Honda to accomplish top brass of 2-wheeler biz

After its split from the Munjals of Hero, Honda is reshuffling the management of its two-wheeler business-Honda Motorcycle and Scooter India (HMSI). As part of this exercise, president Shinji Aoyama will depart and senior Japanese personnel associated with its erstwhile joint venture Hero Honda will enter the management.

Sources in HMSI confirmed the exit of Aoyama, who has been at the helm since June 2007, by the end of this month. The departure, however, raises some eyebrows. "Normally, the company head is appointed for a tenure of three years, and thereafter gets one year extension till the completion of five years. Aoyama now leaves three months short of completing four years in India," a source said.

Sources also said that HMSI will see a major recast, including entry of senior personnel from Hero Honda. These personnel were mainly representatives of Honda who were deputed with Hero Honda when the JV between the two companies was alive. Since the JV no more exists, Honda will pull out its representatives and bring them to HMSI, which is its fully-owned company.

A spokesperson for HMSI did not take calls to answer queries on the matter.

The reshuffle comes at a time when Honda is looking at a major push in the Indian market post the split with the Munjals. Sources said the company plans to scale up operations swiftly as it feels that there is a big demand for its products, something that can be gauged by the waiting period on some of its products.

The split from the Munjals has given Honda the freedom to independently chalk out strategies and launch more products.

Previously, HMSI had to play a restricted role in the big-volume motorcycle segment as it had to always keep Hero Honda and the Munjals in mind. The company has already said it is working on a very low-cost bike, priced around $600 or Rs 27,000, that it plans to sell in markets in Latin America, Africa and possibly India.

Honda has already shown that it can turn around fortunes in India by single-handedly reviving the scooter market, and literally wiping out the once-heavyweight Bajaj Auto from the segment.

However, a big challenge for Honda is absence of a country-wide retail network like Hero Honda that is present even in small towns and villages. Also, Honda will not have the bargaining power that it enjoyed with vendors when buying components for the large-volume Hero Honda. "It will have to expand the network and build up scale to enjoy the benefits it had with the Munjals in Hero Honda," an analyst said.

Sales for HMSI this fiscal (April '10-February '11) have grown 19% at 15,09,426 units. While bike sales are up 31%, scooter sales have grown by 10%.

Hero's new identity costs Rs 100 cr; new name and logo on products

Hero Honda has set aside a kitty of Rs 100 crore to create a new brand identity that will lead to a new company name and corporate logo to be etched on every bike and scooter it sells in the Indian market, people familiar with the matter told ET.

The company has shortlisted five agencies -JWT, Draftfcb Ulka, Mudra, Law & Kenneth , and Percept H - to create the new brand identity, sources said. JWT, Draftfcb Ulka, and Percept H already handle various brands in the Hero Honda portfolio. These five agencies will join London-based design agency Wolff Olins to work on the brand repositioning, including new name and logo.

The new logo, expected to have a direct connect with its mass customers and to be unveiled in the next few months, will drop the Honda name from its corporate identity. Hero Honda has not yet replied to an e-mail query by ET on the rebranding plans.

The 27-year-old Indo-Japanese venture, which is the world's largest two-wheeler maker by volume, is awaiting regulatory approvals to break its joint venture with Honda and pursue operations independently.

Hero Honda managing director Pawan Munjal is taking a personal interest in the presentation made by these agencies, as he wants to ensure no stone is left unturned to announce a new brand post the separation from Honda, people close to the matter said. "The final call on the selection of the agency to work with Wolff Olins could get delayed as senior officials from Hero Honda are in Japan and their arrival back to India has got delayed due to the earthquake," sources said.

The Hero group's new brand would also have a global presence as the company intends to ship its bikes and scooters to markets such as Latin America, Africa, Middle East, and South East Asia.

"Hero Honda wants to ensure that the announcement of the new brand identity and the subsequent communication is high decibel and is in line with the recent brand re-launches, if not better," sources said.

The agencies in fray to undertake the rebranding exercise will also present their assessment of recent brand revamps such as Airtel and entry strategies used by new brands like Tata Docomo - which were also developed by the Wolff Olins.

Analysts tracking the market said that the new brand positioning is likely to be India-centric and will take into account the independent technology strength the company aims to acquire. "Hero has to take its customer connect to the next level. It primarily operates at the entry-level of the two-wheeler market and the new branding has to synergise technology and masculinity associated with the automotive world. It should have a stronger marketing participation at its sales points that will drive customer interest in the company," Shravani Sen, director of Delhi-based marketing firm Synovates , said. A similar rebranding exercise was seen during the divorce of Bajaj Auto from Kawasaki and TVS Motors from Suzuki, he added.

Hero Honda has been one of the largest spenders in the Indian marketing space and has been actively associated with top-notch events such as ICC World Cup, Indian Open Golf Tournament, IPL , and Commonwealth Games . The company likely spends over Rs 300 crore annually on marketing and product promotions.

