HMSI's Aoshima: Life on the fast lane

Since 1949, the year in which it began mass production of motorcycles, till April 2005, Honda Motor has built all of 150 million motorcycles worldwide (for Honda, motorcycles includes scooters as well as all-terrain vehicles and personal watercraft). In 2004 alone, Honda sold 10.8 million bikes manufactured in 28 global plants located in 21 countries. Of that number, some 2.34 million were sold in India alone, via Hero Honda Motors (the 21-year joint venture with the Munjals) and the four-year-old wholly-owned subsidiary Honda Motorcycle & Scooter India (HMSI). That makes India pretty much one of Honda's biggest bases in Asia, which as a region sold a little over 7 million bikes.

The importance of India-accounting for a little over a fifth of total sales-is amply evident in those numbers, and probably explains the need for two ventures, one joint, and the other wholly-owned (although it must be pointed out that Honda has three affiliates in China, which in 2003 did collective sales of 1.13 million two-wheelers). Now the Japanese giant's India thrust has for long revolved around Hero Honda, partly because of the time-worn depth of the alliance, and also partly because Honda had an agreement with the Munjals not to make motorcycles (as against scooters) till 2004. That year came and went, and HMSI launched the 150-CC mobike Unicorn, which didn't exactly set the Delhi-Manesar highway on fire. With bike production, at the Manesar plant, of just under 65,000 in a total domestic market of 5 million, let's face it: Honda's fully-owned subsidiary just doesn't count. Not yet. True, it's cornered close to half of the scooters market in the past five years, but then scooters is just 20 per cent of the entire two-wheeler market (although it's set to increase to close to 30 per cent in two-three years).

So, is Honda content to let its Indian JV lead the Indian charge, with the 100 per cent subsidiary just filling in a flank? Hardly. Yukihiro Aoshima, Chief at HMSI-and the pointman for all Honda ventures in India-may not say it loud and clear but sources at HMSI reveal that the 996,290-million yen (Rs 41,000-crore, for motorcycle operations) Japanese giant's avowed goal is, with its two Indian affiliates, to capture three fourths of the Indian market in five years, which will be all of 10 million two-wheelers by then. Assuming that Hero Honda hangs on to its 50 per cent share till then, this will mean that HMSI could be doing sales of at least 2.5 million by 2010. That would guarantee HMSI a clear #3 position in the two-wheeler stakes, if not the #2 place.

Aoshima, for his part though, would like to jump up to #3 (ahead of TVS Motor and Yamaha) before that, by 2007-08. That, of course, calls for a huge ramp-up in capacity, which is exactly what's on the cards. In the coming year itself HMSI expects to sell 260,000 motorcycles (and 600,000 scooters), and by 2007-08, the Honda subsidiary has projected sales of 600,000 bikes, and a market share in the 8.4 per cent region. Total capacity of bikes plus scooters is expected to hit 1.2 million by then. "India is important to Honda; it is not only a growing market, it is a market that Honda has done well in and we will continue to do well; hopefully we will do even better," says Aoshima, who has been associated with Honda's India operations since as early as 1992.

To achieve all its targets, Honda will, of course, need to have many more bikes than just the Unicorn on the roads. In the second half of the current year, Aoshima expects to launch his second motorcycle pitted head-on against the seven-month young Bajaj Discover, and priced in the Rs 40,000-45,000 bracket. "All I can reveal at this point is that the new motorcycle will have an engine smaller than that of the Unicorn (which is 150 cc); whether it will be 125 cc or 135 cc, I cannot reveal." With Kinetic, LML, TVS and Yamaha having lost market share in a growing market last year, HMSI, with new product offerings, has a good shot at overtaking Yamaha for fourth position in motorcycles in the current year itself.

To be sure, thanks to its heroics in scooters, HMSI has already emerged as India's fourth largest two-wheeler company, behind Hero Honda, Bajaj and TVS. In the four years and a bit that HMSI has been around it has sold over 1 million units and has a 8.3 per cent share of the overall two-wheeler market, which is more than the share of Kinetic, LML and Yamaha. To HMSI doubtless goes the credit of reviving the scooter market, which was all but given up for dead thanks largely to Bajaj Auto's inability to provide consumers much more than the Chetak (although Bajaj is finally getting a strategy in place in this segment, with a flurry of snazzy launches planned in the next 12-18 months). As Kalpesh Parekh, an analyst with the Mumbai-based brokerage ask Raymond James points out, HMSI entered a virtually virgin market. "The competition were flogging old technology; HMSI entered a clean market with new technology and that is why they were able to succeed." Concurs R. Chandramouli, Vice-President, Sales & Marketing, TVS Motor, which is #2 in scooters: "Honda brought in a product that made life easier for the consumer and they aimed at middle-aged men who were previous owners of scooters and preferred scooters to motorcycles." The Activa and its snazzy sibling, the Dio, have become huge hits selling some 344,000 units last fiscal, and the geared Eterno scooter outsold the Bajaj Chetak for the first time last year. In fact, in the last few years, the scooter market has actually shown signs of a (modest) revival growing 4.2 per cent last fiscal.

The foray into scooters did not just bestow a bestseller upon HMSI, it also allowed the company to build up both some semblance of a brand image as well as a dealer network from scratch. From 60 dealers in 2001, the company has ramped up to over 252 dealers today. Such benefits held HMSI in good stead when launching the Unicorn, which has sold a little under 65,000 units in the six months since launch, in line with HMSI's target. "It has done fairly well in semi-urban and rural markets but that is primarily because of its 'brand' value," says Parekh, although he adds that "most people expected Honda to launch something a bit more attractive, because in the urban markets, especially in the higher segments, style is most important; the Unicorn isn't a particularly stylish product."

Of course, when HMSI entered the motorcycle market last year, the first question on everybody's lips was: "What will this do to their 20-year association with Hero Honda?" "We are all part of a family", insists Brij Mohan Lall Munjal, Chairman of Hero Honda. "I have known Munjal-san for almost 15 years now, we meet up at least two to three times every month to co-ordinate our plans... Hero Honda's continued success is in the best interests of Honda Motor," pipes in Aoshima.

Aoshima's short point is that the Indian market is big enough for two Honda companies to operate in. "India will be bigger than China," he asserts, armed with projections that the Indian two-wheeler pie will hit 10 million by 2010 and 15 million by 2020. These growth numbers are backed up by Pankaj Gupta, Senior Director, Society of Indian Automobile Manufacturers (SIAM), who believes that the two-wheeler market will continue to grow at a healthy clip of between 15-20 per cent in the next four-five years.

HMSI clearly has mega-ambitions, but then so does the competition, namely Bajaj Auto and one Hero Honda. In fact when HMSI launched the Unicorn, Hero Honda's sales of the 150 CC CBZ slowed down. While the Unicorn sells some 14,000-15,000 units a month, the CBZ manages anywhere between 1,500-2,500. Even though both companies deny any collusion, some rivals feel that there is a gentleman's agreement between the two Honda firms. Sooner or later, however, both firms would need to go head-to-head in direct competition with each other. For the Honda top brass in Japan, though, two Hondas in a market as huge as India are better than one.