Honda speeds up for bike leadership race in India

As CEO of Honda Motor Company, Mr Takanobu Ito, has a hectic schedule through the year. Despite that, he is taking time off to be present at the inaugural of his Indian two-wheeler arm's new plant in Rajasthan on Wednesday.

“It is a strong message of Honda's intent in India, now that it is on its own without the Hero Group,” an auto sector executive told Business Line. The separation has resulted in Honda losing annual sales of five million bikes to its erstwhile Indian ally.

The company will now have to bridge this deficit quickly which explains why Honda Motorcycle & Scooter India (HMSI) is readying its second plant in Rajasthan and has already made public its intent to commission a third in Karnataka.

In this backdrop, Mr Ito's presence on Wednesday is just not a happy coincidence. It was he who had, less than a year ago, said that emerging markets like India would play a big role in reshaping Honda's future.

“Key competitors in these markets are Chinese and Indian (two-wheeler) makers. For Honda to remain a market leader, it must not only maintain the high attractiveness and quality of products but also improve cost-competitiveness to match the low prices of these competitors,” he had said.

The underlying message is clear. The new HMSI will focus on the commuter bike segment which accounts for numbers of over four lakh units a month. The Hero Group is the leader here thanks largely to its Splendor and Passion models while Bajaj Auto is rapidly emerging a force to reckon with.

This fiscal is expected to see Hero Honda's two-wheeler numbers cross the six-million-unit mark, while Bajaj Auto would be around 4.5 million bikes. The projections for TVS Motor are closer to 2.5 million, while HMSI will end at 2.2 million units.

Once capacity at Rajasthan is doubled to 1.2 million, HMSI's overall output during 2012-13 will be closer to 2.8 million units. With the commissioning of the third plant in Karnataka, the company will look at 3.5 million units in FY14 before reaching four million bikes and scooters during the course of 2014-15.

It is only after this period that Honda will step up the gas and this is when there could be interesting dynamics in the two-wheeler leadership stakes here. What is bound to happen, though, is that India will end up being the Japanese company's top-selling bike market over the next five years, well ahead of Indonesia and Vietnam.

Interestingly, Honda is not as upbeat about China largely due to the fact that the low pricing structure prevalent there is a tough challenge. The company believes that customers in India appreciate quality better and are willing to pay more as a result. In the process, there could be initiatives on the R&D front where a lot of critical work will be done in India.

Honda Motorcycle unveils CBR 250 R

Honda Motorcycle & Scooter India Pvt Ltd (HMSI) today launched its first 250 cc sports bike in the country and hoped to grow sales volume by 20-25 per cent in the face of sharp rise in interest rates."We sold 16.85 lakh units in FY'11. In the current fiscal, we plan to increase it to 21 lakh units. We will continue to grow faster than industry. The turnover is also expected to jump to Rs7,500 crore this year," company head, sales, N K Rattan said at the launch of the bike CBR 250R in Kolkata.

To cater to the growing demand, the company's second plant at Rajasthan would start production from the second half of this year. The new unit would roll out 6 lakh units a year in the first phase."We invested Rs500 crore in the second plant so far," Rattan said.The company's latest offering is priced in the range of Rs1.46 lakh to Rs1.71 lakh ex-showroom Kolkata and, according to Rattan, the company planned to sell 30,000 units in India and export 10,000 units.

HMSI, hopes to sell 21 lakh motorcycles and scooters in the country this financial year, a top company executive said on Wednesday."We are eyeing sales of about 21 lakh units in the country this fiscal," Rattan said.The company currently operates one production plant at Manesar in Haryana with a total capacity of 16 lakh units.Stating that at present the company has a market share of 13 per cent in India, Rattan said: "We have a portfolio of six motorcycles, three scooters and three completely built-up (CBU) bikes." He said the company was looking to launch anew scooter at the end of this financial year."At present, we have 425 dealers across the country and we will add another 100 this fiscal," he added

Honda GoldWing Hybrid

Honda’s Grand Tourer Motorcycle, the Goldwing, could get hybrid power in the future as a patent application submitted by Honda to the US patent office reveals a four cylinder engine supplemented by an electric motor for the Hybrid Goldwing.