Hero Honda’s wrong and Bajaj’s right

What is Hero Honda Motors not doing right?

Analysts said while the country’s largest two-wheeler company is losing its share of motorcycle profits and market share, arch rival Bajaj Auto is gaining spoils and, more importantly, profitably.

Has the rift between the Hero Group and Honda Motor Company (HMC) — which led to Honda walking out of the 26-year-old partnership in December — also contributedto Hero Honda’s profitability loss this fiscal?

Pramod Kumar, analyst with JM Financial, points towards lower growth for Passion and relatively lower margins for Passion Pro, besides a higher marketing spend to deduce that Hero Honda’s profit margins have been eroding.

“For Hero Honda, erosion in profit share has been much higher compared to marginal loss in market share. From a high of 74% of total operating profits (cumulative, top 4) in financial year 2009, its share declined to 51% in the nine months of the current fiscal. We expect domestic motorcycle operating margins in the nine months of this fiscal to be about 13% versus 17% peak in the last fiscal,” Kumar said in a note to clients.

The only bright spot, according to him, is that Hero Honda’s market share has improved to 45% from 41% in the lower-margin, entry segment bikes during the first nine months of this fiscal.

The company also continues to dominate the executive segment.
Another analyst, who declined to be identified, said Hero Honda has been unable to match the success of Bajaj Discover.

“In the first nine months of this fiscal, Bajaj’s motorcycle topline has grown by about 30% against Hero Honda’s 15%. True, Hero Honda’s growth is coming on a larger base but then, the rift between Hero and Honda did take a toll last year … I think Hero Honda should be back on the growth path next year,” the analyst said.

The same analyst said that not only is Bajaj growing profitably, even companies such as TVS Motor have done well this fiscal; also, smaller players such as India Yamaha Motor and Suzuki Motorcycle India are also gradually launching more mass products.

However, a third analyst pointed out that Bajaj’s profitability was much better not only because of its improved margins on two-wheelers but also because almost 40% of its revenues accrue from exports, where the margin profile is better, and another 15-20% from 3-wheelers where the margins are robust.

“Yes, Bajaj brands have scored better than Hero Honda because they are newer brands. I have some concern on the split between Hero and Honda, but it is not significant. The split will not alter business for Hero products, it will mean different branding but also a different cost structure. What I want to se is how much R&D Hero is able to do on its own,” he said.

JM’s Kumar wrote that Bajaj has improved sales mix through Pulsar and Discover brands and the company accounted for 41% of cumulative operating profit of the top 4 players in the first nine months of this fiscal, an 11% improvement since financial year 2008.

During this period, revenue share of the company improved by just 1%, while market share declined by 2%.

Honda India’s approach minus the hero

Honda Scooters and Motorcycles India aimed at the numero uno spot right when they set shop in India and brought back scooter sales from the brink with the now legendary sales scorcher, the Honda Activa. Honda’s alliance constraints with the Munjal group’s Hero Honda meant that Honda never really could get into the bread and butter volumes segment of the Indian motorcycle market.

Due to that, Honda has steadily managed to soldier on with a range of products, all outside the 100cc segment and still has managed to reach the fourth spot in Indian motorcycle sales. Honda isn’t content with this and wants to gun for glory by getting right up to the numero uno position for which it plans to come up with an aggressive strategy.

So, in the near future, we’ll have a 100cc Honda motorcycle, to knock out the likes of the Hero Honda Splendor and the Bajaj Discover 100. If the Honda CB Twister 110′s heady success is anything to go by, Honda might just have another winner on it’s hand that gets it closer to the number one position with very strong volumes in the ultra competitive and challenging 100cc Indian motorcycle segment.

Honda is just about to launch the 2011 CBR250R sports bike for India very soon and with this, Honda’s product launch for 2011 would be complete. The CBR250R, thus far has garnered 2000+ bookings in a record time with young Indian motorcycle enthusiasts very eager to sample the Honda’s latest 250cc entry level sports motorcycle.

What we aren’t too enthused about is the fact that Honda does not anticipate the ultra long waiting periods it’s products in India come saddled with, to go down for the next two years. That’s some bad news from the Honda India camp even as another Honda manufacturing facility is coming up at Tapukara  in Alwar district of Rajasthan by July-August. We hope that Honda also manages to shorten it’s waiting period if it ever hopes to attain the stratospheric sales numbers that Hero Honda has been enjoying for the last decade or so.

India to get Triumph Speed Triple bike

The influx of superbikes from all over the world is increasing day by day. More and more bike manufacturers are keen to enter the Indian market where competition has just started hotting up. God bless competition! Now it is British motorcycle maker, Triumph who seems to be looking at India as a potential market for its high-end bike range.

