Hero Honda Motors could be gearing up to take fight to the competitors’ court by launching its third bike in the 125 cc segment soon.
Hints of a three-bike race in the offing
MUMBAI: Hero Honda Motors could be gearing up to take fight to the competitors’ court by launching its third bike in the 125 cc segment soon.
With the Glamour and Super Splendour, Hero Honda already lays claim to 40% of the executive segment of bikes.
If it does come up with a brand-new product, there would be flutter in the segment that is seeing Bajaj Auto and TVS Motor already fighting for supremacy with their respective new launches XCD and Flame in this space.
Any new product in the 125 cc space would heighten competition. Bajaj Auto, with its XCD, has thrown the gauntlet. TVS Motor unleashes Flame in November to join the fight.
With festival season round the corner, will Hero Honda unveil a trump card?
Anil Dua, vice-president, marketing & sales, Hero Honda, said the company does not comment on future launches.
He said Hero Honda has shrugged off the current industry slowdown by consistently logging far higher volume growth than the industry average over the last few months.
To sustain the momentum in the second half of this fiscal, Dua said, “the company will keep up with its policy of bringing in new products while, simultaneously maintaining lead in the existing segments.”
Already, 12 new products have been launched by the company since April last year.
Shrugging off suggestions that the entry-level, 100 cc bike segment was pulling down the entire market, Dua said:
“Others may think that the 100 cc segment is declining but we do not agree; 100 cc still accounts for about 2/3rd of the entire market and of our total sales.”
He also pointed out that not only in the entry-level and executive segments, Hero Honda has “doubled market share in the premium segment also since the launch of CBZ Extreme last October. Overall, we continue to enjoy over 50% market share.”
Analysts said despite Hero Honda’s good showing on the volume front, margins have shrunk over the last few months on increase input costs.
In a recent analysis, Morgan Stanley’s Balaji Jayaraman has projected a fall of 11.9% in adjusted earnings for Hero Honda during the September quarter despite an increase in overall revenue by 5.3%.
“We expect operating margins (of Hero Honda) to decline by 170 bps to 11% versus last year but improve by 20 bps from last quarter’s 10.8%. This reflects higher raw material costs and higher subvention/discounts versus last year.
Sequential margin improvement is driven by benign commodity prices and lower staff costs, partially offset by higher advertising/promotion expenses,” Jayaraman said.
It is pertinent to note that during the same period, Bajaj Auto’s earnings are expected to also similarly fall by 11.8% but this is largely due to a decline in overall sales volumes.
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