Home >Companies >News >More customers seen shifting to scooters from motorcycles, says Honda’s Minoru Kato

New Delhi: When Hero MotoCorp Ltd parted ways with Honda Motor Co. Ltd in December 2010, many thought the Japanese company would easily dislodge its ex-partner from the number one position in the world’s largest market for two-wheelers. Seven years later, Honda has come a long way although it still lags behind Hero. Between FY11 and FY17, Honda’s market share more than doubled to 29%; Hero’s share declined from 45% seven years ago to 36% at the end of FY17. For Minoru Kato, president and chief executive of Honda Motorcycle and Scooter India Pvt. Ltd (HMSI), it is an uphill task from here on.

In an interview, Kato said he considered himself lucky to have got the opportunity to lead Honda’s Indian operation, the largest in the world for the company. Honda’s strong presence in the scooter segment, along with the Indian government’s focus on improving road conditions, would propel the company’s growth in the country. But a lot still remained to be done in the motorcycle segment, a Hero stronghold, he said. Edited excerpts:

How has your journey in India been so far?

So far it has been very exciting and luckily I came to India, which has been the biggest motorcycle market in the world, and of course we can expect to increase it further. We have a strong sales and service team, and on the factory side as well we have a very capable team to improve the quality of our daily operations and our products. Our sales and marketing network across the nation is now more than 5,500 touchpoints and we have plans to strengthen our network to maximize customer satisfaction.

Looking back at the last five or six years and how HMSI as a company has grown, we have created a record when it comes to volume growth. Besides that we need to improve quality wise, which is not only products but daily operations to take care of our customers at our dealerships. We need to improve because customer expectations from HMSI are getting higher. This is my first priority and we have to become number one at satisfying our customers.

Will the shift in volumes to the scooter segment from motorcycles continue in the years to come?

Now with betterment in road infrastructure across the country, we expect more customers to shift to scooters from motorcycles. Scooters have smaller wheels compared to a motorcycle, so if the road conditions are not good then it is not comfortable for scooters.

Customers who ride scooters do not expect performance and use the vehicle for commuting purposes. On the contrary, in the motorcycle segment customers expect performance. That is why in the motorcycle segment we have seen products from 150cc to 300cc and above but when it comes to scooters, 125cc is enough.

In two years, how do you expect HMSI to perform in the scooter segment as competition intensifies?

We expect growth in the scooter market but on the other hand, competitors are also focusing on the same segment. So from that point the competitiveness in the scooter segment will intensify. So now our market share is relatively high—59% in the April-November period—it will be very difficult to maintain this kind of market share. Next year, I don’t think we will be able to generate double-digit volume growth in scooters. In motorcycles, we expect to gain volumes and market share since our base in motorcycles is comparatively low. Hence we will be looking at double-digit growth.

You spoke about India graduating to more powerful motorcycles with higher engine displacement. What are your plans in the 300cc and above category, especially in the light of collaboration between Bajaj Auto and Triumph Motorcycles?

As of now we don’t have any plan to enter that segment. We understand the customer expectation and the future growth of this category. Unfortunately price competitiveness in this area from Honda’s point of view is still very tough to achieve. We have many global models in the 300cc, 500cc and above segment. It is very difficult to introduce them in India because of price competitiveness. We have been doing customer surveys to understand expectations. We understand that this category is the one with great potential and can see substantial growth in this fiscal year as well.

India has emerged as your parent’s largest market for two-wheelers. What is the direction that you take from here?

Depending on the current market situation it is very difficult to predict volumes for the future. Suddenly, demonetization happened and BS III ban was imposed. With the BS VI norms coming in 2020, it is the biggest challenge for us. Volume-wise HMSI is the biggest contributor to the parent company. Currently export volumes are around 300,000 units per annum. In the future, Honda Motor Japan—the parent company—expects to increase the export volumes from India after the introduction of BS VI emission norms. After 2023, we can export anywhere from here. In India, the BS VI, OBD-2 (a technology that generates error code if the emission management system does not work efficiently) will be introduced from 2023. From a strategy point of view, Honda has many export hubs in Japan, China, Thailand and Vietnam, depending on the model and emission norms. After 2023, India will be one of the candidates to become an export hub. Now we only export to neighbouring countries from India.

When do you expect to overtake Hero as the largest two-wheeler manufacturer?

I won’t like to mention any competitor. We have been working on our sales and service network relentlessly. Of course, we plan for further expansion as well in India and have the intention to increase the market share by introducing new models. We take pride in our yearly expansion in network, which is unprecedented in the industry, and every year we add 400-500 sales and service touchpoints. Yet, to have that last mile connectivity, we may still have two-three years to go. Once we go with the network then the product follows. Our intention is there and we are working towards it. So now in 15 out of the 29 states, we are the market leaders.

Somehow motorcycles as a business has not really taken off for you in India. This is surprising as Hero’s success is attributable to the bikes that you made for them.

Basically a brand like Splendor or Passion of Hero, or Dream of takes a long time for the product to penetrate. In Hero’s case, they have a long history, including the Honda joint venture. Many customers still believe this is a Honda technology and still believe that Splendor is the best motorcycle, not only in India but globally. It takes a long time to build a strong brand.

We have mainly four brands of motorcycles, and we need to continue to improve and strengthen our product line-up. Our market share now is at 16% in motorcycles and has increased by 200 basis points. At the start of this fiscal year, we spoke about launching four new models and out of that three have been introduced. So, you can expect one model from HMSI in the near future.

Is it difficult to establish a brand in India? You are often seen as a company that runs on one successful brand—Activa.

We don’t have any such data but it depends on our effort. Not only in India, anywhere else if we want to launch a new product with a new name, it is very difficult to establish. Whenever a new brand gets launched, it takes time to get it across to the minds of the consumers. It depends on the product as well. For an old company to establish a new brand may be easy but for a new company launching a new brand, conditions may be different. It is not easy irrespective of the country and the segment. A brand ultimately is defined by the trust of the customer.

Given the kind of regulatory impediments that the automotive industry has seen in the past year, do you think it is difficult to do business in India?

Honestly speaking I don’t want to say difficult. India, in terms of cost competitiveness, is much better than other countries and may be the best from the motorcycle industry point of view. Ten years ago, China was number one in cost competitiveness but now India has taken that place. We have a big potential to export from India, which is a big positive. Indian government also has every intention to support the automobile industry. Then, Indian parts suppliers are also very good and the growth potential in the market is there. As a result, everyone wants to focus on the Indian motorcycle industry.

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