While the Indian automotive industry buckles under the downturn and most vehicle manufacturers are keeping their fingers firmly crossed that sales show an uptick during the ongoing festive season, Gurgaon-based Honda Motorcycle & Scooter India (HMSI) is revving up for even bigger play. In fact, it is extremely bullish about clocking higher sales on the auspicious day of Dhanteras compared to last year when it pocketed over 50,000 sales.
Driving this expectation is the installation of the new assembly line at HMSI’s third manufacturing facility at Narsapura in Karnataka for the company’s first volume Dream series bike, the Dream Yuga. This July, another line for the hugely popular Activa scooter was also added and a third assembly line for the Dream Neo is expected to be set up at the plant by November to ease capacity constraints. Following that, the line will have a production capacity of 2,200 units per day, increasing total plant capacity to over 6,500 a day.
According to sources in the know, a new face-lifted CB Shine motorcycle is also likely to be produced at the plant starting December with a production capacity of 250,000 units annually.
Rural mantra
Y S Guleria, vice-president sales and marketing, HMSI, says that huge demand is expected especially from the rural markets that will boost sales of the 109cc Dream series (Yuga and Neo) bikes with the new assembly lines in place. HMSI is banking on the fact that the good monsoon across the country will bring first-time buyers and rural customers to its showroom in droves.
End-August saw dealerships stocked for two weeks with the company recording the same high retails in this month that were reported in October 2012. “Our wish list is to have zero stock at our dealerships. So let us see how far we are able to achieve this wishlist,” says Guleria.
Currently, 35 percent of HMSI sales come from rural markets. He is hopeful of a 10 percent increase in this figure with a product portfolio apt for these markets. Also, the company's aggressive network expansion in these areas will help HMSI chart out higher growth with the onset of the festive season.
Each month sees it expand its rural network and inaugurate one secondary outlet every day. Honda plans to add a total of over 500 outlets this fiscal year; of this, about 200 dealerships will be in rural India with a similar number of secondary networks and authorised service centres. So far it has added 200 outlets and plans to end FY’14 with 2,500 touchpoints
The manufacturer is also moving into North East India and now has a presence in Manipur, Mizoram and Tripura with plans to enter Meghalaya at Shillong shortly.
Overall, for the company, two-wheeler sales in North, Central and East India continue to maintain high penetration levels. The market structure in West and South India is more conducive to sale of scooters compared to all India figures. For instance, Rajasthan is predominantly (over 90 percent) a motorcycle market while Kerala is over 60 percent tilted towards automatic scooters. At present, HMSI is unable to support Kerala sales as supply is unable to meet burgeoning demand. In Kerala, Goa and Chandigarh, Honda claims it leads with automatic scooters.
Meanwhile, Honda is sticking to its plan of launching at least one new model every quarter and as already reported by Autocar Professional in its September 1, 2013 issue it has a new 109/110cc scooter (codenamed K24A) in the pipeline. The scooter will be produced at its Manesar plant and is initially expected to roll out with a capacity of 700 units per month. By the second year of production, it will be ramped up to around 100,000 units per annum.
Thus far, HMSI has been able to beat the slowdown with April-August 2013 sales posting a growth of 21 percent while the industry grew by 1 percent in comparison. However, Honda has been facing capacity constraints mainly in scooters and has a backlog of 120,000 units of which 80 percent is for scooters.
The addition of the new line for the Activa scooter at Narsapura is expected to reach full capacity by this month end and will help clear some of the back orders and limit the waiting period to less than a week before the festive season sets in. At present, the waiting period is around two weeks for both bikes and scooters.
Gujarat is go
In a recent announcement, the Nikkei has stated that Honda Motor Co plans to increase its motorcycle production capacity in India by 30 percent by 2016, in a bid to catch up with market leader and former JV partner Hero MotoCorp. It confirmed that the Japanese company will build a fourth plant, likely to be Gujarat, at a cost of about 20 billion yen ($200.39 million). Honda’s capacity in India will rise to 5.8 million units once the plant starts producing, the Nikkei said. Honda will also hire 3,000 workers, it added.
According to Guleria, by the first half of 2013, HMSI has touched a capacity of 4.0 million units with its three plants and will end the fiscal at 4.6 million after adding the third line at Narsapura after the festive season. "Right now the focus is to meet the full capacity of the second line that we have started for the Activa," he states.
He confirmed plans to add further capacity with a new factory but refused to elaborate further. In its September 1 issue, Autocar Professional had already indicated that HMSI is likely to set up its fourth plant at Vithalapur in Gujarat with the unit going on stream by Q4 2014 or by January 2015.
Earlier this year, Keita Muramatsu, president and CEO, HMSI, had spoken about the company’s target of setting up a total of seven plants and achieving the No. 1 position in India by 2020. This target is expected to be achieved earlier, possibly by 2016-2018.
In early September, HMSI introduced a refreshed Dream Yuga Dual Tone at the Dream Yuga’s existing price. This strategy of offering models at lower cost with value add-ons is expected to run through other models as well.
Overall, HMSI has grown 30 percent in motorcycles and is confident that once its network in the rural regions as well as service network and new products are in place there will be no sales speedbreakers. It has also been scaling up market share.
Between April-August 2012, it had held 9 percent in bikes; a year later, it has a 16 percent share with the 110cc segment up from 5 percent last year to 8 percent at present. This mass segment accounts for 50 percent of the total two-wheelers sold in India. For FY'14, HMSI is targeting sales of 3.93 million units, with scooters contributing 50 percent and the balance 50 percent coming from motorcycles.
There are winds blowing in HMSI's favour, particularly for gearless scooters. These include an increase in female buyers, improved fuel efficiency facilitated by the new Honda Eco Technology in all of its new models, improved styling with telescopic front fork and larger tyres for a more comfortable ride even in the rural areas.
All in all, HMSI is keeping its hand firmly on the accelerator.