In short, can the Hero Honda-Bajaj Auto rivalry ever end up in a result where Bajaj becomes #1? Clearly, this story is as much about Bajaj as it is about Honda; for the historic gripes of rivalry, which had till now only included moves, counter moves, claims, counter claims, has now become a testy, take-no-prisoners war by Pawan Chabra
Hero Honda is facing the heat from Bajaj Auto especially in the executive segment. While Hero Honda’s share fell by nearly 6% to 74.6% at the end of the last fiscal from the 80% level that the company enjoyed at the end of 2008-09, Bajaj’s share increased to 17% from 10.5% at the end of fiscal 2008-09. Bajaj’s volumes are rising steadily in the sub-125cc segment, with numbers going up by 115% last year (9.28 lakh units). On the other end, Hero Honda saw a growth of 23% (40.55 lakh units). “Growth mainly happens when there is demand in the domestic market and introducing Discover at the entry level has reaped rich returns for the company,” says S. Sridhar, CEO – 2 wheelers, Bajaj Auto. That’s a vast cry from the approach Bajaj had just a hanful of years back. There is no denying that the under-125cc segment (mainly 100cc) enjoys the lion’s share of the domestic motorcycle market as it commands nearly 74% share of total industry sales, which makes it crucial for any player to get it right in this play field.
Hero Honda, on the other end, is facing troubles internally and externally. Notably, the company broke the 4.5 million tag in the last fiscal and as it plans to sell more than 5 million units in the current year targeting a growth of 12-15%, the production capacity of the company will be tested 100% and beyond. Keeping in mind that the company is capable of producing five million units annually from its three plants in the northern region of the country – Gurgaon, Manesar and Haridwar – Hero Honda may just be able to provide for this year’s target, but will have a tough time with the start of the next fiscal (2011-12). While experts are of a view that the industry may grow by a decent 10% for a couple of years to come, Hero Honda may face a huge blip in the form of capacity crunch before its new plant become operational, as expected, by the end of 2011. That’s more of an internal challenge, but the company is also facing the heat from various external factors, one being the April 2010 strike at Exide Industries (which supplies batteries for Hero Honda bikes) that is making it difficult for Hero Honda to complete its production, as Exide’s supply of batteries has dropped by 80%.
Beyond market dynamics, there’re stark differences between these two auto giants with respect to their strategic manoeuvres. Hero Honda relies on Japanese technology, while Bajaj believes mostly on Indian technology. Hero Honda positions itself on value for money, while Bajaj Auto offers style. But there’s one critical difference in their objective orientation. “We prefer profitable growth over market share. For us market leadership is not that important,” says Sridhar of Bajaj. Hero Honda’s Dua recalls that “the company had decided in 2006 that it will focus on top line and profits will follow.
Hero Honda is facing the heat from Bajaj Auto especially in the executive segment. While Hero Honda’s share fell by nearly 6% to 74.6% at the end of the last fiscal from the 80% level that the company enjoyed at the end of 2008-09, Bajaj’s share increased to 17% from 10.5% at the end of fiscal 2008-09. Bajaj’s volumes are rising steadily in the sub-125cc segment, with numbers going up by 115% last year (9.28 lakh units). On the other end, Hero Honda saw a growth of 23% (40.55 lakh units). “Growth mainly happens when there is demand in the domestic market and introducing Discover at the entry level has reaped rich returns for the company,” says S. Sridhar, CEO – 2 wheelers, Bajaj Auto. That’s a vast cry from the approach Bajaj had just a hanful of years back. There is no denying that the under-125cc segment (mainly 100cc) enjoys the lion’s share of the domestic motorcycle market as it commands nearly 74% share of total industry sales, which makes it crucial for any player to get it right in this play field.
Hero Honda, on the other end, is facing troubles internally and externally. Notably, the company broke the 4.5 million tag in the last fiscal and as it plans to sell more than 5 million units in the current year targeting a growth of 12-15%, the production capacity of the company will be tested 100% and beyond. Keeping in mind that the company is capable of producing five million units annually from its three plants in the northern region of the country – Gurgaon, Manesar and Haridwar – Hero Honda may just be able to provide for this year’s target, but will have a tough time with the start of the next fiscal (2011-12). While experts are of a view that the industry may grow by a decent 10% for a couple of years to come, Hero Honda may face a huge blip in the form of capacity crunch before its new plant become operational, as expected, by the end of 2011. That’s more of an internal challenge, but the company is also facing the heat from various external factors, one being the April 2010 strike at Exide Industries (which supplies batteries for Hero Honda bikes) that is making it difficult for Hero Honda to complete its production, as Exide’s supply of batteries has dropped by 80%.
Beyond market dynamics, there’re stark differences between these two auto giants with respect to their strategic manoeuvres. Hero Honda relies on Japanese technology, while Bajaj believes mostly on Indian technology. Hero Honda positions itself on value for money, while Bajaj Auto offers style. But there’s one critical difference in their objective orientation. “We prefer profitable growth over market share. For us market leadership is not that important,” says Sridhar of Bajaj. Hero Honda’s Dua recalls that “the company had decided in 2006 that it will focus on top line and profits will follow.
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Source : IIPM Editorial, 2010.
An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).
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