Honda vs Bajaj: The War of Second Spot in Domestic Two Wheeler Market

Form the past couple of months, HMSI is posting sales growth in the range of 50%. HMSI replaced TVS Motors as number three two wheeler manufacturer in India and its now aiming number 2 spot which is traditionally ruled by Bajaj Auto since the geared scooter era was ended.  We earlier posted January and February months figure in the post “Will Honda Displace Bajaj For The Number 2 Spot?”.  The March sales figure has similar and identical story as well.

In the month of March, HMSI total sales grew to 2,20,487 units registering growth of 50% compared to 1,47,301 units in the March 2011 while Bajaj Auto has posted sales of 3,00,48 units registering growth of 10% compared to 2,74,392 units sold in the month of March 2011. Bajaj Auto’s March month number includes export which is in range of 75,000-80,000 motorcycles, so the company has sold around 2.20 to 2.25 lakhs motorcycles in the domestic market. HMSI figure also includes export of around 4,000-5,000 units which means it sold around 2.15 lakhs units in domestic market. So for the month of March Bajaj Auto has still maintained its second spot but the million dollars question is “Would it be possible for Bajaj Auto to retain its second spot for domestic two wheeler sale for the financial year 2012-13?” Let’s do some fact finding to check possibility of the same.

As far as motorcycle sales concern there is no possibility that HMSI will take on Bajaj Auto. Bajaj Auto sales around 2.25 lakhs motorcycle in domestic market whereas HMSI sales around 80,000 motorcycles monthly. In the month of March HMSI has sold around 82,353 motorcycles and 1,38,134 scooters. HMSI will launch Dream Yuga, a mass market motorcycle in upcoming months. However, it will take time to pick the sales of Dream Yuga. Further, it will be difficult for Dream Yuga to make its own space where Hero Splendor is ruling. As far as motorcycle sales is concern there is no possibility that the company will overtake Bajaj Auto in domestic market for the year 2012-13.

Now as far as total sales of two wheeler concern, HMSI is growing very fast thanks to demand of Honda Activa. For example, in the month of March alone HMSI sold 1,38,134 scooters up 70% compared to last year March where it sold 81,402 units. This figure will hold on and will expand only as Honda Activa is undisputed leader in gearless scooter segment. Further, sales of scooter segment is picking up very fast and it has grown in the range of 40% for the last financial year.  For Bajaj Auto this is negative point as it only produces motorcycle and the demand for the same is almost flat in the past few months. Hence, there are high chances that total two wheeler sales of HMSI will exceed Bajaj Auto in the financial year 2012-13.

The only silver lining that Bajaj Auto may retain its second number spot is production capacity. HMSI currently has installed capacity of 2.8 million units which translate into monthly sales of 2.35 lakhs units. The company can stretch it to 2.50 lakhs units at most and further some of the units from the total production will be exported so it can not cross sales more than this without expanding capacity. The company’s third plant will become operational only in second half of financial year 2012-13. Bajaj Auto has installed capacity of 5 million units including three wheelers. It can produce 4.5 million units of motorcycle with current installed capacity which translates into monthly production capacity of 3.75 lakhs motorcycle.  Some of the part will go to export but still the company has more production capacity then HMSI.

Bajaj Auto is also going to launch next generation Pulsar and new commuter in April and May respectively and it has lined up few more launches for this year. It will definitely boost its domestic sales and hence, there are fair chances for Bajaj Auto to retain second spot at-least for the financial year 2012-13. But for the year 2013-14 it will be difficult for Bajaj Auto to retain the same as HMSI will have production capacity and its market leader in scooter segment.

– Mahavir Kothari