What we’re wondering about is not how farther the hybrid Goldwing will go or even about how less carbon it will emit, but as to why exactly has Honda dumped the six cylinder 1,800cc boxer engine for the four potter?

One reason could be because Honda, instead of using the electric motor to cut fuel costs and emissions could instead use it as a power booster when needed. Higher fuel economy and lower emissions could any way be achieved with the smaller four cylinder engine.

This makes a bunch of sense isn’t it, as the Honda Goldwing is essentially a long distance tourer, on which a small electric motor to cut emissions and help extend range won’t exactly work as short distance city commuting isn’t exactly what a Goldwing will be used for.

Hero Honda to provide 3,500 per cent dividend

In a move aimed at making investors happy, the country's largest two-wheeler maker Hero Honda Motors Ltd on Wednesday announced 3,500 per cent dividend or Rs 70 per equity share of face value Rs 2 to its shareholders. This is expected to cost the company Rs 1,500 crore.

"In its board meeting held today, the company considered and declared an interim dividend at the rate of 3,500 per cent, that is Rs 70 per equity share of Rs 2 each," company said in a filing to the Bombay Stock Exchange (BSE). In its filing to the stock exchange, the company did not say how much it would cost the bike major. The company's spokesperson could not be reached for comment.

However, according to a senior official of the company the dividend payout will cost it about Rs 1,500 crore. "This payout will cost the company about Rs 1,500 crore. But this is just a rough estimate. The exact figure I can tell only after calculations," he said. "There is nothing surprising in this announcement as the company has performed well. We have enough cash surplus. Last year too, we shared a similar dividend with all the stockholders. So, I do not see it having any negative impact on revenues in the long run," the company official added.

In March last year, the company had declared a Silver Jubilee Special Dividend of 4,000 per cent or Rs 80 per equity share of Rs 2 face value each. The announcement was received well by the markets and the market experts. The Hero Honda stock rallied at the BSE closing 5.86 per cent higher at Rs 1,735.10.

Market analysts said that the dividend payout will have no negative impact on the company's revenue. Surjit Arora, auto analyst at leading brokerage firm Prabhudas Lilladher, said, "The company is cash rich. They have about Rs 6,000 crore cash reserve in their balance sheet. After calculation the whole payout will amount to Rs 1,400 crore. Even after the payout there will be enough reserves left with the company. So, I do not see any negative impact on the company."

His view was supported by Jatin Chawla, an analyst at Hero Honda to give 3,500% dividend India Infoline. "I see it as a very healthy trend to keep the investors happy. These days investors like companies which invest and share it (the gains) with them. So, I see the impact will be positive and it is apparent from the way the market has reacted today," Chawla said.

"The company has done well - exceeding market expectations. The two-wheeler sector in general is doing well. There is a lot of cash reserves with the company. So, I do not see why it will have any negative impact on revenues," Chawla added. Meanwhile, Hero Honda Motors appointed Toshiyuki Inuma as a non-executive additional director with effect from April 13.

The company also accepted the resignations of non-executive director Yuji Shiga and non-executive and independent director Shobhana Bhartia from its board with effect from April 13.

Honda CBR250R unveiled in India

Honda Motorcycle & Scooter has launched its CBR250R motorcycle in India. The ABS version of the motorcycle is priced at Rs 1,68,001 (ex-showroom Delhi) while the STD model would cost  Rs 1,43,001.

The bike is available in three colour options-red, silver and black.

It is powered by a single cylinder 250cc DOHC engine. The engine of CBR250R is light and compact and gives smooth and vibe free performance reflecting the sports character, and also retaining great mileage and sheer power of 25 Bhp, the company says.

The company claims that CBR's PGM-FI technology facilitates easy starting even in cold weather. Apart from reducing emissions, it also enhances performance and ensures great mileage, it says.

Korea's Hyosung to introduce 250cc bikes next year

Korean bike brand Hyosung will launch 250cc performance and cruiser bikes next year for under Rs 200,000 each, to compete directly against the best seller in that segment, the Honda CBR 250.

Hyosung, which sells cruisers and sports bikes, is presently setting up a completely-knocked down (CKD) assembly facility in India for two models, the ST7 and GT 650R, along with partners Garware Motors of Pune. The Honda CBR 250, priced at Rs 151,000 (ex-showroom, Mumbai) has garnered total bookings of around 3,000 units since January from across the country.

