New Bike Launches in India

As Hero Honda, India’s leading two-wheeler manufacturers, gear up to detach the Honda name from their logo, we take a close look at their glorious past, dominant present and uncertain future

This has been a potboiler and one of the most dramatic splits the Indian automobile sector has witnessed to date. The end of the Hero and Honda joint venture was, perhaps, the most talked-about, rumoured and speculated news that dominated most part of the financial year 2010-11. It has been almost like a break-up of two Bollywood sweethearts replete with denials, ‘no comments’, ‘we’re very much together’ and then, when people actually began believing that the split might really be a rumour, they confirmed that they were parting ways, but would remain good friends… at least until 2014.

BIKE India tries to bring the split of this very successful partnership of 26 years under the microscope and give you a clear perspective of what to expect of India’s leading two-wheeler maker and the fastest growing Japanese two-wheeler company in the country. We roped in a professional analyst to shed some light on the business point of view and then we have our in-house industry experts who shed some light on things to come.

According to an analysis done by the Standard Chartered Bank, one of India’s leading banks, this could be the beginning of a new era. Following months of speculation the Munjal family of Hero Honda Motors (HH) finally signed an MoU to buy out the entire 26 per cent stake of Honda Motor, Japan, in the joint venture. The deal has been signed for an undisclosed amount (we reckon it to be to the tune of a whopping Rs 8,600 crore), but it is expected to be at a substantial discount to HH’s current market price. The report further suggests that although the market was expecting royalty payments to increase following the news, management has clarified that royalty payments on existing products will either be constant or lower than FY10 level of 2.6 per cent and will eventually stop after FY14. For the new models, as per management, royalty will be anywhere between three per cent and five per cent.
Going by the research, the split does not necessarily have a negative connotation for the Indian firm. It paid an astounding Rs 416.4 crore as royalty in FY10. When this figure goes down, it could result in long-term profitability for HH. But India’s leading two-wheeler manufacturer needs to take three very crucial steps to remain on top of the game.

1983

• Joint venture agreement with Honda Motor Company Limited (HML), Japan, signed whereby HML would furnish complete technical information and support to Hero Honda.

1984

• Hero Honda Motors Ltd. incorporated on January 19.
• The company to manufacture motorcycles upto 100 cc.

1985

• CD 100 introduced – the first four-stroke motorcycle to be rolled out in India in the 100-cc range, which is fuel-efficient and lightweight. Also equipped with an electronic ignition system, illuminated speedometer, four-speed gearbox, etc.
• Second phase of expansion takes place by increasing production capacity from 1,20,000 to 1,50,000 vehicles per annum.

1987

• 100,000th motorcycle produced.

1989

• The Sleek, a stylish new model, introduced in July.

1990

• Working on a new motorcycle, CD 100 SS, aimed at semi-rural conditions.
• Five lakh motorcycles produced.
• Company reported to have 46 per cent of the market share.

1994

• New motorcycle, the Splendor, introduced.
• Ten lakh motorcycles produced.
• HH proposes to expand capacity of existing plant to 2.4 lakh units per annum.
• Begins setting up of another plant at the Gurgaon Industrial Estate with a capacity of 1.5 lakh units per annum.
• Production increased to 1,83,490 motorcycles.

1995

• A new technical collaboration agreement signed with Honda Motor Co Ltd, Japan, for the period upto the year 2004, which includes technology to produce bigger capacity motorcycles and scooters.

1997

• The Street, a new motorcycle, introduced on January 24, making it India’s first auto clutch step-thru, designed for city use.
• Second manufacturing plant at Gurgaon inaugurated
• As part of their globalisation plan, set up a plant in Brazil.

1998

• Hero Honda consider entering scooter manufacture in collaboration with partners, Honda Motors, after the Japanese company decides to walk out of Kinetic Honda, their scooter venture with the Firodias.
• Twenty lakh motorcycles produced.

1999

• The company launches its fastest and most powerful bike, the CBZ, which changes the Indian two-wheeler buyer’s perception and raises the bar for the two-wheeler industry.

2000

• Forty lakh motorcycles produced.
• The bread-and-butter bike, Splendor, declared ‘World No 1’ largest selling single two-wheeler model.

2001

• A new 100-cc motorcycle, the Passion, launched. Hero Honda Motors Ltd. become the largest sellers of motorcycles among all Honda companies and venture in the world by selling one million motorcycles during the financial year.
• Fifty lakh motorcycles produced.

