Honda bets big on rural market to take on Hero

epaper Updated: May 24, 2016 10:03 IST

NEW DELHI: Honda Motorcycles and Scooters India (HMSI) plans to open 550-600 dealerships in rural areas, considered a stronghold of its long-time JV partner and now rival, Hero MotoCorp.

“More than 70% of the 800 new dealerships in 2016-17 will come up in rural areas,” said Yadvinder S Guleria, head of sales and marketing at HMSI.

Honda currently has 4,500 dealerships in the country, 30% in rural areas.

Hero MotoCorp, on the other hand, has 6,000 dealerships — half of that in rural areas. According to market estimates, nearly two-third of its sales comes from semi-urban and rural India.

“That’s because we came up with our mass-market motorcycles only in 2012,” Guleria said.

Honda is looking at a 22% growth in overall sales in 201617, riding on increased rural demand. Last year, the company grew by just 1%.

“This year we will sell more than five million two-wheelers for the first time,” said Guleria.

Hero sold 6.63-million units last year.

Honda has also added 1.2-million manufacturing capacity in Gujarat.

With good monsoon around the corner, demand for personal transportation is expected to grow. “The two-wheeler market will grow at 5% this year,” said Abdul Majeed, partner at PwC.

Villagers buy motorcycles — only one out of 10 two-wheelers sold is a scooter. In towns and cities, the number is 3:1.

Honda is strong in scooters. But in motorcycles, the company has just 14% share. Hero has 52%.

To change that, Honda launched 15 new products last year, mostly motorcycles. Shine SP and Livo were launched to counter Hero Splendor and CB Deluxe.

The company has also partnered with Indusland Bank to offer special loans, where a buyer spends 12.5% less on a loan amount of ` 60,000, compared to market rates.

But, Guleria isn’t taking his eyes off scooters. For Honda, two out of 10 scooters are sold in villages. That’s more than the industry average. Activa has been the highest selling twowheeler for the first four months of 2016, more than former market leader Splendor.

First Published: May 24, 2016 05:46 IST