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Hero Honda says no to joint marketing from HMSI

Hero Honda is undeniably the market leader in the 100cc space with over 50% market share in this segment. It is an equal joint venture between the Hero Group and Honda Motor Company; HMSI is a wholly owned arm of Honda and operates as a distinct entity. Speculations have been on the rise about HMSI's imminent 100cc entry creating unnecessary competition for Hero Honda.

Clearing the air about the same Mr. Pawan Munjal, managing director, Hero Honda, said "We are trying not to compete head on while designing (the new 100cc bike) but obviously we cannot avoid some cannibalization. It will happen. The two-wheeler market in India operates in a very narrow band of 100-225cc at best. So differentiation is quite difficult anyway. Even within Hero Honda, model range differentiation is very difficult".

He added that through a model committee, which comprises representatives of all Honda group companies in India, Hero Honda is trying to avoid competition (among group companies). But to a question on whether Hero Honda and HMSI would collaborate on the marketing and distribution front, Munjal replied in the negative.

"We have no plans to do any joint marketing or joint product distribution. But yes, we do discuss production capacity and supply chain synergies with HMSI." In fact, when Hero Honda was using only some of its installed capacity at the new facility in Haridwar last year, Munjal said he offered to make some of HMSI's bikes there!

And though he did not elaborate on supply chain synergies, vendors point out that Honda is already looking to source "common, standard" parts used in the Hero Honda Splendor for the new 100cc bike from HMSI. One of their key parts suppliers said "We have been told that many parts such as body and engine parts would be common for the Splendour and the new Honda 100cc.

This way, Honda wants to keep the costs down and also arrive at standardization of key parts faster. But not all HMSI suppliers supply to Hero Honda as well. So obviously the production synergies Hero Honda is talking about may be slightly difficult to achieve".

In addition to this, HMSI is aiming at an initial production volume of about 2 lakh units for the 100cc bike, which is slated for launch early next year. Its volume expectations indicate that the bike won't make an immediate dent in the 100cc universe, where Hero makes and sells many times more already.

[Via: Infibeam]