Honda Motorcycle sees sharp increase in revenue, profit for FY24 as motorcycle volumes surge

Honda Motorcycle and Scooter India (HMSI), the Indian subsidiary of Honda Motor Company, has accelerated its growth in FY24, narrowing the gap with market leader Hero MotoCorp and leading profit expansion among major two-wheeler manufacturers. According to Ministry of Corporate Affairs filings, the maker of Activa reported a 46% rise in net profit to Rs 2,705 crore in FY24, boosted by an 18% increase in revenue.

This impressive achievement is attributed to the company’s entry into the economy bike segment and a stringent focus on cost efficiency that significantly enhanced its profit margins.

HMSI's increasing profitability is reflected in its Return on Equity (RoE), a key measure of shareholder fund utilization. In FY24, HMSI's RoE soared to a multi-year high of 26.82%, eclipsing its peak of 26.11% in FY2018.

The company's operating margin expanded to 14.58% in FY24, reflecting an increase of 205 basis points compared to the previous fiscal year. Within the Indian two-wheeler industry, operating margins range from 11% to 27%, with TVS Motor at the lower end and Royal Enfield at the higher end of the spectrum.

All this have contributed to a surge in its operating profit per vehicle, which now stands at Rs 9,516 per unit, surpassing its closest competitor. Moreover, on a per-unit basis, HMSI earned Rs 5,528 in FY24, representing an annual growth rate of 12.87% over the past five years.

Surging Revenue

The company also witnessed an 18% increase in revenue, reaching an impressive Rs. 31,945 crore. This surge, primarily fueled by higher sales volumes, represents one of the most substantial revenue figures in the company’s history.

Reviewing the FY-24 earnings, the director's report stated, “In FY 2023-24, HMSI reinforced its position as a key player in the Indian two-wheeler industry, achieving 12% sales growth with 4.89 million units sold, including 4.53 million in the domestic market and 0.36 million exports. Our global expansion strategy remains strong, with exports reaching 58 markets across Europe, Central & Latin America, the Middle East, Southeast Asia, Japan, Australia, New Zealand, and SAARC nations."

HMSI’s volume growth in FY24 was driven by its strategic focus on the economy and premium motorcycle segments. The Economy segment accounts for an 11% share of its domestic market, underlining a significant headroom for the brand to grow.

The increasing prominence of HMSI’s motorcycle portfolio has been instrumental in diversifying its overall product mix. The segment’s contribution to the company’s total volume surged to 44% in FY24, marking a 10% rise over the past five years. This transition has mitigated the pressure exerted by the stagnating scooter segment and has provided HMSI with a more balanced and resilient revenue stream.

The Shine 100 brought incremental volumes of over 2.6 lakh units, boosting its segment share to 12.64% from a negligible presence the previous year.

Due to HMSI’s entry, the entry motorcycle segment got a fillip and grew 10.6% year-over-year to 2.09 million units in FY-24. However, the segment has almost halved, shrinking to 11.6% in FY24 from 18.3% in FY19.

The premium motorcycle segment also proved to be a crucial growth driver for HMSI. The Unicorn, a longstanding model in HMSI's portfolio, recorded a healthy 41% year-over-year increase in sales, with total volumes rising to 340,180 units in FY24, up from 246,130 units in the previous year. This growth also propelled HMSI’s segment share in the premium segment to 16%.

The company’s financial strength is reflected in the brand's growing stature within the Indian market, where it now commands revenue equivalent to 85% of Hero MotoCorp’s topline for FY24, up from 77% in FY19.

Meanwhile, TVS Motor, another key player in the sector, is rapidly narrowing the gap with HMSI, with the revenue differential shrinking to a mere Rs 168 crore in FY24 from Rs 7,710 crore five years ago.

The Indian two-wheeler market, including exports, expanded by 10% to 21.43 million units during the fiscal year. This growth was primarily driven by a substantial 13.3% rise in domestic sales, which totaled 17.94 million units. However, the industry experienced a downturn in exports, with overseas shipments declining by nearly 5% to 3.45 million units.

New Products

HMSI began FY24 with OBD-2 compliant upgrades for the Dio 110, CD 110 Dream Deluxe, Shine 125, Unicorn, Hornet 2.0, and CB200X, alongside new launches like the SP160 and Dio 125. Special editions of the Activa Limited Edition and SP125 Sports Edition were introduced for the festive season.

HMSI expanded its BigWing network with 22 new touchpoints, bringing the total to 140+ locations. BigWing Topline serves 300cc-1800cc models in metros, while BigWing focuses on 300cc-500cc bikes in other cities.

The CB300F and CB300R (OBD-2 compliant), Legacy Edition & New Hue Edition of H’ness CB350 and CB350RS were launched. HMSI also introduced NX500 and XL750 Transalp adventure tourers, along with the Gold Wing Tour, reinforcing its presence in premium and touring segments.

Scooter Slowdown

While motorcycles contributed significantly to HMSI’s overall expansion, sales of its scooters, a segment that HMSI traditionally dominated, grew at a slower pace than the industry.

This allowed competitors to eat into the company’s share. The contribution of domestic scooters to HMSI’s total volume has steadily come down to 52% in FY24, compared to 62% five years ago.

Over the past five years, HMSI’s domestic scooter volume has declined at an annual rate of 7.22%, whereas the industry-wide decline stood at a relatively lower 2.72%. This disparity has resulted in market share gains for its peers, with HMSI's share in the domestic scooter market slipping to 43.3% in FY24 from 54.9% in FY19.

Despite a 4.6% year-over-year growth in the company’s FY24 domestic scooter sales to 2.5 million units—including 2.25 million Activas—HMSI has faced challenges.

Part of the reason could also be attributed to a lack of electric vehicles in its portfolio over the last five years, as this segment has been a driver of sales for rivals. EVs account for over 10-15% of the overall scooter segment, and Honda Motorcycle has just entered it.

Outlook

The total capital expenditure in FY24 amounted to Rs 1,589.3 crore, covering investments in buildings, plant and machinery, equipment, vehicles, computers, furniture, and software.  

HMSI's financial growth and its strength in the motorcycle segment highlights its strategic ability to adapt to the changing Indian two-wheeler market. The company has strengthened its market position by balancing the economy and premium bike segments while improving efficiency. However, challenges remain, especially in the competitive scooter segment, where declining market share requires renewed focus.

With the company’s entry into EVs, a dedicated factory planned for global operation out of India, and planned expansion in the premium segment, Honda plans to tactically reinforce different segments of the market.

The road ahead for HMSI will likely involve deeper penetration into emerging market segments, sustained innovation, and enhanced cost optimization strategies to maintain its growth momentum in an increasingly dynamic industry landscape.