Honda to harness distribution network and customer base of two-wheeler unit to expand car sales

NEW DELHI: Honda Motor is looking at harnessing the distribution network and customer base of its two-wheeler business to push car sales in India, as the Japanese company seeks to double its share in an automobile market dominated by Maruti Suzuki and Hyundai Motor.

In major markets globally, the Japanese automaker manages two- and four-wheeler businesses under one company. In India, where Honda entered in association with different partners — SIEL for cars and the Hero Group for twowheelers — it has separate units to handle the two. Shinji Aoyama, who held the reins at Honda Motorcycle & Scooter India (HMSI) at the time when Honda and Hero ended their joint venture in 2010, is currently the chief officer (Asia & Oceania) at the parent and the man behind the latest move.

The aim is to reach the double-digit mark in the Indian market share in the next five years, Aoyama told ET. In the April-June quarter, Honda’s share was a mere 5.3% in the Indian passenger car market, where Maruti sold one in every two units. It was the fifth largest manufacturer during the three-month period, behind Maruti, Hyundai, Mahindra & Mahindra and Tata Motors.

With two-wheeler operations in India bringing in strong growth, the emphasis for Honda is to turn around the automobile business, Aoyama said. Collaborating with two-wheeler dealer partners, the company expects, will help it expand quickly to rural markets, which bring in nearly a third of volumes for Maruti.

“I think we can collaborate more as far as dealer network is concerned. HMSI dealers (who) sell with profit can reinvest in Honda’s automobile business. This is (already) happening. We will accelerate this momentum,” Aoyama said. “For automobiles, personally, I have to focus more on the business … our position is still (in) a single-digit. I want to make it double-digit … it is a very difficult task. In five years’ time, I want to realise this to 10%.”

HMSI has been rapidly growing its distribution network, and has a total of 5,379 dealer outlets, branches and sub-branches. Honda Cars has 348 sales outlets in 233 cities. For Honda, the twowheeler arm in India has been a major success. In the seven years since Honda separated from the Hero Group, it has become the largest scooter manufacturer and the second largest motorcycle brand in the country. HMSI commands a 30% share in the local two-wheeler market.

Work is also in progress to examine the possibilities of tapping into the two-wheeler customer base to buoy car sales. “That can be a possibility, a collaboration between the subsidiary of two-wheelers and the subsidiary of automobiles.”

Conceptually, it is a great strategy to leverage the two-wheeler distribution network to expand the reach of the four-wheeler business, said VG Ramakrishnan, managing partner at consultancy firm Avanteum Partners. He added that it would be trickier for Honda to tap into the two-wheeler customer base to bring in incremental volumes.

“Suzuki could not replicate Maruti Suzuki’s success in its two-wheeler arm as others like Hero and Honda were already offering products with strong value proposition. Given the strength of the Honda brand, the company would be able to bring in incremental volumes. It can be complementary, but not a core strategy for doubling market share,” he said.

Two-wheeler sales at HMSI increased 10.3% to 4.73 million units in FY17. The target is to add a million customers in FY18. Honda Cars’ volumes, declined 18% to 1,57,313 units in FY17. It rose 21% to 38,562 units between April-June 2017. With sales of 57,984 units, flagship City accounted for more than two-thirds of the sales last fiscal. Compact cars Jazz, Amaze and WR-V brought in another 72,305 units.

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