Japanese automobile major Honda saw India emerge as its biggest two-wheeler market last year, overtaking Indonesia. That might be just the beginning.
Keita Muramatsu, president and chief executive officer at Honda Motorcycle & Scooter India, to Ajay Modi on the outlook. Edited excerpts:
Maruti Suzuki, a Japanese company, commands almost 50 per cent of the Indian car market. Your company has emerged the second largest in two-wheelers. Could Honda become a Maruti Suzuki of two-wheelers?
Maruti Suzuki is a very strong brand here and leads in customer satisfaction. For us, India gives a strong growth opportunity due to the changing regulations such as BS-VI emission norms. We have to hurry up and prepare for the 2020 target. This will bring a big jump in technology and quality. We are evaluating what new products can be introduced in India. This is not so easy. Customers might not care for BS-IV or BS-VI. This year, we have five million new customers. Whether they will follow us or not in future is a challenge. Being a favourite of the Indian customer is not so easy.
How is India perceived at the global Honda level? What bets are being made on India?
Quantity wise, India is now the leading market. Almost one-third of the (global) volume comes from here. Demonetisation here is also impacting Honda’s global volumes; a decline in India volume means the global volume goes down. Global Honda is also focussing on the BS-VI emission norm in India, as it is a big jump. Increasing mileage is a focus, while we want to minimise the cost of (a switch to) BS-VI. It is an R&D (research and development) challenge to tailor this for Indian conditions.
How do you see the Indian contribution change to global Honda in the future?
India is the epicentre of Honda’s two-wheeler activity. Right now, Honda gets 30 per cent from India and this is huge. We are the largest contributor. Maybe we can add another 20 per cent from India; this is not so difficult. Our market share in India is 29 per cent. In Indonesia and Thailand, the share is much higher at 70 and 80 per cent, respectively, but these markets are not growing. The Indian market is increasing and so is our market share. It might take three to five years for India to contribute half of Honda’s global two-wheeler sales. When it happens, we might sell eight million a year in India. We might have to set up another factory if the market continues to increase. We have not taken a decision.
In India, almost 60 per cent of your volume comes from scooters, while motorcycles remain a smaller contributor. What are your plans for motorcycles?
We are expanding motorcycle sales but scooter growth is much higher. Therefore, it looks like motorcycles is not growing for us. We try to push motorcycles but the customer demands more and more scooters. We have maintained our 14 per cent share in the motorcycle segment and focusing on rural markets. Our motorcycle penetration is not strong but you will see us emerge stronger.
You also see India emerge as an export hub for Honda?
There is a big opportunity for us to do so for two-wheelers. Low cost, high quality and standard regulation (on migrating to BS-VI) will give us an edge over Honda two-wheelers made in any other country. We can make global models here for the local and export markets.
How do you ensure that profitability is maintained as you grow market share?
Fortunately, our profitability has been intact. We have increased capacity, manpower, dealer network and model line, and are not borrowing any money from Honda. We are a debt-free company as well.