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Last Updated : Jun 13, 2019 11:31 AM IST | Source: Moneycontrol.com

Honda says BS-VI will be a game changer for MoTown, remove discount culture

Honda claims that it is the combination of discounts and new models that has hurt the company’s volume growth

Swaraj Baggonkar @swarajsb
 
 
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Even though scooter sales have softened since the past several quarters, the 125cc segment has bucked the trend. Little wonder, almost every scooter maker now has a product in the 125cc pie.

But Honda Motorcycle & Scooter India (HMSI), which is the largest manufacturer of scooters in the country, has been struggling in the 125cc scooter segment, even as rivals like Suzuki Motor Corporation and TVS Motor Company have been gaining market share.

Honda claims it is the combination of discounts and new models that has hurt volume growth. It has two models in the 125cc scooter category – Grazia and Activa 125.

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Speaking to Moneycontrol, Minoru Kato, President and CEO, HMSI, said, “Thanks to new models and discounts by our competitors , the 125cc scooter segment is growing, but we are struggling.”

But that may change.

With the onset of Bharat Stage VI (BS-VI) emission norms due in April 2020, Honda hopes to reverse the trend with the elimination of discounts and higher competitive advantage.

“BS-VI brings one of the biggest chances for us to change the game. Not just applying BS-VI norms but also through new value additions (on products)," said Kato.

He added that with the new norms coming in, discount strategy won't be good for the future of branding and won't be viable.

“We don’t know about the competitor’s cost structure for BS-VI, but I believe cost competitiveness regarding BS-VI models will improve for us. I think we will have a better cost competitiveness than our competitors,” he added.

The segment

Suzuki’s Access 125 has become the best-seller in the 125cc segment, dethroning the Ntorq from TVS. As per street estimates, the 125cc segment has grown 70 percent in the last few months as compared to a decline in 100-110cc segment.

From a negligible presence, the 125c pie has grown to nearly 30 percent in the scooter segment. Mahindra & Mahindra (M&M), Vespa, Aprilia and Hero MotoCorp are some of the other brands and manufacturers of 125cc scooters.

Growing need for powerful engines for better performance on highways and within the city, improving mileage and better features has helped shift buyers to 125cc scooters from 110cc scooters.

India's scooter demand is majorly centred around small family-oriented gearless scooters that score high on comfort, utility and mileage value. These unisex scooters are typically priced in the range of Rs 50,000-55,000 (ex-showroom). The 125cc models are priced above Rs 60,000.

Honda is waiting to see how the market reacts to the new norms and then take a call on its future strategy. The company is contemplating launching 150cc scooters after the implementation of BS-VI.

Italian two-wheeler major Piaggio was the first in the country in recent years to launch a 150cc scooter, with the launch of Aprilia SR 150.

Honda is hoping to be ahead of its rivals on cost structures under BS-VI, drawing from its experience of Euro 5 standards. For Honda’s rivals such as Hero and TVS, the switch-over to higher emission norm will be for the first time.
First Published on Jun 13, 2019 11:31 am
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