Feb. 14 (Bloomberg) -- Honda Motor Co. is seeking to quadruple motorbike and scooter sales in India by 2020 and overtake former partner Hero MotoCorp Ltd., as rising incomes in rural areas boost demand for personal transportation.
Honda plans to introduce a two-wheeler model every three months and expand its dealerships to reach about 10 million in sales, or a third of the 30 million-unit market by 2020, according to Tatsuhiro Oyama, senior managing officer in charge of motorcycle operations. The Tokyo-based company’s Indian deliveries rose 40 percent last year to 2.52 million units.
“We want to be number one in every market we are in, its unacceptable at the company to not be number one,” Oyama said in an interview in Tokyo on Feb. 12. “When wages go up, motorcycle sales directly get a boost.”
Honda, which ended a 26-year-old joint venture with Hero in 2010, is banking on a lack of public transportation in rural areas to boost demand for motorcycles and scooters among the country of 1.24 billion people. Competition is intensifying as Hero, Bajaj Auto Ltd., and Yamaha Motor Co. roll out new models to attract buyers.
Honda had about 18 percent of the Indian two-wheeler market last year, overtaking Chennai-based TVS Motor Co. to become the country’s third-largest two-wheeler maker, according to data from the Society of Indian Automobile Manufacturers. Hero is India’s biggest motorcycle maker with a 43 percent share of the market.
“The long-term growth prospects in the two-wheeler industry in India remain intact as there is strong demand due to the low penetration in the market,” said Ashwin Patil, an analyst at LKP Shares & Securities in Mumbai. “Honda has already dethroned TVS and is giving Bajaj and Hero stiff competition.”
Honda has introduced at least seven new models since it parted ways with Hero, which has added four new models. Bajaj, India’s second-largest motorcycle maker has rolled out at least five in the period.
Last May, Honda introduced the 44,657 rupee ($830) 110-cc Dream Yuga motorcycle to compete with Hero’s 42,250 rupee ($785) 100-cc Splendor, which was built using the Japanese company’s technology. Honda plans to add another model this year in the same segment, which makes up about half of the industry, Oyama said.
The company also plans to increase the number of dealerships from the 1,653 it currently has in the country, Oyama said, without giving a target.
A new factory in Bangalore, southern India, will open this April, expanding Honda’s total production capacity in the country to 4 million units a year. Depending on demand, an extra line may be added at the factory to boost capacity to 4.6 million units, Oyama said.
Oyama expects sales to grow “by at least 1 million units” with the new factory in the year ending March 2014. Honda will decide on its next factory investment in “about a year and a half’s time,” he said.
Industrywide sales of two-wheelers will probably outpace the auto association’s estimate for 5 percent to 7 percent growth to 14.4 million units for the year ending March 31, he said.
India doesn’t limit the number of new vehicles allowed on the road, which creates greater potential for growth, Oyama said. “Our battleground is right here, and demand for motorcycles will further accelerate.”
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