2002

• Ambition, featuring a 133-cc, 11 BHP, four-stroke engine, introduced.
• Honda Motor for the first time decide to source motorcycles from their Indian joint venture to sell under the ‘Honda’ brand-name in Vietnam.
• Royalty to the Japanese parent, Honda Motor Co, hiked to Rs 630 per vehicle as compared to the flat royalty of Rs 200 on existing models like the Splendor and the Passion.

2003

• The Eterno, a geared scooter, launched in May.

2004

• Ten lakh units produced.
• October witnesses the launch of the Unicorn, HMSI’s first motorcycle for India featuring mono-shock and a 150-cc engine.

2005

• New variants of the Activa and the Dio launched in October.
• New colours and graphics for the Eterno introduced in November.

2006

• Twenty lakh two-wheelers produced.
• The Shine, a 125-cc commuter motorcycle, launched in April.
• The Unicorn gets an upgrade in October.

2007

• The Manesar factory upgraded to produce 6,00,000 scooters and 4,00,000 motorcycles per annum.
• The entire range gets a facelift.
• Cast wheels introduced on the Unicorn and the Shine.

2008

• The production of the Eterno suspended.
• A new gearless scooter, the Aviator, launched in January.
• The CBF Stunner, a trendy 125-cc motorcycle, launched in June.

2009

• The CBF Stunner Fi launched in May.
• Fun biking theme. The CBR 1000RR and CB1000R superbikes introduced in February to heighten brand image.

2010

• The CB Twister, a 110-cc motorcycle, launched in January.
• Hero Honda and Honda officially part ways following a go-ahead given by the HH board.
• Foundation laid for a second factory at Tapukara, Rajasthan, with an annual capacity of six lakh units.
• Landmark of 60 lakh units reached.
• VFR 1200F super-cruiser introduced in July.
• Third factory proposed in Andhra Pradesh.
• New models aimed at the masses announced.

2014

• This is the year when the three decade old partnership between Honda Motors Ltd. Japan and Hero Group hits the end of the road. Where will the two independent companies stand then is the big question.

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Hero’s In-house R&D and finding new partners
Until now Hero had been solely dependent on Honda for all technical support. Although, HH will continue to get technical assistance from the Japanese firm until the financial year 2014 (FY14), they have roughly three years to develop their own R&D facilities and think about re-branding the company. Until that time the current popular models such as the Splendor and Passion will provide it enough momentum to occupy the top slot, but eventually it will need newer model and technology to maintain the leadership. The company is planning to set up its own R&D centre in Dharuhera. Apart from the large investment needed to build this facility, HH will also need to tie up with an established international company. Unfortunately, most major two-wheeler makers are already present in India or have a joint venture with an Indian counterpart and the independent product developers have not been able to impress Indian buyers with their models. However, if you look at history you will notice that Hero had signed the dotted line back in 2003 with Italian performance bike maker, Aprilia, with the intention of introducing scooters and high-end motorcycles in India. Interestingly, a year later HH announced a licensing agreement with Austria-based Bombardier-Rotax to produce 125-cc to 175-cc engines. But nothing was heard about it later on. So, is the Hero Aprilia venture on the backburner or has it been shelved altogether? We are sure the wait for this answer won’t be too long.

Focus and ramp-up of exports
HH has been a marginal player in the export market due to the restrictions imposed by Honda Motors and export constitutes just two per cent of their total volume. The Indian company was not allowed to export to countries where Honda Motors were already established. With the new MoU this restriction has also come to an end. HH would look at expanding in countries like South East Asia, Latin America, Africa and the Middle East. HH’s export limitation gave Bajaj Auto an upper hand to become the market leader in export with a 74 per cent market share. However, now HH are expected to catch up with Bajaj Auto. For the time being HH have the option to use the Hero Honda brand, but we feel that the company will re-brand their export products right from the beginning as it would make more business sense.
There is a rumour that the Hero Group is also very keen on developing a diesel powered two-wheeler in an attempt to create a completely new segment of buyers and will also be looking at exporting the vehicle. Going by the report, the bike will sport a 400-cc diesel motor, which is currently undergoing certification testing at the Automotive Research Association of India (ARAI). The two-wheeler giant is in talks with a South India-based firm for developing the diesel engine and the motorcycle would be assembled at HH’s Dharuhera plant, where they are also developing their own R&D facility.

