Honda Motorcycle & Scooter India (HMSI) is learnt to be working on an aggressive growth plan. That plan includes establishing facilities in all the major regions of the country in order to be close to markets. When these facilities are built, HMSI will have a total of seven plants by 2020. The two-wheeler market by then is projected to reach 34 million units annually.
According to an industry source, HMSI plans to set up a plant each in Gujarat and Odisha (formerly Orissa). “The cumulative production capacity will be 12-15 million units by 2020,” our source said. This is in line to Honda’s earlier stated plan of reaching an annual sales level of 10 million two-wheelers by 2020. That figure, incidentally, is the same as the current market leader HeroMoto Corp’s planned production capacity by 2017-18.
The company currently has a plant in Gurgaon in the National Capital Region and at Tapukara in Rajasthan. Its third plant at Narasapura, Karnataka, will start operations during the first half of 2013. With this facility, HMSI’s cumulative annual production capacity will reach four million units.
While HMSI’s fourth and fifth plants are likely to come up near its third plant in Karnataka, the sixth plant may come up in Sanand, Gujarat, and the seventh in Odisha. A Honda spokesperson denied "any such rumours regarding the said expansion plan and 15 million units by 2020.”
HMSI is learnt to be drafting its new three-year plan, which will come into effect from April 2013.
HMSI's market share at the end of December 2012 for 2012-13 was 17 percent, compared to 15 percent a year earlier. “Currently, Honda is the only player gaining market share in the two-wheeler space. It may end the year as the number two player,” says an official from one of Honda’s business associates.
The key drivers in HMSI’s growth are its Activa scooter and the 125cc bike CB Shine. HMSI clocked sales of 217,612 units in December, a 14 percent YoY growth. While motorcycle sales comprised 106,297 units (up 35 percent), scooters sold 111,315 units (down 1 percent) during the month.
For the 2012-13 fiscal year and the nine-month April-December 2012 period, HMSI has sold a total of 2,043,416 units, posting 37 percent overall growth. While motorcycle sales are up 51 percent (943,953 units), scooter sales have increased by 27 percent (1,099,463).
The growth trajectory and the future plans reflect Honda’s earlier stated intent to be the number one in “quantity and quality” in India, by 2021. While the target is to surpass Hero by then, HMSI’s previous chief, Shinji Aoyama had told this magazine in an interview last year that HMSI’s volumes “will be comparable to those of Hero in 6-7 years”. However, HMSI has had to face the slowdown challenge that has hit the market after Aoyama left India. During April-November 2012, two-wheeler sales grew four percent YoY. Motorcycle sales, which contribute over 70 percent of total two-wheeler sales, remained flat. SIAM has indicated that it may lower growth projection of two-wheelers during this financial year.
The challenge for HMSI will be to extend its reach into untapped markets beyond the major cities and maintain its growth ride.
SUMANTRA BAROOAH