HMSI ties up with Shriram Automall to sell pre-owned two-wheelers

In an exclusive tie-up with Shriram Automall India (SAMIL), two-wheeler major Honda Motorcycle & Scooter India (HMSI) has decided to increase its penetration of the pre-owned two-wheeler market in India. The market of second-hand two-wheelers in the country is currently pegged at 50 percent of new two-wheeler sales. 

In December 2014, new two-wheelers accounted for sales of over 12 lakh units in the domestic  market which translates into 600,000 pre-owned two-wheelers a month. Only 10-15 percent of this number falls into the organised sector, with the balance constituting unorganised sales.

HMSI has, over the past two years, established about 60 pre-owned outlets under the best Deals brand name and sells about 20,000 units per annum. Now, with the partnership with SAMIL, it is moving a step forward. Honda outlets will now act as a one-point contact for customers.

While the Best Deal outlets will exchange the old Honda vehicle and, after refurbishment and certification, offer it to a used-vehicle buyer, the tie-up with Shriram Automall will enable two-wheelers of other brands to be also sold at Shriram Automall and be replaced by new Hondas. The old Hondas will be refurbished at the new look refurbishing facility at various Shriram Automalls and sold at the Automalls in 40 cities to start with, expanding to a pan-India presence in three years. Funding will also be made available by Shriram City Union, the finance arm of Shriram.  The partnership is looking to sell 350,000 used two-wheelers in three years.

YS Guleria, vice-president (sales and marketing), HMSI, says that the potential of growing the pre-owned two-wheeler business in the organised market is huge and hence the tie-up with Shriram Automall, a 100 percent subsidiary of Shriram  Transport Finance Company, which has been funding purchase of old vehicles, mainly CVs, for the past four decades.

Shriram Automall currently sells used CVs, passenger cars, tractors and construction equipment and is now entering the used two-wheeler segment. Of its current topline of Rs 1,500 crore that accrues from selling 80,000 used vehicles annually, 40 percent is contributed by CVs, 25 percent by passenger cars, 15 percent by construction equipment and 15 percent by agricultural tractors.

“We expect 4-5 percent of the business to come from used two-wheelers for us in this fiscal,” said Sameer Malhotra, CEO of SAMIL. He is optimistic of clocking sales of 100,000 units this fiscal, growing by about 30 percent annually. SAMIL will charge 4 percent as fees for selling the non-Honda two-wheelers from the seller and 1 percent from the buyer as its charges. Furthermore, it will scale up from the current 44 Automalls to 60 by end-2015.  

HMSI, similarly, is looking to expand its Best Deals outlets to 100 within a year where up to 10- year-old two-wheelers are sold with a six-month warranty.

Cited as a first-of-its-kind tie-up by both partners, Shriram will take care of all documentation of inventory and insurance services for used two-wheeler buyers. Prior to entering this agreement, the partners have conducted pilot projects at five different towns and have sold 200 used two-wheelers.

With the product retention period for two-wheelers reducing, the pre-owned business is considered to be a growing market and with the tie-up with Shriram Automall , Honda expects a faster growth in the organised pre-owned segment. Customer convenience, hassle-free transactions, on-ground events for physical bidding besides online bidding, private treaty and a one-stop classified kiosk at the Automalls are expected to pull prospective buyers. In 2014, SAMIL conducted 4,000 online bidding events. In addition, Shriram Automalls will offer the touch-and-feel option before the final purchase. A new sales paradigm in the Indian two-wheeler market has begun.