattan, divisional head, sales & marketing, HMSI. “The overall direction at HMSI is to focus more on fun biking and move away from basic commuting. This is what will make us unique while ensuring that there is no cannib cannibali alisat sation ion with with Hero Hero Honda’ Honda’s s motor motorcyc cycles les in the proces process,” s,” said said Mr Shinji Shinji Aoyama, President and CEO of HMSI. The recent launch of the 125cc Stunner is a move in this direction and this is what the 100cc bike, due to debut this fiscal, is intended to do too. “Its price could be a bit higher but the styling and performance will be unique to HMSI and customers will know the difference,” he added. However, conflicting views emerge from both, Honda companies as well as the industrial sector. Recently, Pawan Munjal, managing director and CEO, HHML, said since both operated in the 100-150cc segment, there had been some cannibalisation of products. Hero Honda sells as many as 14 products in the local market and HMSI sells six. In Bang Bangal alor ore, e, whil while e laun launch chin ing g a new new vers versio ion n of the the CBF CBF Stun Stunne ner, r, a 125c 125cc c motorcycle, Honda Motorcycle president and CEO Shinji Aoyama said that HMSI has turned profitable and aims to maintain 17% sales growth in 2009-10. Further, he added, “Business is getting better, but our profits are not as big as our competitors like Hero Honda (Motors Ltd) or Bajaj (Auto Ltd),” which indicates recognition of Hero-Honda as a competitor as well.
4.4 4. 4 HM HMSI SI’s ’s Cu Curr rren entt St Stra rate tegy gy HMSI has set a sales growth target of 18 per cent for the financial year 2009-10. HMSI aims to continue being the leader in the market and looks forward to continue meeting the customers' requirement with the changing times.
Page 15 of 25
HMSI also states that volumes and market share are not priority areas. “I do not care about market share because this does not make customers happy. The focus for us is on quality quality products and services,” services,” says Mr. Aoyama. Aoyama. Rising Rising price of raw material material has hit HMSI recently but global slowdown has kept the price in check for some time. From Honda’s point of view, India remains an attractive market for two-wheelers. “There are a huge number of youngsters in India with disposable incomes getting higher. I expect demand to grow consistently, though it could be in single digit figures, in the coming years,” he said. “Indian 2wheeler market is progressing from mass market to a diversified market due to changes in lifestyle of consumers. HMSI is committed to provide unique experience to Indian customers through its innovative products and quality in every aspect of business. To maintain this quality and advanced value creation, HMSI is mainly focusing on- Fun, Safety & Environment. Honda will spread Fun Biking in a responsible manner with emphasis on safe riding and good customer services. In the Enviro Environm nment ent,, many many signif significa icant nt effort efforts s have have been been made made like like elimin eliminati ating ng use use of asbestos, lead free paint & hazardous material from our manufacturing to protect the environment. In India we will continue to bring exciting products and be a full line company to serve every kind of customer” adds Mr. Shinji Aoyama. Page 16 of 25
1. App Append endix ix 2 3 4 6.1 Exhibit 1
Production of Motorcycles by Manufacturers in India (Calendar Year - 1993 to 2002) Year 1993
BAL 128305
YML 97382
HHML 139869
KEL -
LML -
IJPL 1563
REML 13201
TVS 44394
Total 424714
1994 1995 1996 1997 1998 1999 2000
175380 241725 287441 306889 349578 408489 567832
151852 173865 228271 174662 177340 228527 213290
174242 218422 247971 375720 498374 682353 985043
-
-
4673 6932 2133 -
14629 21490 22707 23718 17700 23289 22733
