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Honda's move to launch a $600 motorcycle in China next year could be part of a bigger strategy for other growth markets like India.
This could be in place once it parts ways with the Hero group, a move which is expected to be public soon.
Honda has already made it known that it is up against stiff local competition in countries like India. Its Chief Executive Officer, Mr Takanobu Ito, recently said in Japan that for the company to remain a market leader, "it must not only maintain the high attractiveness and quality of products but also further improve costcompetitiveness to match the low prices of these competitors."
IN THE MARKET
Honda' largest selling bikes in India are the Splendor and Passion from the stable of its joint venture with the Hero group. Both are in the Rs 40,000-45,000 price range and account for nearly 2.8 lakh units each month. They are part of India's largest bike `executive commuter' segment, which does monthly numbers of over four lakh units.
It now looks as if Honda is seriously exploring the sub-Rs 40,000 slot once it calls it quits with the Hero group. Sources say the idea is to offer a top-class bike at a killer price and grow the buyer base. Ironically, it is the reverse strategy at play in Honda Motorcycle & Scooter India, the 100 per cent arm of the Japanese automaker.
Here, the focus is on sporty, premium bikes quite unlike the more successful Hero Honda paradigm of the basic commuter option.
LOW-COST STRATEGY
Will the new low-cost strategy work in Honda's next phase of growth in India? If the idea is to quickly ramp up volumes after parting ways with the Hero group, it will work like a charm.
However, observers are not entirely convinced if this makes good business sense from the viewpoint of profits or brand-building.
"There is actually little option for Honda given the kind of competition it is up against from Bajaj Auto in particular.
Once it is on its own without the Hero group and the products, it will have to
make up four million units annually.
The only way to do this is through incredible bargains," an auto industry official said.
LOCAL CHALLENGE
It remains to be seen if this will work though. While there is no question that the Honda brand is powerful globally, customers in India are getting more than what they want from local players.
Bajaj Auto, for instance, is going flat out with its Discover range, which is doing over two lakh units a month. TVS Motor, likewise, is gradually eating into the HMSI monopoly of gearless scooters with its recently launched Wego.
By the end of the day, the low-cost strategy will doubtless give Honda its twowheeler numbers except this will have to be balanced by premium products which assure the big bucks. If that does not happen, the script may just go awry.
Source:The Hindu Business Line
This could be in place once it parts ways with the Hero group, a move which is expected to be public soon.
Honda has already made it known that it is up against stiff local competition in countries like India. Its Chief Executive Officer, Mr Takanobu Ito, recently said in Japan that for the company to remain a market leader, "it must not only maintain the high attractiveness and quality of products but also further improve costcompetitiveness to match the low prices of these competitors."
IN THE MARKET
Honda' largest selling bikes in India are the Splendor and Passion from the stable of its joint venture with the Hero group. Both are in the Rs 40,000-45,000 price range and account for nearly 2.8 lakh units each month. They are part of India's largest bike `executive commuter' segment, which does monthly numbers of over four lakh units.
It now looks as if Honda is seriously exploring the sub-Rs 40,000 slot once it calls it quits with the Hero group. Sources say the idea is to offer a top-class bike at a killer price and grow the buyer base. Ironically, it is the reverse strategy at play in Honda Motorcycle & Scooter India, the 100 per cent arm of the Japanese automaker.
Here, the focus is on sporty, premium bikes quite unlike the more successful Hero Honda paradigm of the basic commuter option.
LOW-COST STRATEGY
Will the new low-cost strategy work in Honda's next phase of growth in India? If the idea is to quickly ramp up volumes after parting ways with the Hero group, it will work like a charm.
However, observers are not entirely convinced if this makes good business sense from the viewpoint of profits or brand-building.
"There is actually little option for Honda given the kind of competition it is up against from Bajaj Auto in particular.
Once it is on its own without the Hero group and the products, it will have to
make up four million units annually.
The only way to do this is through incredible bargains," an auto industry official said.
LOCAL CHALLENGE
It remains to be seen if this will work though. While there is no question that the Honda brand is powerful globally, customers in India are getting more than what they want from local players.
Bajaj Auto, for instance, is going flat out with its Discover range, which is doing over two lakh units a month. TVS Motor, likewise, is gradually eating into the HMSI monopoly of gearless scooters with its recently launched Wego.
By the end of the day, the low-cost strategy will doubtless give Honda its twowheeler numbers except this will have to be balanced by premium products which assure the big bucks. If that does not happen, the script may just go awry.
Source:The Hindu Business Line
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