With a better monsoon season predicted by the Met department, Honda Motorcycle & Scooter India (HMSI), like most automakers, is bullish on higher sales from rural markets in FY2016-17.
19 May 2016 | 3758 Views | By Shobha Mathur
With a better monsoon season predicted by the Met department, Honda Motorcycle & Scooter India (HMSI), like most automakers, is bullish on higher sales from rural markets in FY2016-17.
Improved sales numbers from rural India will help HMSI reach its volume target of 54 lakh units in FY’17, a ...
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With a better monsoon season predicted by the Met department, Honda Motorcycle & Scooter India (HMSI), like most automakers, is bullish on higher sales from rural markets in FY2016-17.
Improved sales numbers from rural India will help HMSI reach its volume target of 54 lakh units in FY’17, a 22 percent growth over FY’16 which saw total sales of 44.83 lakh units, with 42.83 lakh units comprising domestic sales.
Like most commuter motorcycle manufacturers, HMSI has felt the pressure of slowing sales from rural markets which have experienced a slowdown since November 2013, especially in the 100-110cc mass segment motorcycle segment. Now, with an improvement in market sentiment, HMSI is optimistic sales from rural regions will increase.
Also, since 2014, the company has been strengthening its all-India distribution network with a focus on stepping up its footprint in rural India and expects it to realise benefits this fiscal. It opened 850 touchpoints last fiscal, taking up its network to 4,500. The expansion plan is to grow this number to 5,400 touch-points.
According to YS Guleria, senior VP (sales and marketing), HMSI, “Our experience is that when you open any new network in the rural areas, more than the product it is the relation that you develop with the customer. And the relationship cannot be developed without experience and this experience comes from the two-wheeler ownership. Then, word of mouth will drive the volumes.”
For HMSI, rural India contributed about 25 percent of its total sales in 2013-2014; they now account for 28 percent. Importantly, with scooter penetration improving in rural regions, the company expects higher numbers to come its way. HMSI says the dealer contribution which was 1:9 for scooters versus motorcycles three years ago now stands at 2:8.
Inks retail finance MoU with IndusInd Bank
To further drive its customer reach through easy financing, on May 18, HMSI announced a tie-up with IndusInd Bank for retail finance for two-wheelers. In India, total two-wheeler retail finance penetration stands at 40 percent, half of that of four-wheelers that account for 80 percent due to the larger ticket size and customer appeal for cars.
With this new tie-up, HMSI has partnered with the top 3 two-wheeler finance companies in the country. With the IndusInd Bank pact, loans of up to 90 percent of the cost of the vehicle with a repayment tenure of 36 months, will be mostly extended in urban and semi-urban areas. The bank claims its loans will enable a saving of Rs 7,500 on an amount of Rs 60,000 with a zero processing fee.
Navi sells 5,000 units since March
Meanwhile, the Navi hybrid, HMSI’s newest two-wheeler revealed at the Auto Expo and launched in early March at Rs 39,500 (ex-showroom Delhi), has sold about 5,000 units across 10 urban cities.
The company now plans to step up distribution of the 110cc Navi in a phased manner covering India’s top 35 urban cities by end-FY’17. These towns currently contribute 33 percent of two-wheeler sales in the country. The plan is to target these towns initially and based on demand, expand the Navi’s penetration to other regions.
“In over 50 percent of the Navis sold, customers have opted for personalised options starting a customisation culture in two-wheelers. About 80 percent of the users are between 19-25 years old. Since we have not gone pan-India with it yet, we are ramping up Navi production slowly,” said Guleria.
The two-wheeler maker will be adding more products to its customisation options with a box below the fuel tank to be on offer over the next few months.
Gearing up for production in Gujarat
Honda is also all set to beef up its production capacity at its fourth Gujarat facility for scooters by end-June when its second production line will start rolling. With a capacity of 600,000 units annually, the plant is expected to reach full capacity within 2-3 months taking up the full production capacity of the plant to 1.2 million units. The plant was inaugurated earlier this year and will relieve the stress on scooter capacity. While the Activa scooter is made on its first production line, the Dio scooter will roll out from the second line along with the Activa.
With the Gujarat going on stream, exports are expected to rise by 15-20 percent this fiscal as the company was constrained by a shortage of capacity in the past 2-3 years. “Our priority was the domestic market,” admits Guleria.
With a rise in scooter sales, scooters would account for a share of 67-68 percent of HMSI’s business by end-FY’17. In FY’16, scooters contributed 65 percent of the share of business and motorcycles the balance 35 percent.
The popular Activa remains its best-selling two-wheeler and has, over the past four months, clocked sales of 200,000 units a month, with a lead of over 52,000 over its rival. Backorders for scooters as of April 30, 2016, stood at 31,000 units and a tad lower than March when they were pegged at 35,000 units. By the onset of the festive season, customers are expected to get deliveries immediately.
HMSI is also giving a relook to the production plan of its CB Hornet 160R bike where sales have accrued mostly from the top-end model. According to the initial mix, the business plan had not factored in many volumes for this top-end model.