The inside story of how Honda Motorcycle & Scooter India (HMSI), the wholly-owned subsidiary of Honda Motor Company, Japan, took the wind out of the sails of domestic two-wheeler giants.
10 May 2023 | 10038 Views | By Shruti Mishra
From entering one of the largest two-wheeler markets in the world through a joint venture to gaining a strong foothold there on its own, even after breaking away from its partner of 26 years, Honda Motorcycle & Scooter India (HMSI) has come a long way and is now indeed more ...
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From entering one of the largest two-wheeler markets in the world through a joint venture to gaining a strong foothold there on its own, even after breaking away from its partner of 26 years, Honda Motorcycle & Scooter India (HMSI) has come a long way and is now indeed more competitive domestically as a standalone entity.
The Japanese multi-product two-wheeler brand has remained a consistent and undisputed contender for second place in India for the past decade, pushing homegrown Bajaj Auto to the third spot.
From the perspective of parent company Honda, India is one of the fastest growing regions globally, as highlighted by the former President, MD, and CEO of HMSI, Atsushi Ogata. “I would like to believe that the worst is over for the Indian two-wheeler market as we are seeing capacities being utilised to the fullest, and new capacities being added,” Ogata told Autocar Professional on the sidelines of the launch of the Honda Shine 100cc motorcycle in March.
Notably, it is the only foreign original equipment manufacturer among the top four players in this space, with an ambitious target to take over the prime spot in the near future. In the last five years, HMSI has almost halved the domestic sales gap between itself and its arch-rival Hero MotoCorp. In FY23, the company sold 4,025,527 units in the domestic market, up 16 percent Y-o-Y as compared to 5,155,793 units sold by Hero MotoCorp with a YoY growth of 11 percent.
So, what has been HMSI's secret sauce? One factor that has strongly worked in favour of the company throughout these years is its focus on the scooter segment, where it has always topped the charts with over 60 percent market share. Over the past decade, the company has built a brand 'Activa' which has become synonymous with the term 'automatic scooter'. According to Ogata, ICE technology still has a big advantage with respect to distance per charge or refuel. “While electrification is growing, India needs to stick to IC engines for a long time to come,” Ogata said during the launch of the OBD2 compliant Activa in January.
With an annual production capacity of 52 lakh units, the Tokyo headquartered two-wheeler maker has four manufacturing facilities in India, one each in Manesar (Haryana), Vithalpur (Gujarat), Tapukara (Rajasthan), and Narsapura (Karnataka).
Yet, a deeper look at HMSI's current business dynamics shows that the Gurugram-based company is on a spree to identify the white spots in its product portfolio in a bid to win the battle for pole position. From entry-segment to premium bikes to EVs, HMSI suddenly seems to be everywhere, doing everything at once.
Playing on extreme ends
The first jolt that HMSI faced in the Indian market was on January 1, 2011, when the company and its erstwhile partner Hero MotoCorp parted ways after a successful joint venture (JV) that lasted 26 years. While the maker of the Splendor motorcycle retained its dominance even after the JV ended, Honda’s HMSI took a major hit as it remained glued to its strategy of scooterisation in India.
In the conventional two-wheeler market in India, ICE motorcycles are the largest segment currently, with over 60 percent market share. The recent downturn in the two-wheeler industry due to hikes in fuel and input costs largely impacted the budget motorcycle sub-segments (100cc-110cc) in particular, sharply reducing the market share of Hero MotoCorp to 47 percent from 51 percent five years earlier.
During the same period, HMSI made a remarkable jump in market share from 13.5 percent in FY19 to 16 percent in FY23, on the back of its dominance in the executive (125cc) and performance (160cc plus) segments.
As the race for the number one spot got hotter, it soon became clear to HMSI that without a substantial presence in the commuter segment, which comprises 60 percent of overall motorcycle sales, it is impossible to win the battle. With five or six models in commuter 100cc-110cc, rural India is a hotspot for Hero MotoCorp, as the demand for low-priced bikes is the highest out there, while this is not the case with HMSI. The company has not been able to make most of its sales in the hinterland due to its limited offerings in the segment.
As the rural market is gradually making a comeback, HMSI recently made an entry in the 100cc segment and launched the Honda Shine 100 at Rs 64,900 (ex-showroom Delhi) with the hope of bringing in incremental volumes from both rural and urban markets. "The demand is coming back, and with the introduction of Shine 100, for the first time, I expect that next year we will be operating close to our total capacity,” Ogata said at the time of the launch.
However, the price point still remains an area of concern, as Hero MotoCorp is still selling its high mileage motorcycle model — HF Deluxe at Rs 56,900 (exshowroom Delhi).
Parallelly, the company is also looking to expand its premium pie with a new portfolio of locally produced mid-size motorcycles, challenging the supremacy of Royal Enfield. In the past two years, the company has launched some prominent products, such as the Honda CB300F, H'ness CB350 and CB350RS in the mid-weight motorcycle segment, where Royal Enfield has over 80 percent market share. The differentiators for HMSI are the young population and riding cultures in the country which leaves ample room for the potential players to grow.
