HERO - IN THE AFTERMATH OF A DIVORCE
By Ruma Dubey
A couple, happily married and growing together for 27 years. Sounds like bliss? But life is never this easy. One partner feels he could grow better but for the shackles of the other partner. Marital discord and a divorce happens. Now each partner, works in the same industry and knows every nuance of each other and the objective is to bring the other down. Well, this is the bitter taste of a divorce and more than collectively fighting the sector, it becomes more about fighting each other.
This is the story of Hero Moto Corp and Honda Motorcycle. The split was amicable and was bound to happen. But today, looks like Hero will have to work doubly hard to not just make a mark with its solo brand of ‘Hero’ but to fight against the might of the brand ‘Honda’.
On 5th Jan 2012, Hero Moto unveiled its first new two-wheeler, without any assistance from Honda. It is a new petrol-electric hybrid scooter, developed with active participation of an overseas engineering company. This new scooter, aimed mainly for the export markets, will be the first global product from Hero MotoCorp, which is now free to sell bikes and scooters anywhere in the world.
And in the evening, same day, at the Auto Expo in Delhi, Honda Motors, the world’s biggest motorcycle maker, unveiled the ‘Dream Yuga’, for the mass market but more importantly, there was a report stating that Honda is developing a low cost bike in China, which could be manufactured in India and is to be sold in India. It is a 125 cc bike which will have a price tag of around Rs.30,000 (ex-factory Delhi), which is almost Rs.4000 cheaper than Hero’s best-selling bikes – CD Dawn and Super Splendour. And very ominously, their senior managing officer & director motorcycle operations, Tatsuhiro Oyama said, "we are working out plans to gain leadership in the Indian two-wheeler market.” Currently Hero accounts for 46% of the bikes sold in India so naturally, the competition is head-on with its ex-partner. Keita Muramatsu, president and chief executive officer of Honda Motorcycle also said, “Right now, India contributes around 13% of our global sales and we want to increase this to 30%.”
That’s not all. Honda is planning to put up fourth plant in India, at a capex of Rs.1000 crore, to spike up its total capacity to 5.2 million units pa, which is a tad shorter than Hero’s current capacity of 6.15 million units pa. So it is planning to go for Hero’s jugular – expanded capacity as well as low cost bikes.
But this is not just a threat to Hero. Bajaj Auto also needs to watch out as Honda is a giant and when it moves, it speeds. Honda has already nudged out TVS from the No.3 to and has firmly ensconced itself there. Now sights are on Bajaj at No.2 and then the current No.1, Hero.
There are many who are pooh-poohing this new low cost bike, saying that ‘Made-in-China’ tag will kill it. That’s being too naïve. That Apple iPod, the Lenovo laptop, the Nokia cell phone and almost every other big brand, is manufactured in China, for the entire world and there are no quality issues. It is all about the brand for which China manufactures. And Honda, given its reputation will suffer nothing on quality front. Also, once the bike is accepted, Honda said that it could manufacture them in India. When asked to a cross section of people, whether they would buy a Hero or a Honda bike, most did not even think for a minute and said, “Honda”. And when asked why, majority said that Honda was the best brand in the world and it was Japanese.
Yes, Honda is a giant and we cannot take its footsteps lightly. The sheer impact could vibrate and shake-up the entire sector. Bajaj and Hero, especially Hero needs to watch out.
The 27 year old marriage was split for a purpose and Honda will surely make the divorce more than worth it.