Honda India Case Study

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"Its symbol, the Wings, represents the company's unwavering dedication in achieving goals that are unique and above all, conforming to international norms. These wings are now in India as Honda Motorcycle & Scooter India Pvt. Ltd. (HMSI), a wholly owned subsidiary of Honda Motor Company Ltd., Japan. These wings are here to initiate a change and make a difference in the Indian two-wheeler industry."

- www.honda2wheelersindia.com.

The Launch

In September 2004, Honda Motorcycle and Scooters India Limited (HMSI), the wholly owned subsidiary of the Japan-based Honda Motor Company Limited (HMCL),1 launched its first 150cc motorcycle named 'Unicorn.'

Priced at Rs 50,043 (ex-showroom price, Delhi), Unicorn had a four stroke 13.3 bhp engine with five gears.

The new bike was available in five colours and was designed to achieve a speed of 0 to 60 kmph in five seconds. Unicorn was promoted with the caption "Be a wing rider." (Refer Exhibit I for a visual of Unicorn).


Targeted at youth, Unicorn looked sportier than all the existing motorcycles in the premium segment and was pitted against Bajaj Pulsar, the leader with 75 percent market share in that segment. The other bikes in this segment were TVS Fiero, LML's Graptor and Hero Honda's CBZ (Refer Exhibit II for a comparison of leading motorcycle models in India). HMSI expected sales of 56,000 units of Unicorn in the first year of launch.

The Indian two-wheeler industry, traditionally considered a scooter market, witnessed a gradual migration towards motorcycles from the 1990's. When HMSI was incorporated in late 1999, the Indian motorcycle market was booming, compared to the scooter market.

Still, SI announced that it would initially concentrate only on the scooter market and would enter the motorcycle market in 2004, the year when the HMCL joint venture agreement with the Hero Group2 was due for revalidation. HMSI was credited for reviving the scooters market in India. Within three years of commercial operation, HMSI emerged as the market leader in the scooters segment.

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Honda in India: New Challenges






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Excerpts

Honda In India

Honda first entered the Indian market in 1984 through a joint venture with Kinetic Engineering Limited (Kinetic). The JV called Kinetic Honda Motors Limited (KHML), was set up to manufacture scooters. The partnership’s flagship product, ‘Kinetic Honda’ was considered a game changer in the Indian scooter market with several features like variomatic gearless transmission, self-start, auto choke, etc.

Honda entered into another joint venture the same year with the Hero Group called Hero Honda Motors Limited (Hero Honda) to manufacture motorcycles. The Indian motorcycle market was very sluggish at that time. Many people preferred scooters to motor cycles as scooters were perceived to be safer and more suited to the Indian roads.

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New Challenges

In 2011, Honda India started to face new challenges in the form of increased competition for and decreasing sales of all of its models sold in India from 2011. Some of the new competitors who entered the Indian automobile market started to pose stiff competition to the company and overtook it in some product segments where it had been a leader. In 2011, VW’s Vento replaced Honda City as the top selling mid-size sedan in the Indian market within 8 months of its launch..........

Setting The Strategy Right

Some analysts said that the main reason for the decline in the performance if Honda India was its lack of a long-term strategy for a market like India. They said Honda had grown too complacent due to the good performance of its high-end sedans and the brand value it enjoyed in the Indian market. The Indian market was traditionally dominated by small cars due to the low income levels of its population.......

Continuing With The Strategy Shift

In August 2012, Honda completely bought out the stake in Honda India and made it its 100 percent subsidiary. After the stake sale, Honda Siel Cars India Limited was renamed as Honda Cars India Limited. Honda wanted to have total control over its Indian operations to further improve its fortunes in one of the most difficult automobile markets in the world..........

Price Cuts And Other Initiatives

Apart from launching new models, one of the important steps that Honda India took was to drastically reduce the prices of its vehicles in India. It slashed the price of its flagship sedan, Honda City by Rs. 44,000 to Rs. 66,000 (depending upon the model) in June 2011 to compete better in the Indian market. In August 2011, Honda India released a new version of its Honda Jazz which was priced nearly Rs. 150,000 lower than its previous version..........

The Road Ahead

New launches from Honda India started to give good results to the company in 2014 in the form of higher sales and market share. The demand for many of Honda India’s newly launched models like Honda Amaze and Honda Mobilio meant that its plants in India reached their maximum capacity. The demand for many of its models exceeded the expectations of the company and Honda India started second shifts in its manufacturing plants..........

Exhibit

Exhibit I:Classification of Indian Passenger Vehicle Market
Exhibit II: Honda India’s Cars Launched in India
Exhibit III:Models Sold by Honda India in 2014 and Nearest Competitors (Figures in INR Thousands)
Exhibit IV:Chart of Petrol Prices in India from 2002 to 2014 (Prices in the Country’s Capital Delhi)

 

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