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Thread: Hero Honda market share falls closer to 50% mark

  1. #1
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    Default Hero Honda market share falls closer to 50% mark

    The market share of India’s largest two-wheeler manufacturer Hero Honda Motors Ltd may slip to below 50% as competition heats up and production lags demand, say analysts.

    Amid talk of a possible exit by its Japanese partner Honda Motor Co. from the joint venture, the company’s market share in the motorcycle segment dropped to 52.9% at the end of the September quarter from 60.4% a year earlier, according to data from the Society of Indian Automobile Manufacturers.

    Analysts say Hero Honda is losing ground to Bajaj Auto Ltd, which re-entered the 100cc motorcycle segment in July 2009. It has also not been able to keep pace with the spurt in demand because of capacity constraints. Bajaj Auto’s market share increased to 34% from 29% a year earlier.

    “The company has lost ground to arch rival Bajaj Auto, which re-entered the 100cc segment last year with Discover,” said Surjit Arora, an analyst at brokerage Parbhudas Lilladher. “Sales of Discover and Pulsar will help Bajaj grow at 40%, whereas Hero Honda might grow at 12-13% for the fiscal (2010-11). This will bridge the gap between the two companies,” he said. He also said the two-wheeler industry is expected to grow at 15% this fiscal year, which could drag Hero Honda’s market share to below 50%. Bajaj’s Discover and Pulsar contributed 86% to Bajaj’s domestic motorcycle sales, which grew 53% to 632,672 units in the second quarter, outpacing the industry’s 21% rise.

    Bajaj’s total motorcycle sales grew 47% to 883,494 units. Hero Honda’s total two-wheeler sales increased 9% to 120,000 units.

    Hero Honda has dominated India’s two-wheeler industry in recent years, with models such as Splendor, Passion and Glamour helping it keep its market share at above 50%.

    “Over FY2007-10 (fiscal 2007-10), Hero Honda gained market share, benefiting from Bajaj Auto and TVS’ product failures and strong rural demand. However, competition is now rising as evident from continued retail demand for Bajaj and HMSI (Honda Motorcycle and Scooters India),” analysts Vaishali Jajoo and Yaresh Kothari of Angel Broking Ltd wrote in their report on Hero Honda’s second-quarter results. “Further, the economic improvement in FY11 is likely to be led by urban demand, where Bajaj has a better presence.”

    They added: “We see Hero Honda’s market share falling to 50% in FY2011.”

    A spokesperson for Hero Honda blamed the fall in market share on capacity constraints, adding that this would be addressed when it begins production from a new plant.

    The company is scouting locations for its fourth manufacturing facility. It conducted feasibility studies in at least 10 states over the past six months, but has not finalized a location yet, the spokesperson said.

    Hero Honda’s three production facilities are at Dharuhera and Gurgaon in Haryana and at Haridwar in Uttarakhand, with a total capacity of five million units a year.

    “Capacity constraints will continue to hamper the company’s prospects. It currently produces around 5.2 million vehicles per annum, which it can stretch to 5.8. This will not compensate for the drop in the market share,” said Arora of Prabhudas Lilladher.

    Hero Honda’s market share is also hit by the entry of Honda Motorcycle & Scooter India Pvt Ltd with CB Twister. The Honda subsidiary has sold 68,332 units in October this year as against 21,721 units in October 2009.

    The Japanese company so far played a second fiddle to Hero Honda in India, focussing on scooters. It has turned aggressive in the motorcycle segment as well.

    Honda’s India arm is investing around Rs.500 crore to ramp up its two-wheeler capacity from 1.5 million to 2.2 million units a year.

    Hero Honda is aware of the pressures. In a message to shareholders in its annual report released in September, Hero Honda chairman Brijmohan Lall conceded that “there will be greater competition and there will be greater pressure on market share.”

    Source:Hero Honda market share falls closer to 50% mark - Home -

  2. #2
    Rusted ken cool's Avatar
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    Good good; so what goes up should come down. I'm pretty happy about B.A.L
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    Rusted payeng's Avatar
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    With Honda severing its ties with Hero, Honda will also try its level best to increase its share.

    The going will be tough for Hero.

  5. #5
    Rusted madhav krishna's Avatar
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    Well now i understood why honda wanted to part ways with hero. It had already thought of such situations & hence wants to part ways in order to avoid any losses in the future.

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