It is Hero Honda vs. Honda now!

Honda Motorcycles and Scoters Ltd (HMSI) the fully owned Honda subsidiary, is now relatively small player in Indian motorcycle market with 14 percent share, selling mostly large engine capacity bikes. It also sells more scoters than bikes and it’s Activa scoter is a run away success.

This is changing fast. For, HMSI is taking on its own long-term partner in India, Hero Honda (In which Honda has 26 percent stake) and in the latter’s key area of dominance, the 100 cc mobike market. The Honda company is working on to get in to the same segment and hopes to get the market capture quickly, with it’s focus on quality. HMSI wants to make sure, the bike sales is more than its scoter sale. Which would be a big change from its current mix, where scoters are 65% of its entire sale.

It is quite evident that, this entry might give a sleepless night for Hero Honda, which enjoys 80% of the market share in 100 cc segment. And this segment also accounts about 60% of Hero Honda’s entire sales.

At the moment, both the players are not affecting each other and infact both are eating in to Bajaj’s market share. Recent data shows that Hero Honda’s sale was up 24 percent (Decent job considering the current economy and one of few companies who reported Q-o-Q increase in sales, how they did it is pretty interesting) and HMSI reported a jump of 14 percent.

Quite interesting!

Actually this is a clear example as how transparency works for benefit of both the parties. Each other are not affected because they know which segment they are targeting. Also, two companies have a committee which knows in advance what the other is planning to launch in India market, so that clashes can be avoided.

Notable point is 100 cc market has many segments and they would operate in areas where their partners do not. If we divide 100 cc segment in to parts starting from entry level to deluxe level, there is potential in every segment. And HMSI and Honda have clear demarcation as who will be in which segment. This helps to avoid competition among them selves and thus they are eating on Bajaj’s market share.

Personally speaking, there is lot of learning in this strategy if I apply this to our business operations. And I guess, we are in middle of similar situation and we need to appreciate moral of this strategy and see how all will be benefited.