"We cannot supply enough to dealers and customers so we need to increase capacity for scooters"

HMSI’s chief speaks to Shobha Mathur about the new 125cc Activa, the new Gujarat plant and market competition.

HMSI has announced that its fourth plant in Gujarat will make mainly scooters. With TVS also unveiling an automatic scooter with AMT, do you feel the competition is hotting up?
In the long run, I think there will be an increase in the market especially for scooters. Currently, we cannot supply enough to dealers and customers so we need to increase capacity for scooters. A portion of female customers for scooters has also increased and as we expand our dealer network, the availability of scooters will also increase. Secondly, competitors here compared to other segments are also higher. For now, we are just considering how to improve our scooter mileage, quality and technology.

Will the Activa series be the first model to roll out from the Gujarat plant?
It will be mainly the 110cc Activa that will be made at Gujarat. We are still working out and will finalise by April the plan for producing the 125cc Activa. Depending on demand, we are flexible enough to make it anywhere that it is required.
At present, we have been able to bring down the waiting period for the Activa in some pockets of the country to two weeks. We do have capacity constraints as we still have 70,000 back orders for automatic scooters. This is the main segment of the scooter market which is booming.

Will you also look at making motorcycles in the new plant?
The Gujarat plant will have a total capacity of 1.2 million units per annum, which will increase step by step starting with 0.6 million. Making motorcycles in Gujarat will depend on the market situation. In the next two years, we will try to reach full capacity in our fourth plant. Our existing three plants have a total capacity of 4.6 million per annum.

Suzuki has rolled out its new engine technology that rivals the Honda Eco Technology. Will we see a follow up on HET this year?
We are improving our quality and technology. Honda is trying to satisfy its customers. We are not considering any competition now but are focusing on what we shall do technology-wise and dealer network-wise.

The technical centre at Manesar was to innovate new technologies and increase localisation? What is it currently working on?
HET is an umbrella and not just one technology for scooters. We started HET first with scooters and then motorcycles but the end results and deliveries are different — 60kpl for scooters and 74kpl for motorcycles.
The technical centre team along with the R&D centre’s Honda team and the design and purchase teams are working on how to innovate to increase mileage further, not only in the Dream series or in scooters but in the entire product range.

What is the next target in terms of raising the mileage bar further? Rival scooters are delivering 63kpl upwards.
Honda never talks of the ARAI mileage or our homologation certificate mileage. On our ARAI certification, the mileage is much higher than 60kpl but that is not what the customer will get actually in city riding conditions. Honda believes in doing what it says and delivering what it says.

Are all HMSI’s new models at the Auto Expo HET-based?
Depending on the new development, existing models maybe changed several times. In that case, we will try to change the new engine under HET. At present, not all of the new models unveiled are based on HET but one by one we will change the engines.

Which of the new forthcoming models will be based on the HET?
We will do it, one by one. The Dream Yuga at first did not have HET; it got the tech after the Dream Neo. R&D activity revolves around how we transfer the technology under this umbrella to increase the mileage of even the existing line-up. So, maybe in future, in our new refreshes you will find some mileage increase.

Do you think both the Dream bikes are adequate to take on competition in the mass commuter bike segment?
It is not so easy to expand our brand and model awareness in the Dream segment, especially for the rural customer — they still understand the competitors’ models. Now we have entered the rural market but don’t have much of a network in this region and are now gradually increasing it as our rural customers are also increasing.

It is just two years since the Dream Yuga and Dream Neo were launched and it will take maybe 1-2 years for their brand awareness or model awareness to increase. At the same time, we have to expand our dealers and customers. Then we have to expand our customer care functions as well.

Will you be adding another sibling to the Dream series?
I understand what you say but I cannot say (confirm).

Honda has just launched its 125cc Activa. Do you think it will cannibalise sales of the existing Activa?
Yes. Currently we have a large customer base and some people will choose the 125cc Activa next time. Every time the product line increases, some portion will be cannibalised. But there are new customers coming and new entrants may choose the Dio or the 110cc Activa and some may choose the 125cc Activa.               There are some customers who want to upgrade but don’t have a choice and there are many families where the Activa is the third or fourth scooter. So they may think why not go in for a new-technology Activa. So we are looking at the replacement segment and also some male customers who are looking at higher power and pickup.

Honda was also looking at developing a low-cost, two-wheeler model below 110cc. How affordable can a Honda model get?
There is still no plan to go below 110cc.

How do you plan to grow your presence in the rural markets?
We want to expand our dealer network. Our major focus of network development will be in rural markets and we will be building on the after sales capacity as well as with service bays and service parts in urban areas. We have a customer base of over 15 million and we need to be closer to new customers in Tier 3 towns and rural areas for selling new products.

What will be the direction of your exports strategy?
We need orders from outside and, of course, we want to increase our exports. We already export to 26 countries.

Honda also had plans to assemble higher-powered bikes in India. Hero MotoCorp has showcased its 620cc super premium bike.
We have already announced the 250cc bike. Honda has a big global network with many big motorcycles but possibly I would like to try the CBR 650cc, four-cylinder motorcycle and would like to bring it in CKD kits. But we have not decided where we will make it as we have three factories already.