Honda Motorcycle & Scooter India (HMSI), the Indian arm of two-wheeler major Honda Motor Co, has begun 2013 with a bang. Close on the heels of announcing handsome growth in December 2012, the company made two major announcements in January – the opening of its state-of-the-art technical centre in Manesar and the surprise launch of its 2013 scooter model range, all powered by the new Honda Eco Technology which aims to enhance fuel efficiency by 11 percent.
In a bid to reduce costs and make its two-wheelers more affordable and fuel efficient for customers, HMSI is also mulling local assembly operations for its higher-capacity motorcycles – VT1300 CX, CBR1000RR, CB1000R and VFR1200F on a priority basis.
These superbikes are currently imported as completely built units (CBUs) from the Honda Italia factory in Europe and are priced between Rs 10-17 lakh. In future, the manufacturer is exploring options of local assembly and production of both the existing models as well as new bikes ranging between 500cc-1300cc. At present, HMSI does not have any 500cc-engined family bike in its product portfolio and therefore this premium bike would be a new addition, says Keita Muramatsu, president and CEO, in an exclusive interaction with Autocar Professional.
Going forward, many more models in this segment will be brought to India. These initiatives will help shore up customer demand for these superbikes though Muramatsu does not place a time-frame for this.
“Customer demand is just not increasing. The challenge will be on how to guarantee the same quality if we assemble and produce them locally as the 1000cc bike clocks speeds close to 300kph and has to go through several checkpoints. At present, the quality guarantee comes from our Japanese factory in Italy. These will not be easy to manage in our Indian factory. Here we can consistently try to maintain low cost in terms of assembly but quality-wise it is not so easy,” he clarifies.
These large premium superbikes together account for sales of around 100 units annually for Honda and the company does not expect too much of a radical change in volumes in the immediate future. “The road infrastructure (in India) poses a constraint for two-wheeler enthusiasts,” adds Y S Guleria, operating head (sales and marketing), HMSI.
All-new Tech Centre is a one-stop shop
That the company is serious about making its products low cost and more environment-friendly is underlined by the fact that HMSI recently inaugurated its Honda Technical Centre (HTC) at Manesar that will facilitate development of vehicles and parts from scratch. With local development, customers will benefit from a low price and increased mileage from the newly introduced Honda Eco Technology (HET).
The new eco-friendly and fuel-efficient technology for India, jointly developed by Honda R&D Japan and Honda R&D India, has been leveraged in developing the latest avatars of the popular Activa as well as the Dio and Aviator scooter models. While the Activa is priced at Rs 47,188, the Dio costs Rs 44,701 and the Aviator Rs 48,212 for the standard variant and Rs 53,531 for the premium model (ex-showroom Delhi).
At the crux of the HET is reduced friction, improved combustion and optimised transmission of the 110cc Honda engine. The technology combines the increased cooling of the engine for improving efficiency as well as the highly ignitable nickel spark plug for improved combustion and performance enhancement.
HET has stepped up the fuel efficiency of all these three models to 60 kilometres per litre (kpl) from the existing 54kpl. Honda says HET will be leveraged to develop four new models at the tech centre for catering to the India market, one of which will be a 100-110cc low-cost motorcycle on the lines of the 110cc Dream Yuga commuter bike.
Gauging by the success of the Dream Yuga that has notched sales of 200,000 units in just eight months since its launch, more models are required to bridge the gap in the mass commuter segment.
At present, the Dream Yuga has a market share of five percent in this category where families are the top buyers and the company is targeting sales of 300,000 units of the model in this fiscal. Hence, another model that will be lower priced than the Dream Yuga is visualised to take on the battle right into the enemy camp (read Hero MotoCorp) and is currently under development at the technical centre. It will be launched during 2013-14.
Since the Dream Yuga costs around Rs 44,657 (ex-showroom Delhi), the new model is expected to be priced between Rs 30,000-40,000 to compete against its former JV partner Hero MotoCorp's HF Dawn which has a boa constrictor-like hold over the market with a 70 percent share.
HMSI has already made known its plan of launching a new model every quarter starting January (excluding the three scooter models launched on January 17) this year and going upto March 2014. The indigenously developed models will form part of the scooter and motorcycle juggernaut to stave off aggressive competition in the two-wheeler market.
Shorter time to market
For the first time, Honda will have combined R&D operations focusing on the domestic market. The technical centre will facilitate development in a short duration and will be in line with Honda’s global slogan for 2020 to provide good products to its customers for speed, affordability and low CO2 emissions as well as high quality at a competitive price.
