Mumbai: Honda Motorcycle and Scooter India Pvt. Ltd (HMSI), the maker of Activa scooters, has been outselling erstwhile joint venture partner Hero MotoCorp Ltd in the popular executive motorcycle segment since FY15, according to data compiled by the automobile industry lobby group. Honda sold more than 980,00 units in the year ended March 2018 in the executive segment (motorcycles with engine capacities between 110cc and 125cc) compared with Hero’s 870,000 units.

That’s because Honda CB Shine is finding greater traction among buyers than Hero Glamour. For the fiscal to date, Honda sold more than 495,000 units of Shine compared to Hero’s 354,000 units of Glamour. This trend has been continuing since the year ended March 2015, when Honda sold more than 840,000 units compared with Hero’s 580,000 in this segment.

The difference could be explained by the absence of the popular Super Splendor’s sales in the category, which Hero has been reporting under Splendor’s sales in the entry-level segment (75-110cc) since FY16. The most recent sales data released by the Society of Indian Automobile Manufacturers (Siam) for the Super Splendor states that 149,060 units were sold in FY15, down by almost half from 298,670 units in FY14.

However, in the largest segment of the market, Hero is still the dominant player. A Hero MotoCorp spokesperson said in an emailed response to Mint’s queries that the firm has a “clear leadership" in the 110-125cc segment, with 1.59 million units (including Super Splendor) in sales and a 55% share of the segment.

Honda has also been making inroads, with the exception of the fiscal so far, in the entry-level segment, which has traditionally been Hero’s stronghold with its best-selling Splendor and Passion models.

In four of the past six entire fiscal years, Honda has beaten the segment’s growth with its Livo, Dream and CB Twister models to gain share, albeit off a low base. Of course, Hero has also grown faster than the market in three of these years, and that on a very high base of more than 4 million units.

Hero nearly outsells Honda 10 to 1 in the segment, though the gap has narrowed from a factor of 33.8 in FY12 to 9.9 in FY18.

A recovery in rural sentiment and demand over the last one year has benefited Hero to a larger extent, with the maker of the Splendor posting a 16.39% rise in sales to more than 2.7 million units for the fiscal so far, compared to an 8.6% decline to 226,800 units for Honda.

The lack of a model priced under 40,000 explains the decline, according to Y.S. Guleria, senior vice president of sales and marketing at Honda. A “majority" of the growth has taken place in this segment on the back of rural recovery and cutting of prices by a competitor (Bajaj Auto Ltd), he said.

While Hero has been able to recoup the drop in sales in FY16 and FY17, Honda has not been able to do so for the same reason, Guleria said. Honda will not develop a model at this price point for the time being, he said.

Guleria admitted that the contribution of the entry-level segment to total volumes has been falling and conceded that the segment is “too large to ignore". “We will continue to expand our network in rural areas and expect motorcycle volumes to rise in rural areas," he said.

India’s rural areas account for nearly 40% of the country’s overall two-wheeler sales, which stood at over 20 million units in FY18.

Honda has been aggressively increasing its rural dealerships in the past two-three years. During this fiscal, it is set to spend more than 800 crore to increase its dealership count by 300 to about 6,000, Guleria said. About 70-80% of this expansion will be in rural areas, he said.

Since ending their 26-year-old partnership on 22 March 2011, Honda has posed a formidable challenge to Hero in the broader two-wheeler market, with overall market share nearly doubling from 14.9% in FY12 to 28.6% in FY18. Meanwhile, Hero’s overall market share has declined nearly 10 percentage points from 45.1% to 36.6% in the same period.

In terms of the broader motorcycles category, Honda’s market share stood at 15.49% in FY18, a sharp decline from the 7.66% in FY12. In the same period, Hero’s share declined more than four percentage points to 51.5%.

However, analysts are confident Hero will maintain its lead in the segment on the back of a higher resale value and a stronger brand. “We are impressed by Hero’s market share resiliency in the 75-110cc motorcycle segment and are confident that the company will be able to maintain its dominant position in the medium-to-long term, as we have seen that consumers stick to brands with a better resale value in this segment," wrote analysts Saksham Kaushal and Poorvi Banka of Prabhudas Lilladher Pvt. Ltd in a 10 September note.

However, an increasing shift in consumer preference towards scooters and more premium and powerful bikes could be a threat to sales in this segment, according to Ashutosh Tiwari, head of research at Equirus Securities Pvt. Ltd.

“Hero MotoCorp remains the most preferred brand for customers in the 100-125cc motorcycles category. We have had robust growth in the first quarter of this fiscal and are confident of carrying this trajectory forward and expect to grow at double digits in the upcoming festive season, with four new launches," the spokesperson said.

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