The bike and scooter maker also experimented in the market with Minimoto models like the Navi, the Activa scooter-based small-wheel automatic lifestyle motorcycle. Although highly popular in markets like the United States of America, the Navi failed to enthuse the Indian audience.
HMSI rolled out a new brand for its premium bikes, called the Silver Wing to cater to the sales and service of the mid-size motorcycle segment, and the premium motorcycle range from 300 cc to 1,800 cc. The company has also created a separate sales channel for its CKD and CBU models that will carry the Silver Wing mark. Red Honda Wing is the brand for Honda’s mass-market bikes.
Dominance in scooter space
Very early, HMSI sensed the peak of urbanisation, and therefore the company has always been optimistic about scooter demand in the country. It also bet high on the concept of co-usage, where the primary requirement of the women workforce was not mileage but convenience and unisex automatic scooters. And that’s how the legendary model Activa changed the face of the scooter market in the country.
It wasn’t surprising, of course, when the company found new ways to act in its own interests by launching multiple models under the same Activa umbrella brand name. So you had the Honda Activa 125, Honda Activa 6G, and Activa Premium Edition all sharing space in showrooms.
As soon as the new OBD II and RDE norms kicked in April 2023, HMSI was the first to upgrade its Activa 6G and CB350 ranges to meet the latest emission norms.
It is also one of the first movers to take scooterisation beyond urban areas with its rural-focused model ‘Cliq’ that shares the same platform as Activa. According to HMSI, the market for higher-displacement scooters should evolve gradually. The buyers of the Activa 125 are largely upgraders from the 110cc scooter segment or from entry-level motorcycles. However, the company believes that the 110cc segment should continue to be the single largest segment over the medium term.
EVs — a late call?
The maker of Activa is aiming to attain a production capacity of 1 million electric vehicle units by 2030, though the company hasn’t made its maiden voyage in this segment yet. Ogata, who ended his three-year stint on March 31, 2023, played a pivotal role in creating the HMSI’s EV roadmap for India. He took charge of the Indian market in May 2020, roughly four months after the company’s peers TVS and Bajaj made their debut in the hyperdynamic electric twowheeler market. Following suit, Hero MotoCorp also launched its electric scooter Vida in 2022, making HMSI the only company left out of the league. All this while, Ogata was bombarded with questions on HMSI’s debut in electric space, but he never shied away from sharing the company’s step-by-step development in establishing EV manufacturing and related supply chains in the country.
"Honda will make significant inroads, especially into the mediumspeed electric scooter market, which has space for more players," Ogata told reporters while addressing his last event in March on the company's EV strategy. Prior to this, Autocar Professional disclosed that the company is preparing a product portfolio of 10 EVs for the upcoming decade for the Indian market. The blueprints for at least two model types – hub motor platform and chassis-mounted platform were submitted for trademark approval and HMSI even teased the market with renditions.
As part of the roadmap, the company highlighted the establishment of a separate 6,00,000 EV manufacturing unit at its Narsapura plant in Karnataka to roll out electric two-wheelers. Its first two e-scooter models are expected to hit the market in the current fiscal year.
The company’s march towards electrification will be initiated under Project Vidyut, under which HMSI will launch two new electric two-wheelers in FY24. It is also considering bringing in a dedicated platform on which multiple EV models with both fixed and swappable batteries would be introduced. Ogata signalled that the first electric scooter from the company's stable, likely to be based on Activa’s BS-IV version platform, will go into mass production in midMarch 2024, followed by a market launch.
Ogata knew that the success of any new product lies in localisation, and therefore he was quite particular about creating an indigenous supply chain for products like battery packs, power control unit (PCU), motor, charger and contactor. "We are trying our best to avoid importing from China. It is actually quite difficult to localise some core EV components such as motor magnets and battery enclosures, and therefore, the initial gross localisation percentage is going to be lower compared to ICE vehicles," he added. Despite such massive preparation, it is going to be tough for HMSI to arrive late in the EV race and still win. That too, at a time when TVS and Bajaj have already secured a sizable market with their sole e-scooters iQube and Chetak, 19.5 percent and 4 percent, respectively, as per the Vahan database. And then there are startup brands like Ola. Ather. Okinawa, BGauss among others to contend with, in the e2W scooter space. As of now, there are no plans for making an e2W motorcycle which has just a handful of players namely Revolt, Tork, Matter and a few others.
The way forward
Though for a brief period, HMSI tasted success in September last year when it dethroned Hero MotoCorp in monthly retail sales since their separation. HMSI recorded higher retail sales of two-wheelers as compared to Hero MotoCorp—298,000 vs 267,000—according to data from Vahan. HMSI is banking on unrepresented areas like Tier 2 or Tier 3 markets and aims to strengthen its retail presence in rural markets.
In a nutshell, HMSI’s multi-pronged strategy to overcome its weak points in the two-wheeler market seems to be well calculated. In the ICE category, the company will bank on products in the 160cc-350cc premium category of motorcycles along with 125cc scooter this year. Tsutsumu Otani has already actioned some decisions to help grow the brand. He has just inaugurated the stateof-the-art VR-equipped Nagpur Zonal office as a part of HMSI’s Rupantar project that will further enhance the technical skills at the dealership level, adding to better customer service.
This feature was first published in Autocar Professional's May 1, 2023 issue.