Honda vs Hero: Will you pick Dream Yuga or Splendor?

Sales of motorbikes, a family vehicle for millions of Indians, outstripped car sales by five to one in the last financial year, partly helped by high interest rates and fuel costs that pushed up the price of automobile ownership. But who’s taking the advantage? The Mobikes!

After Bajaj Auto launched Discover 125 Sports Tourer (ST) on Monday, Honda, on Tuesday, announced plans to focus on mass volume bike segment by launching its cheapest bike : 110cc motorcycle Dream Yuga, priced at Rs 44,642.

Honda has made its debut in the commuter bike market with its 110 cc mass, after breaking away from the 27-year-old joint venture with Hero.

Honda’s launch of the Dream Yuga is expected to stir up the bottom end of the two wheeler market and challenge the supremacy of erstwhile partner Hero Motocorp.

Although Dream Yuga is Honda’s cheapest motorbike worldwide, with a starting price of Rs 44, 642, the bike costs Rs 2,500 more than the entry level Splendor NXG, the current market leader.

So, will Honda’s strategy of pricing its Dream higher than the market leader, Hero Motocorp’s Splendour pay off?

The high-end version of Dream Yuga too with a self-start and alloy wheels would cost Rs 48,125 or Rs 3,000 more than Hero’s Passion Pro. Even Bajaj Auto’s recent offering the Discover 100 is priced lower. The Japanese giant seems to be betting on the Honda legacy to extract a premium but analysts feel the pricing could be a let down.

“Frankly, no company can survive only by increasing volumes. We need to have operating margins to be a healthy and profitable company,” Yadvinder Singh Guleria, VP & Operating Hd - Sales & Mktg at HMSI told CNBC-TV18.

“Dream Yuga is very competitively priced bike. First time we are entering into the mass segment. Dream Yuga comes with perfect combination of power, performance and economy - which customers of this segment are looking for. Its 110 cc engine gives a mileage of 72 km/ltrs,” Guleria said.

Honda is confident and hopes to sell up to 3 lakh units of its new bike by the end of the fiscal year. It also expects India’s contribution to its total global revenues to more than double to 30 percent from the current 13 percent in the next eight years. HMSI is also ramping up production to 4 million units in the next 12-18 months from 2.8 million units at present.

“India will be the most important market and will continue to be in focus for the next 10 years,” said Yadvinder Singh Guleria, marketing head for Honda India. He added that Honda expected to boost exports from India to 150,000 two-wheelers in the year to March 2013 from 111,000 the year before.

Honda will hike production of the Dream Yuga based on the response it gets. But with a price higher than the competitive price, will it get enough response?