Hero Honda sees new models spurring sales

NEW DELHI: Hero Honda Motors Ltd is well on course to improve its sales through new models but marketing costs will rise, a top executive said on Thursday.

Motorcycle sales in India have been falling after the central bank raised interest rates five times since June last year to control inflation, which hit a two-year high in January.

But Hero Honda’s market share rose to more than 50% in April from about 47% eight months ago, Anil Dua, head of sales and marketing, said.

“We have bucked the trend so far and we will sustain the growth momentum. Market share and topline growth will remain our priority this year also,” he said. Dua said sales of Hero Honda, in which Japan’s Honda Motor Co and the Munjal family each own 26%, grew 2% in March when the industry shrank 2%, while in April they rose 5% against a 5% overall decline.

He said he expected this trend to continue in May. The firm’s sales growth came at the cost of margins, which contributed to a 27% fall in net profit in the January-March quarter due to high input costs and competition.

Analysts say marketing expenditure has hit margins but Dua said spending on such initiatives would increase this year. Dua said the firm’s new plant, which will be commissioned this year in Uttarakhand, will boost margins because of tax breaks.

The plant with an initial capacity of 500,000 units, which will double in 200809, may account for 30% of overall earnings growth, a Morgan Stanley report said.