Hero MotoCorp, the world’s largest two-wheeler producer, has completed its rebranding exercise, pulling out the Honda name from its entire product range, two years ahead of the agreed deadline.
Most of its 3,000 sales and service outlets and some of its major products have switched to the new branding conceptualised by London-based Wolff Olins. This was preceded by months of aggressive brand campaigns, including a new catchphrase — Hum Mein Hai Hero — replacing the earlier Desh Ki Dhadkan.
However, more than 12 months after the exercise kickstarted, most buyers walking into Hero showrooms are still confused as to why the Honda name is missing on the two-wheelers, according to reports from at least two brokerage houses.
The impact may have been reflected in Bajaj Auto’s claim on Wednesday that Discover has overtaken Hero’s flagship Splendor for the first time ever in September. Hero has however refuted this, saying Splendor, which contributes to 35 per cent of its total sales, still retains the top spot.
But analysts say Hero is indeed feeling the impact of the brand change. During a recent field visit to a few dealerships, analysts from Antique Stock Broking said they found a certain amount of customer discomfort. “We understand from Hero dealers that after the company has dropped the ‘Honda’ tag from the Splendor Pro and Splendor Plus, conversions (from enquiries to actual sales) have been impacted by 5-10 per cent”, says the Antique report.
Another report from Spark Capital said “our recent channel checks suggest some amount of customer discomfort, particularly in the north and the west.”
The slackening of consumer confidence comes at a time when almost every two-wheeler manufacturer in India is pushing for a bigger pie of the domestic market where Hero commands a 44 per cent share.
The Antique report further adds, “interestingly, some dealers also said that in smaller towns, people still commonly refer to Hero bikes as ‘Honda ki gaadi’. We were aware of this phenomenon prevailing much earlier, but assumed that it had diminished substantially over the years”.
Market watchers say unlike in the West, the Indian market is still only in the developing stages and any changes in traditionally trusted brands could also mean loss in clientele.
Harish Bijoor, chief executive, Harish Bijoor Consultants, says, “The two-wheeler market presently is very dissipated. Any reorganisation of brand takes time to percolate down. A divorce (of brands) is not very well understood in a growing market like India. It is certainly a challenge for Hero and it will need to address this well as the power of two companies has now gone down to one”.
Though the market leader readies itself to pump funds into enhancing production capacities, sales of its largest selling model Splendor have actually been going down for some time. According to a production schedule of Hero, it intended to make only 93,000 units of the Splendor 100cc in September, down from the levels of 225,000 units three months ago.
Splendor is the bread and butter model for Hero and has been riding high on its promise for ultra-high fuel efficiency levels of around 70-75 km/litre. Over the past few months, newer models such as Bajaj Discover, Honda Dream Yuga and Twister, Suzuki Hayate, TVS Star City and Jive have been launched in this segment.
According to Hero dealers, the inventory days with them has gone up to 45 days, which analysts say, is unusual during this part of the year. The onset of the festive period kickstarts demand growth for two-wheelers bringing down the inventory days to about 20-25 days.
A Hero MotoCorp spokesperson says, “As already stated, owing to the slowdown in the market, we have adjusted our production plans. However, we will ensure that there is sufficient stock available at the dealerships to leverage the high retail opportunity that comes with the festive season. All our brands are in good health, and we have a robust communication plan leading up to the festive season.”
The Delhi-based company, which has 18 products in its line-up, recorded its second straight fall in monthly sales in August. The year-on-year fall in sales in July for Hero was a first in 26 months. The last such fall was in April 2010.
Domestic sales of Hero MotoCorp fell by 26 per cent in September to 404,787 units as compared to the same month last year when it was 549,625. The company’s share in the local market till August had fallen to 43.78 per cent from a high of 48 per cent recorded in March 2010.
As per market watchers, a majority of 100cc bike buyers especially that of Splendor have veered towards gearless scooters commanded by Hero’s former partners Honda. As per SIAM numbers the scooter segment has grown to 1,167,726 units, recording a growth of 23 per cent during April-August even as the two-wheeler industry recorded a growth of just 7 per cent.