Traditionally, Honda R&D operates as a separate entity across all segments of vehicles globally. But in a shift, the new tech centre is a first step towards a new form of global operations.
The R&D division, which currently employs 100 staffers and kicked off operations at Gurgaon in June 2003, will now play a more active role in catapulting HMSI to numero uno position in terms of mileage of its two-wheelers latest by next year as the company strives to increase fuel efficiency to over 60kpl in all its upcoming models.
The HTC, which covers 10,000 square metres at the Manesar plant, is staffed with 200 engineers including 100 from Honda R&D India, who have helped co-develop HMSI’s 2013 model scooter range for India.
According to Atsushi Amataka, president, Honda R&D India, “We are committed to deliver products of the highest quality at an affordable price by enhancing our efficiency of having R&D, design, engineering, purchase and quality under one roof for the first time.”
In a first for the two-wheeler industry in India, the technical centre houses an advanced wind tunnel facility which simulates real-world air flow to monitor aerodynamics and its effect on models to develop fuel-saving vehicles. On a walk-through the technical centre, this correspondent was witness to the aerodynamic effects of wind on a superbike rolling at between 120-160 kilometres per hour.
Among other equipment, the chassis dynamometer simulates actual road load conditions inside the lab, while the emission system measures the exhaust emanating out of the vehicle. Besides, the bench dynamo measures mileage and power and facilitates engine durability testing at high rpms as well as fuel economy testing.
With the technical centre on stream, HMSI’s first focus will be on the domestic market as the motorcycle segment contributed to an overall growth of 54 percent in 2012 while scooters grew 24 percent. This was due to capacity constraints in scooters and growth over a low base for motorcycles, says Guleria. Further, bike launches were in the mass segment generating good volumes for Honda.
For HMSI, at present, the CB Shine sells 50,000 units every month while the CB Unicorn goes home to 18,000 new buyers every month, up 71 percent from the earlier number of around 10,500 units every month last year.
The company is now inching towards a 50:50 contribution from both scooter and bike segments, going forward with a sales target of 27.5 lakh units this fiscal. As per SIAM vehicle sales data, between April-December 2012, HMSI has sold 1,935,123 units, which means it aims to sell around 815,000 units by the end of March 2013.
With the third plant at Narsapuram, Karnataka slated to go on stream by the first quarter of FY’14 after the second phase of expansion completion at the Tapukara facility from 0.6 million to 1.2 million units, HMSI's total production capacity is pegged to rise to four million units next fiscal.
The Manesar plant currently produces 1.6 million units annually and makes the Activa, Dio and Aviator scooters as well as the Dream Yuga and CB Twister, CB Unicorn, CB Shine, and CBF Stunner. The Tapukara plant rolls out the Activa, CB Twister and CB Shine. Both plants together have a manpower strength of 11,000 with another 2,000 to be taken on board for the third facility.
Meanwhile, growth in the the two-wheeler industry has been marginal this fiscal at 4 percent. HMSI sales though grew 37 percent between April-December 2012 with motorcycles accounting for 51 percent and scooters 27 percent. The 150-180cc segment experienced de-growth by almost 20 percent but Guleria claims Honda grew in this category as well. HMSI is optimistic of continuing with its growth run with Narsapuram on stream. In an 11,896,433 unit two-wheeler industry, HMSI garnered a market share of 17 percent in FY’13, up from 13 percent in FY’12. Overall, sales (including retail deliveries) stood at 2,043,416 units in FY’13 compared to 1,491,345 units in the same period during the previous year.
Strengthening the dealer network
To be in tandem with future growth plans, HMSI is also strengthening its dealer network. The target is 2,000 touch-points this fiscal and another 500 sales and service outlets in FY’14 with the focus on products that will appeal to the masses. The current localisation level of its models is close to 100 percent with 200 suppliers providing the parts locally.
A visit to the company’s Tapukara plant that began production in July 2011 and completed its second phase of expansion in February 2012 shows two shifts in progress on the two assembly lines that churn out 4,400 units every day. The 'takt' time or the time taken from one job to another on the assembly line is 22 seconds.
Over a combined acreage of 600 acres shared between HMSI and Honda Cars India, the Tapukara plant sits on 58 acres with 57 percent built-up area. The facility houses the press shop, weld shop, machine shop, paint shop, assembly area, final inspection and die casting areas.