Local parts to save cost
Until now HH sourced components only from approved vendors from India and abroad. In the next few years the Hero group will try to source spares from more cost-effective vendors in India. As of now HH import six per cent of ancillaries (as a per cent of raw material), which make the company susceptible to the risk of the fluctuating international currency rates. But we see this as a double-edged sword. On the one hand, this step would make the bike more affordable, but then there could be questions about the product quality. Currently the name Hero Honda spells reliability and low maintenance because the company has the most evolved vendor base in the country. With new suppliers coming into the picture we hope Hero do not cut corners and compromise on quality to keep the cost down.

Apart from the steps mentioned above, HH have already started working on their new branding strategy to ensure that the customer goodwill stays intact even after ‘Honda’ is no longer a part of their name. They have put their advertising firm, JWT, to work for a new media campaign which will gradually be put to play towards 2014. The company will be planning a completely new corporate identity and a brand-new logo. It is obvious that the focus of the advertising campaign would be on promoting individual motorcycle models such as the iconic Splendor and Passion. This is the new beginning.

Honda on the offensive
Honda Motorcycle and Scooter India (HMSI), the cent per cent Japanese subsidiary of Honda Motors Japan, is expected to get into the top gear and switch on their aggressive mode in India. Currently they are a marginal player in the two-wheeler segment with a market share of about 12 cent. Though technologically stronger, the Japanese company is far behind HH in terms of deep reach across India. Over the years Hero have built an extremely strong and well-penetrated network which HMSI will take some time to match. Currently HH have about 4,500 outlets that include authorised dealerships, service centres and authorised representative dealerships. HMSI, on the other hand, have just about 1,150 outlets as of now. HMSI now command the fourth position in the two-wheeler market behind HH, Bajaj Auto and TVS Motor, which is something the Japanese firm would like to improve on.

Trouble for all
Now, what’s interesting is that when the Munjals pay almost Rs 8,600 crore to Honda Motors for the latter’s 26 per cent share in Hero Honda, Honda would inject a good portion of this amount into their Indian arm, which would work like a steroid to beef up their operations in the country. The current line-up of bikes such as the Twister and Stunner were deliberately aimed at avoiding disruption of HH’s domain and hence did not generate great volumes. Now HMSI can focus on volumes and will target the entry-level segment, which has been the main reason for Hero’s success. Expect a slew of entry-level models from HMSI, similar to the Splendor and Passion, only that it will feature new-age technology, top-notch quality and will also be priced very competitively. Honda will now hit hard and that too where it hurts the most. The disposable income, plus Honda’s aggression make a volatile combination and this will cause trouble not just for HH but for other major players as well. Recently Rahul Bajaj, Bajaj Group chairman, was quoted as saying that post the Hero Honda disintegration, the market may get hyper competitive, but by hindsight, it would be good for customers. Most two-wheeler makers will now keep a keen eye on Honda’s moves and, at the same time, work hard to keep their individual product lines as competitive and attractive as possible. Obviously, we are not complaining.

Hurdles
Ramping up production and distribution is easier said than done. The Japanese auto major has to overcome certain hurdles such as constraints from suppliers, manpower and quality components. Shinji Aoyama, President and CEO, HMSI, recently said that while expanding their product line-up, it was equally important to grow the dealer and vendor network and ensure that there was no shortage of manpower. Aoyama said that Honda may be able to invest in any number of plants, but these other issues were far more important and not immediately within the company’s control. He further stated that while the leadership position of the Activa in the gearless scooter segment was a cause for cheer, HMSI was equally upbeat on motorcycles where it currently produced over 60,000 units a month. Bajaj and TVS are strong players with a longer history than HMSI. There are also many things to learn from them on producing at competitive costs. However, he is not unduly worried because of the Honda belief of providing the best quality products to customers at reasonable prices.

Another hurdle that HMSI have been working hard to overcome is the waiting period for their products. At the moment the two-wheeler maker is struggling to meet the order backlog of over 2.2 lakh motorcycles and scooters. It does have a plan in place and is investing in two new plants, apart from the one in Manesar, Haryana. The second plant in Rajasthan will be operational by June this year and will have an initial capacity of six lakh units, which would solve the waiting period issue for the time being. HMSI expect to roll out over two million two-wheelers from these two facilities per annum. They also propose to set up a third manufacturing facility in the country very soon with a total investment of Rs 1,000 crore. This could be the company’s first plant in the south (reportedly in Andhra Pradesh) and would be spread over an area of 100 acres. The new plant will have a capacity of 2,000 units per month, which the company plans to increase gradually.

