Anil Dua, VP - Marketing & Sales of Hero Honda said the company has raised bikes prices due to rising input costs.

However, he added that the recent price hikes only partially offset the higher input costs and said that it is keeping options open for further price hikes. It added that its volume growth is at 17% but if interest rates remain high, he said only a single digit growth is possible.

 

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Dua added that the second half of the year and the festival time would be the key decider going forward, and is looking to improve internal efficiencies.

Excerpts from CNBC-TV18's exclusive interview with Anil Dua:

Q: First you cut prices in March, now you have raised prices again in August. Will this price rise be enough to counter the rise in input cost or can we expect more price rises?

A: In March when we had dropped prices, it was essentially to pass on the entire excise benefit to our customers. We had lobbied really hard to get that excise drop from 16% to 12%. So, when it happened, we passed on the entire benefit to our customers to the last rupee. But then the input cost pressure kept catching up with us.

 

We raised our prices a couple of weeks back. But this has been done in a sensible way. We have increased our prices from Rs 100 to Rs 1,500 per bike. On the cheaper 100cc bikes, the price increase is only Rs 100, namely on CD Deluxe.

On the upper end, on Karizma, the price increase is Rs 1,500. For the bikes in between the price increase typically ranges from Rs 600-850. This only partially offsets the input cost increase.

Q: Will we see another hike, or do you think you can manage with this?

A: We are keeping our options open. We are looking at how commodities are behaving, as steel is pretty much on a high right now. We are looking at our internal efficiencies on how we can manage despite all the cost increases. We will keep our options open.

Q: You have managed a year-to-date volume growth of 17%. Can this run rate be maintained?

A: Yes, I think this is in line with the trend that we have seen over the last one and a half years. We have been growing even though the industry declined last year. We managed a marginal growth. So, we have managed to grow 17% in line with that trend this Q1 as well, although the industry is about 5-6 percentage points behind that growth.

Going forward for the industry as a whole, the pressure will build up because the fundamentals in terms of interest rates, financing squeeze, inflation and all those issues which were hampering growth last year are very much there.

What we have seen for Q1 is precipitation of some of the decisions, which had got postponed. Last year, many customers who were waiting for things to improve finally when they got their bonuses got their increments in festival and marriage times. They have precipitated their decision, and have gone ahead and purchased.

But going forward, the festival time and the second half of the year is really going to be decisive. That is going to be crucial. If the interest rate situation, financing situation remains the same then the double digit growth of the industry will certainly come down to a single digit growth.

Q: So in your own case you are expecting that 17% could be a challenge?

A: I would say that we’ve built a certain momentum. We have been doing better than the industry. From a share in the mid-40s range last year, today we are close to 55% share of the domestic motorcycle market. We will maintain our lead over the industry. We will continue to sustain this momentum.

Q: 11 Mobike models are to be launched in the next 13 months, will any of these be in the 125cc category where the Bajaj competition has hotted up considerably?

A: When you have 55% of the market, you cannot look at any one segment. That is exactly what we have done, and that is actually the secret of our success. We have had a multi-focal approach, we have focused on all segments 100cc, 125cc, 150cc and above, scooters, and we have had very successful new launches across the segments.

Going forward as well, talking of these 11 launches in the next 13 months, definitely they cannot be concentrated on any one segment. You will see action across segments from Hero Honda.