79315 114564 157388 201322 252308 314494 360814
600091 776998 945911 1082311 1295300 1657152 2164950
Source: http://www.indiaeconomic http://www.indiaeconomicstat.com/industries/18/indu stat.com/industries/18/industrialsectors/107700/automobiles strialsectors/107700/automobiles/52/stats.aspx /52/stats.aspx
Page 17 of 25
6.2 Exhibit 2
Production of Mopeds by Manufacturers in India (Calendar year 1993 to 2000) Year
BAL
KEL
Royal MALEnfield
TVS
YMI
Total
1993
72842
127145
104561
4091
149157
0
457796
1994
71683
121865
119505
0
202334
1549
516936
1995
71075
158432
118091
0
257487
19035
624120
1996
70206
156944
137240
0
294919
18765
678074
1997
58724
163191
138381
0
294589
12357
667242
1998
38211
160903
128195
0
334540
9850
671699
1999
69475
162615
111119
0
381301
0
724510
2000
58381
159424
107524
0
369645
0
694974
Source: http://www.indiaeconomic http://www.indiaeconomicstat.com/industries/18/indu stat.com/industries/18/industrialsectors/107700/automobiles strialsectors/107700/automobiles/52/stats.aspx /52/stats.aspx
Page 18 of 25
6.3 Exhibit 3
Women employees in organized sector Calender Year 1992 - 2006 Year
Women (’000)
Total (’000)
% Women
1992
3889.8
27055.7
14.4%
1993
4026.3
27176.6
14.8%
1994
4153.9
27374.8
15.2%
1995
4227.9
27524.7
15.4%
1996
4426.4
27940.9
15.8%
1997
4637
28244.5
16.4%
1998
4773.6
28165.8
16.9%
1999
4829.2
28113.1
17.2%
2000
4922.8
27959.7
17.6%
2001
4949.3
27789.2
17.8%
2002
4935.4
27205.5
18.1%
2003
4969
27000
18.4%
2004
4934
26443
18.7%
2005
5016
26458
19.0%
2006
5121
26993
19.0%
Page 19 of 25
6.4 Exhibit 4
6.5 Exhibit 5
6.6 Exhibit 6
Page 20 of 25
6.7 Exhibit 7 Honda Activa
Features: •
110cc smooth engine
•
18 litre storage capacity
•
Combi Brake for shorter
•
Puncture Resistant Tuff-up
braking distance with stability •
Anti-theft Key shutter for safety
tube in the rear tyre •
of vehicle
Under standard conditions, mileage of 50 km per litre
Price : Rs. 35,628 - Rs. 39,052
Honda Dio
.
Features: •
102 cc engine
•
Light weight body
•
Sleek aerodynamic design
•
Effective shock absorption
Page 21 of 25
•
Low positioned seat with high
•
ground clearance
Stays balanced even during emergency braking
Price : Rs. 40,000 – Rs. 42,000
Honda Aviator
Features : •
Front facade styling with large
•
clear lens multi-reflector lamps •
Lightweight 12 inches alloy
seat space •
wheel •
Adequate 20 Litre of under
Telescopic front suspension for better on road control
Puncture resistant tuff-up tube
•
High impact resistant body
Price: Rs. 45,175 - 48,935
Eterno
Features : •
•
Aerodynamic Body with masculine looking body style Ground Clearance of 161 mm Page 22 of 25
•
Dual Spring Suspension technology for better comfort
•
Spacious Flat Board
•
Grab rails for convenience and safety
•
CLIC - Lift Up Independent Cover for easy maintenance
Price: Rs 36,000-38,000
Page 23 of 25
6.1 Exhibit 8
Y on Y growth in 2-wheeler categories Scooter Motorcycle Moped Total
Year 1993 1994 1995 1996 1997 1998 1999 2000
-
23% 20% 11% -2% 1% -1% -21%
41% 28% 20% 16% 20% 28% 28%
11% 20% 13% -5% 3% 5% 4%
25% 22% 14% 3% 8% 12% 6%
Source: http://www.indiaeconomic http://www.indiaeconomicstat.com/industries/18/indus stat.com/industries/18/industrialsectors/107700/automobiles trialsectors/107700/automobiles/52/stats.aspx /52/stats.aspx
Page 24 of 25
6.2 References 1. http://www.honda2wheelersindia.com 2. http://world.honda.com 3. http://indiaeconomicstat.com 4. http://indiastat.com 5. http://www.livemint.com 6. http://auto.indiamart.com 7. http://www.thehindubusinessline.com 8. http://ia.rediff.com 9. http://www.bikeindia.in 10. http://www.team-bhp.com 11. http://www.financialexpress.com 12. http://www.indiaprwire.com 13. http://www.mydigitalfc.com 14. http://www.business-standard.com 15. http://findarticles.com 16. http://www.ibef.org
And 17.Dealer in Kolkata – TodiHonda – Discussion Discussion and visit
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