Like Honda, more companies are keen at starting local production of such high-performance bikes in India after gauging the demand generated by the Kawasaki Ninja 250 launched by Bajaj Auto and priced at Rs 269,000.

Diya Garware Ibanez, managing director, Garware Motors, said: “We are discussing with SNT Motors (owners of the Hyosung) to see how the volumes work out for our two models. We will follow the launch with the naked version of the GT 650R later in the year, followed by the 250cc models next year.”

Adding:”With regard to pricing of the 250cc, we have to be right up there with the best selling models like the (Honda) CBR 250. Other models of Hyosung could also follow, as there is a big portfolio of models to choose from.”

Garware will open bookings for the ST7, priced at Rs 600,000, and the GT 650R, priced at Rs 550,000, on April 21, with deliveries to start by May end. The company will accept bookings at 10 dealerships which will be opened shortly, followed by an additional 10 outlets to be opened later in the year.

Although engines, transmissions and gearboxes for the Hyonsung bikes will initially be imported into the country from Korea due to the low volumes projected during the first year, they may get locally made in due course if demand improves substantially.

Garware is expecting sales of around 2,000 units of the two models in the first year.”We may have to go in for local production of engines to benefit from the lower tax duty if there are enough volumes supporting it,” stated Ibanez.

By the revised rules of the finance ministry, all imports of pre-assembled engines, transmissions and gearboxes will have to pay a customs duty of 30 per cent as against 10 per cent levied last year.

The company is in talks with distributors of neighbouring countries like Nepal, Sri Lanka and Bangladesh for sales of Hyosung bikes. Hyosung had recently appointed a distributor in Nepal, which is keen on procuring the bikes from Garware due to lower duties.

The company is spending Rs 20 crore towards the CKD facility being built at Wai in Maharashtra. It has acquired 25 acres, which can be used for expansion, said executives.

Honda expects India to be its largest 2-wheeler market in 5 years

Honda has targeted India to be its top two-wheeler market in the world within the next five years.

Though China is the world's largest producer of motorcycles today, it is of little relevance to Honda thanks to the unrealistically low levels of pricing prevalent in the country.

“Honda always keeps quality as its top priority and it is difficult to meet the existing pricing structure in China. However, this is not the case in India where people appreciate our quality and are willing to pay a price for it,” Mr Shinji Aoyama, the outgoing President & CEO of Honda Motorcycle & Scooter India, told Business Line.

Incidentally, the Japanese automaker's two-wheeler operations in Indonesia and Vietnam are slightly ahead of India in terms of numbers though it is only a matter of time before the scales are tilted. “India has the potential in the near future to be the largest business operation for our bikes and scooters globally,” he said.

From Honda's point of view, this is but imperative considering that it has lost nearly five million two-wheelers annually to its former partner, the Hero group, after exiting the 26-year-old joint venture. As a result, its global numbers are down to 13 million bikes and scooters.

Its 100 per cent subsidiary HMSI will end this fiscal at a little over 1.6 million units, going up to 2.2 million units in 2011-12. To catch up with the Hero group would call for greater aggression with launch of mass motorcycles while ramping up capacity quickly. In the process, a third plant could become a reality by 2015-16.

“Our R&D capacity in India will be strengthened so that Honda can act faster and become more responsive to the needs of customers. By the end of this decade, India could hopefully account for half the output of Honda's bikes and scooters. It is our most important market and we will accelerate activity in Japan to improve our presence here,” Mr Aoyama said.

This fiscal is expected to see two-wheeler production in India at around 12 million units of which the Hero group will account for five million, followed by Bajaj Auto with 3.5 million units. TVS Motor will be closer to two million units with HMSI at 1.6 million bikes and scooters.

HMSI estimates that the next decade could see production of two-wheelers at over 20 million units by which time it aspires to be the market leader. Experts say this will be quite a challenge considering that there will be stiff competition from local players. “The Hero group, Bajaj and TVS are going to be as aggressive and it will be interesting to see how the leadership stakes pan out at that time,” they add.

Mr Aoyama also reiterated that the domestic market would be top priority for Honda. “HMSI will not become an export hub though it will do its bit in meeting demand from other countries which is the case now. Our operations in China and Asean will also play a role in exporting bikes whenever the need arises,” he said.