So far the plant has involved an investment of Rs 1,000 crore with one assembly line producing the 110cc Activa and CB Twister with the second dedicated for the 125cc CB Shine. Thanks to high demand, the Activa is also produced at the Manesar plant and has a waiting period.
A separate shopfloor assembles the petrol engines with the casting shop providing machined castings for engine assembly and the steel machining shop producing machined crankshafts and cylinder blocks.
In the frame area, the press shop presses the steel sheets into fuel tanks and supplies them to the weld shop which welds and produces frame bodies and fuel tanks and in turn supplies to the paint shop. The painted parts are then supplied for frame assembly which, with the help of engines and painted parts, roll out complete vehicles which are furthered for vehicle quality inspection. Once okayed, they are sent to logistics for despatch. Critical parts are made in-house on the shopfloor.
Metal movement is through automatic lines with a high level of automation in the machine shop, assembly areas and paint and weld shop. The weld shop has two robots. The production of the crankcase and cylinder head also involve automated processes. Welding involves mig welding, seam welding and spot welding for different parts for making the frame body and fuel tanks here.
Natural lighting is a highlight on the shopfloor and engine assembly is dust-free so as not to affect the efficiency of the engines which are produced on two assembly lines. A special painting process through reciprocators and robots is in use here. Transfer efficiency of water-based paints is very high on parts compared to other Honda plants. Once the paint is transferred from robots to parts, some of it is wasted; it's here that the transfer efficiency comes into reckoning.
While HMSI is not keen to talk about new plants in the pipeline, sources say that Honda did not like the land shown to it in Gujarat and hence a facility in that state still hangs in limbo. But as the two-wheeler manufacturer strides on, it is amply clear that it is gearing up to firmly take on Hero MotoCorp. The new technical centre will only facilitate the march forward.
INTERVIEW WITH KEITA MURAMATSU, PRESIDENT AND CEO, HMSI
With plans to take the battle straight into the Hero camp, Honda has an aggressive growth strategy for India till 2020. What do you have to say about this?
First by 2020, I retire from Honda. My understanding now is how to strengthen our organisation, improve the dealer network, strengthen product development, ensure quality, good suppliers and reduced costs. I have to achieve this improved positioning fast. For example, we want increased localisation.
Quality is related to customer satisfaction, so the issue is how to improve it but high quality and new development immediately raises costs and then customers will not like that product. The tech centre will improve all product categories, cost and quality that are opposite to each other as well as development of new products and parts.
So the new tech centre will help you to localise faster?
It will further both new development and decrease costs. The cost of inputs is too high that raises costs in addition to rising fuel prices.
Is the rollout of HET driven by rising fuel prices?
Honda has many technologies and it is not so difficult to get higher mileage. If the mileage increases, then the cost and price also rise and the customer is not satisfied. So price and fuel consumption are the key for new models. HET has been jointly developed by Honda R&D Japan and India, though it comes basically from Japan.
Honda has developed a small 125cc global engine. Any plans to bring it to India?
Honda had developed the 125cc global engine for scooters but currently we have no plans of bringing it to India. It all depends on the cost, as we have many many toys but which one will fit in the Indian market? We grow our engine platform but each country has a demand on the basis of which we choose the engines — whether a high-powered or a good-mileage engine or the cheapest engine is required. Accordingly, we choose from our line-up and then offer the same to the Indian market.
Honda had plans of setting up seven facilities in India by 2020. How far are you on achieving that roadmap?
At the moment, we are only focusing on our third plant coming up at Narsapuram in Karnataka and are targeting four million units next fiscal.
Which model will roll off the lines at Narsapuram first?
Both scooters and motorcycles. I cannot say now which specific models as we are still deciding on how to divide the models. We are currently concentrating on start of production next May.
What are the new models in the pipeline. . .
In future there will be demand for big motorcycles. We are checking on it as they attract very high import duty, on CBUs. Local assembly is one of the possibilities that we will look at in the next few years to reduce costs.
Which platforms can be developed on the new HET?
Depending on the engine, different technologies are needed. Currently, HET is being used in the 110cc scooter but will be in bikes next fiscal or with higher-engine capacity bikes. It will apply to all Indian bikes and help us to become the number one mileage company this year or next year.
Where is the focus now and what is the strategy to drive growth in scooters? Will you look at an all-women production line like Yamaha?
The focus is on mileage and quality. We have the Dio compared to the Yamaha Ray. Personally, I am very much for employing women but currently we have no plans of an all-women assembly line.
Your wish-list for the Budget?
Reduce taxes. . .
SHOBHA MATHUR