HMSI will be introducing the CBR 250R in India next month, which is one of the most anticipated bikes for the country’s enthusiasts. As a brand building exercise the company has gradually launched its international range of superbikes such as the CBR 1000RR, the sports cruiser VFR 1200F and practical street fighter CB 1000R that have captured the attention of Indian performance bike buyers. But it will now enter the all-important mass 100-cc segment that will translate into greater volumes and, in turn, larger profits.
Words: Sarmad Kadiri

The personal transport maker introduces the x2 and i2 in the country

A word that best describes the current state of Indian automobile market really well is – BUZZING!
Almost every week a new player enters this market by introducing its product to woo a fraction of the 1.2 billion Indians. Segway Inc. the US based personal mobile vehicle maker is the latest firm docking at the Indian shores. The firm makes zero-emission, battery operated two-wheelers on which a person stands and can zip around narrow indoor paths or out-doors, at a max speed of around 25 km/h. You might remember it from the Mall Cop movie.

This could be an ideal toy of the spoilt rich brats as it has a steep price of over Rs 3 lakh, making it out of reach for most of us. Now, why would a flourishing US firm enter a market at the other end of the globe? Obviously, Segway sees some sizable profit in India and the spoilt brats make up just a fraction of their target audience. According to Jason G Barton, Vice President, Worldwide Sales, Segway Inc. says that the company’s focus will be on commercial usage and for policing where it sees tremendous potential. These vehicles can be of high practical utility at places like the Special Economic Zones (SEZ), airports, golf courses, malls and large factories. You know, just like Paul Blart did in Mall Cop.

The US firm has tied up with Bird Group of Companies, which is into high-end retail covering BMW cars to luxury yachts. Ankur Bhatia, Executive Director, Bird Group, said that its prime target would be commercial establishments and the firm will also offer it on lease. The fun and practical Segways will be imported from New Hampshire near Boston the Indian partner will display and market it through its 30 centres across the country. To start with Segway will offer base models namely the x2 and i2. As these pictures suggest, the i2 the saner of the two apt for indoor use, while the more rugged x2 can be used outdoors. The fun two-wheelers are now available in India. Now, it’s too short a notice to save that big an amount. Guess we have to join the security force of an upmarket mall to get you a ride report.

Words: Sarmad Kadiri

Dutch magazine spill the beans on KTM’s strategy for the next two years

Recently, our friends from Nieuwsmotor.nl visited the KTM headquarters in Mattighofen, Austria, and went back home with some very interesting tidbits, skillfully gleaned out of Robert Prielinger, head of R&D for KTM’s streetbikes. We have the extract here.

According to Prielinger, KTM will launch all-new versions of the Super Duke and Adventure bikes in 2012, which will be fitted with brand-new twin-cylinder engines. The 2012/2013 KTM Super Duke is likely to be a very high-tech machine, with a 1200cc V-twin and advanced electronics, including sports-ABS, traction control and ride-by-wire technologies. The off-road-oriented 2012 Adventure would be available with at least two engine sizes – 1200cc/1000cc and 700cc/800cc. Next year, the KTM Duke 690 may be replaced with the Duke 700, fitted with a revised single-cylinder engine and revamped styling. There might also be a more expensive ‘R’ version of the Duke 700, with higher-spec components.

KTM, in collaboration with Bajaj who now owns more than a third of it, will also continue to develop smaller streetbikes for India and other Asian markets and some of these bikes will also make their way to Europe by mid-2011. The two companies have started working in close coordination in the area of technology development. In fact, the 2011 RC8R even uses dual spark plugs in each of its cylinder heads, which is a development of Bajaj’s patented DTSi technology. The two companies will continue to develop small capacity single- and twin-cylinder motorcycle engines for Asian markets, while Bajaj will also introduce the KTM brand in India shortly, which is the world’s second largest motorcycle market.

 

Words: Saeed Akhtar

Dr. Venki Padmanabhan takes the riding seat as R. L Ravichandran moves on to the Eicher Board

Royal Enfield Motors, manufacturer of the iconic Bullet motorcycle has announced the appointment of Dr. Venki Padmanabhan as the company’s new Chief Executive Officer. The motorcycle maker has in the recent years strengthened their brand image in India and internationally by their witty commercials and bike rides. Dr. Padmanabhan will have the task of taking this to the next step.

Dr. Padmanabhan first joined Royal Enfield two years ago, acting as COO under marketing wizard CEO R.L. Ravichandran. During that time, the company posted a 21-percent growth in sales volume, 54-percent growth in sales turnover and a return to two digit profitability. Prior to joining Royal Enfield, Dr. Padmanabhan, a citizen of the United States and an Overseas Citizen of India, was Managing Director of Chrysler’s South East Asia Global Sourcing Office based in Chennai, India and responsible for $1 billion worth of material sourced to its parent manufacturing units in the United States.

