In rural gambit, Honda drives into used 2-wheeler business

Honda Motorcyle and Scooter India Pvt Ltd has aimed for nothing less than the top spot in the Indian two-wheeler market within the next 10 years.

The Japanese giant has already started taking baby steps in that direction.

Besides gearing up for entering the mass market 100cc bike segment the company also plans to enter into second-hand two-wheeler market, the first of its kind venture by a player in the segment.

Naresh Rattan, head of operations (sales and marketing) said as part of a pilot study, the company has set up five ‘Best Deal’ outlets in Bangalore, Delhi, Thane, Ahmedabad and Punjab.

“We want to study how to reach the customers who are currently not able to buy Honda products. We will be refurbishing the products and also offering a six-month warranty, knowhow, spare replacement, branding, etc,” Rattan said.

Honda has similar operations in Thailand where it has a separate factory that refurbishes old bikes for second-hand sale.

Rattan said in India too if they are able to achieve high volumes in this market they might consider a plant that will cater to refurbishment of two wheelers.

Honda hardly has a presence in the rural market now — nearly two-thirds of its sales come from the urban areas.

“Entering the second-hand market will help us penetrate the rural areas, it will also help us retain customers. There is no need for Honda to get into this business but we want to learn from the business model and we are serious about it,” Rattan said.
Abdul Majeed, automotive practice head at

PricewaterhouseCoopers, said the second-hand market has been a successful business model for four wheelers so far.
“I was expecting this move to happen in the two-wheeler space as well. What Honda is trying to do here is get into the nook and corners and not only create a brand but also get closer to the customer.

In the two-wheeler segment it’s important to be present in the Tier II and III towns and that is what Honda will do now by intensifying its distribution network there. It is only a matter of time when the other two-wheeler manufacturers also enter the second-hand market,” said Majeed.

Honda will close this financial year selling 16.5 lakh units and plans to sell 27% more, or 21 lakh units, in the next fiscal. Of this, 45% will be contributed by its Activa scooter and 20% by Shine.
  
According to industry data, entry-level motorcycles with 100cc-125cc engine capacities comprise more than half of the over 9 million motorcycles and scooters sold in India each year.

The two-wheeler market is poised to grow to 20 million by 2020 and Honda aims to have a 33-35% market share in the growth, this also translates into a vast pool of customers for its second hand bike market venture. Until January 2011 Honda has sold 70 lakh units over a decade of its operations in India.

In its scooter category Honda sells Activa (110 cc), Aviator (110 cc) and Dio (102 cc) and in bikes its portfolio consists of Shine (125 cc), Stunner (125 cc), Unicorn (150 cc), Twister (110 cc), CB 1000R, CBR1000RR and VFR1200F. HMSI bikes are at premium compared with its peers in the respective categories.

For its 100 cc bike, which will be launched next year and will be developed in Japan, Shinji Aoyama the outgoing president ad chief executive officer said the company can use its CB Twister engine (110 cc) and also choose from the wide range of Hero Honda products.

“Hero Honda engines are old so if we plan to use them we would have to improvise upon them,” he said.

Also in the works is the finance arm of the company. Rattan said talks are on with Indian banks to form a joint venture in order to set up a NBFC.