The company will soon launch the Speed Triple in India says Indiandrives. For the keen bikers among us, it is the latest 2011 model that will come ashore. The bike will be priced at around INR 12 Lakh which means it will go head-to-head with the Kawasaki Z1000 and Honda’s CB1000R.

At the heart of the beast is a 1050cc, inline three cylinder engine with a meaty 128 horsepower at hand. Peak torque figures stand at 81 lb-ft. The new model features a new chassis which alters the steering geometry. Fuel tank capacity has also been reduced while the bike still weighs over 218 kg. 320mm, four-piston upfront and 255 mm two-piston clamps supplied by Brembo perform the anchoring job. Let’s hope that this news turns out to be true and the Speed Triple is indeed launched in India.

Gearing Up For A Long Ride

There is a sense of a new dawn at Honda Motorcycle & Scooter India (HMSI), the wholly owned two-wheeler subsidiary of the $92-billion Honda Motor Company, after the latter’s separation from the Munjal family-promoted Hero group. “The challenge has become bigger,” says Shinji Aoyama, president and CEO of HMSI. “We need to hurry up to change our product portfolio. We aim to be No. 1, but it will take time, maybe a decade.” Aoyama is not being modest, just practical.

Having severed the umbilical cord with Hero — Honda will continue to support Hero with technology for new bikes and spare parts for existing bikes up to 2014 — HMSI is now free to plan its future independently. But turning No. 1 bike-maker is easier said than done. Experts are divided in their opinion. “Honda will command respect, but it will be very difficult for it to be No. 1 in India on its own,” says automotive expert Tutu Dhawan. Angel Broking, on the other hand, is bullish: “We expect the domestic two-wheeler segment to record a compound annual growth rate (CAGR) of 12 per cent during FY2012E. However, we expect HMSI to increase its market share going ahead at the expense of Hero Honda, Bajaj and TVS.”

For now, the picture HMSI paints for its path ahead seems more tactical than strategic. Next fiscal, the company — No. 3 in motorcycles and No. 1 in scooters — will only launch one new scooter and a 250-cc bike. It will focus squarely on meeting the huge demand for scooters; there are waiting periods stretching from two months to eight months for products such Activa, which it plans to address with the imminent launch of its new, 600,000-unit plant in Rajasthan. It will launch commuter bikes — low-frills, conservative bikes of 100-cc displacement, which make up the bulk of the market — later.

The More, The Better
Overall, HMSI has four motorcycles in India — the 110-cc CB Twister, 125-cc Shine and Stunner, and the 150-cc Unicorn (not counting the high-end 1,000-cc-plus bikes like CB1000R, CB1000RR and VFR1200F). Including variants, HMSI has 11 motorcycles. Hero Honda has eight bike brands (a total of 14 including variants). Bajaj Auto has four motorcycles and 11 variants. However, HMSI doesn’t have a single commuter motorcycle, a segment Aoyama calls “the centre of Indian customer demand”.

Motorcycles comprise three-fourths of the 10-million unit two-wheeler market in India, of which commuter bikes comprise 72 per cent. More than 70 per cent of this segment is owned by Hero Honda, through models such as Splendor, Passion and CD-Dawn (Splendor sells more than a million a year). The No. 2 player in this segment, Bajaj Auto, has 27 per cent share, with Discover 100-cc selling more than 800,000 units annually. Another strong player is TVS Motors, which has 7.5 per cent market share in the segment, with three bikes — the 100-cc Star City and Sport, and the 110-cc Jive.

HMSI has only one product in this segment, the Twister, which sells about 160,000 a year. Aoyama is satisfied with this number, and says Twister is “too stylish for normal people to accept, and not designed for the mass segment. We will bring in no-frills, conservative 100-cc bikes to India”. He adds that bikes like Twister will see more takers in future, but the core of the market will remain in the conservative bikes.

2011 Honda CBR250R Booking in Full Speed

In a telling sign of the Indian motorcycle market maturing rapidly to accept larger capacity, sporty motorcycles, the 2011 Honda CBR250R has garnered 1,800 bookings reflecting tremendous enthusiasm for the premium Honda motorcycle among the Indian performance motorcycle community. The sportily styled 2011 Honda CBR250R closely resembling the larger sibling the Honda VFR1200F features a class leading 250cc four stroke engine with four valves per cylinder driven by a DOHC valvetrain and produces about 25 Bhp of power. Electric Bike

This motorcycle is good for a top speed close to 160 kph and also comes with a costlier ABS variant. To put things into perspective, the Kawasaki Ninja, which costs double that of the Honda CBR250R could muster close to 1,000 units after being on sale for a full one year. On the other hand, the 1.5 Lakh Rupee CBR250R by managing to surpass the Ninja’s yearly sale in under one month only underscores the huge market that exists for good motorcycles under the INR 2 Lakh mark, which in other words is the new 1 lakh mental barrier that people previously used to have when they went motorcycle shopping. Used Cars Delhi