Words: Sarmad Kadiri

The Chennai based company is all set to enter the Brazilian market

Royal Enfield, the classic Indian motorcycle manufacturer has a strong desire to enter the Latin American market and wishes to begin this venture with Brazil. The company is apparently in talks with various contract manufacturers in Brazil. RE is looking for a contract manufacturer as the company doesn’t want to raise the stakes too high and enter an unknown market all by themselves. The Brazilian two-wheeler market is approximately 6-7million units a year and it would benefit RE if they enter this market. This venture will also help them to create a bigger footprint the world of two-wheelers. However, the company has not released any information confirming these plans. But we expect RE to do it shortly.

Words: Ravi Chandnani

A twin-cylinder engine bike on the anvil

 

 

Come 2013 and we might be able to see a twin-cylinder machine bearing the Royal Enfield marque. Though it may sound difficult to believe, the Chennai-based motorcycle company is said to be working on such a bike. The big bike is apparently in the concept phase and the company hopes to finish it by 2013. Along with the twin-cylinder engine bike the company will also roll out a new avatar of the Thunderbird and a new range of bikes with café racer-inspired styling. It seems that Royal Enfield are viewing Harley-Davidson as a threat now and are gearing up to compete with the American legend.

Words: Ravi Chandnani

Piaggio showcases the spectacular line up of its global two wheelers

 

Piaggio Vehicles Pvt. Ltd., the Indian subsidiary of Piaggio & C s.p.a. of Italy, today unveiled the superbike Aprilia RSV4 Factory at the Mumbai International Motor Show along with the original, iconic scooter Vespa LX 125. Aprilia has been a part of the Piaggio Group since 2004 and the Aprilia RSV4 Factory is the flagship from the Aprilia stable. Its super compact 180 HP, 999.6 cc, 65° V-four cylinder engine is designed for maximum power and uses ride-by-wire multimap technology and a sophisticated electronic injection system with 2 injectors and adjustable height ducts for superior performance. All four variants of the RSV4 will be on sale here, and prices will start from Rs. 13 lakh for the base version, going upto 18 lakh for the fully-loaded models. Piaggio also showcased the Vespa LX 125 at MIMS to give buyers a foretaste of what to expect when the iconic Vespa brand hits Indian roads next year.

Speaking at the ocassion, Mr. Ravi Chopra, Chairman and Managing Director of Piaggio Vehicles Pvt. Ltd. Stated, “Piaggio India is proud to unveil the superbike Aprilia RSV4 in India. This bike is a living example of the technological superiority that Piaggio offers to consumers across the globe. We are in the process of bringing our global line-up of highly successful superbikes to India. We believe that today’s young and mobile Indian has a strong appetite for powerful bikes, and we see immense potential for Aprilia in India. This bike has set world racing tracks ablaze with it sheer power and technology and it will hit Indian roads soon. We are also looking forward to the launch of the iconic Vespa in the country soon. The Vespa LX 125 is much more than a scooter – it’s the original, timeless 2-wheeler that has become a “way of life” in market after market around the world”.

 

Bajaj to drop its name; retain only the core models’ names

 

 The brand that gave India the slogan ‘Hamara Bajaj’, a catchphrase synonymous with a whole generation, will cease to exist come April this year. Bajaj Auto Managing Director Rajiv Bajaj recently stated his intention to remove the Bajaj brand and, in its place, establish its top-selling Pulsar and Discover as separate brands in their their own light. This is not an unusual move for brands in European and foreign countries but will certainly be a first for Indian automotive manufacturers who rely on family names for their product range (read TVS, Mahindra and Tata).

“Actually I don’t want that (Bajaj) name. We have already started the process so today on a Pulsar, the Bajaj name is seen only on the engine. The same is the case with Discover. Our three-wheeler has Bajaj in small font while the initial ‘RE’ is in much bigger font. One day, We will drop the Bajaj name from there also completely”, Rajiv Bajaj disclosed in a recent interview. “Consumers know that the product is coming from Bajaj, just like I know my Audi is coming from Volkswagen. But there is no Volkswagen on the Audi product. This creates a perception that there is something more in the product”, he added.

The project is spearheaded by Fitch, the international design agency that have collaborated with brands as diverse as Aditya Birla Group, Boeing, Reliance ADAG, Tata and Microsoft in the past.

Words: Saeed Akhtar