By R Jagannathan
The big story in the Indian two-wheeler industry is that Honda is rising. And it looks pretty unstoppable. It has already overtaken TVS Motor as No 3 in marketshare, and is pushing hard to become No 2 this year. Nobody has any doubts that the Japanese two-wheeler major has its sights on No 1.
Though both Hero, the current No 1 by far with a 56 percent marketshare in mobikes, and Bajaj Auto, the No 2 with a 26 percent marketshare, are talking bravely about holding their rankings, they are taking action to redefine their strategies to accommodate the fact that Honda will be a much, much bigger presence in India. It is only a matter of time, given it huge lead in technology.
Both Hero and Bajaj are now seeking growth outside India in third world markets to compensate for what they may lose in India.
In an interview to The Economic Times, Hero Motocorp Managing Director and CEO Pawan Munjal said as much: “Yes, whatever we make from now on, will be designed keeping in mind global markets and customers. We have very little exports right now – only to neighbouring markets and to Columbia. We intend to enter new markets in Central America by the end of June and following that would foray into the East African markets.”
Rajiv Bajaj, boss of Bajaj Auto, expressed the same idea in strategic terms to the same newspaper last month. “Should I make many products for one market, make one product for all markets or make all products for all markets? I think what works is staying in one space and trying to dominate the world. That’s how you specialise.”
Translated, Bajaj is probably trying to say that he will build volumes by taking one product – like the successful Pulsar brand – global rather than just trying to be No 2 by making many kinds two-wheelers in India.
A Standard Chartered Equity Research report on Hero and Bajaj says export is the way to go. “We expect HMC (Hero) and BAL(Bajaj) to report a 25 percent export CAGR (compounded annual growth rate) over the next five years, driven by the strong export potential and core competencies, by when exports should account for 40 percent of BAL’s and 7 percent of HMC’s total two-wheeler volume.”
Well, they’d better hurry. Honda is the next big camel in the Indian tent, and its not big enough for all three.
In March, Honda, which sells two-wheelers through Honda Motorbike and Scooter India (HMSI), briefly went past Bajaj’s numbers (2,12,812 to 2,10,383) even though Bajaj will be ahead in the whole year’s numbers. To which Rajiv Bajaj was said to have told one newspaper, “One swallow does not make a summer.”
But he is already making headway in exports with nearly a third of his sales coming from abroad.
The writing on the wall is clear. To accommodate Honda’s growing ambitions in India, the Big Two of India’s two-wheeler industry have to go global with a vengeance.