| |
BUSINESS: HERO HONDA
Hero No.1
Riding on a motorcycle boom and a winning product,
the company has become India's largest two-wheeler maker.
The tale of its amazing journey and challenging future.
By Rohit Saran
| |
|
| |
WHAT A RIDE! Brijmohan Lall Munjal and son Pawan at the HHML plant
|
Sometime
in the late 1940s in Hamamatsu, Japan, Soichiro Honda was laying the foundation
of a business that would be known a few years later as the Honda Motor
Company. Around the same time, some 5,000 km away in the same continent,
Brijmohan Lall Munjal and his three brothers were launching a business
in Amritsar, Punjab, that was to be known as Hero Cycles in a few years.
Within 30 years, Honda became the world's leading maker of two-wheelers
(in addition to being Japan's third-largest carmaker). And Hero, the world's
largest cycle manufacturer.
With such a pedigree, Hero Honda Motor Limited's
(HHML) ascent to the No. 1 two-wheeler manufacturer in India was only
a matter of time. Yet when HHML hit that milestone during the first quarter
of the current financial year (April-June 2001), it seemed as if a David
had knocked down a Goliath. After all, the company HHML unseated from
the top slot was Bajaj Auto, the unchallenged two-wheeler king of India
for 43 years. "We always knew we had the best technology and best
business practices but we did not expect to become the market leader so
soon," says a happy but self-effacing Brijmohan, chairman and managing
director, HHML.
 |
|
|
MAN FROM JAPAN: Yanagida says no partner would
risk hurting a company of HHML's scale and profits
|
|
Brijmohan's surprise isn't unfounded. Just five
years ago, HHML was about one-fourth of Bajaj's size. In 1996-97, HHML
sold 2.7 lakh two-wheelers for Rs 743 crore while Bajaj sold 12.3 lakh
vehicles for Rs 2,638 crore. By 2000-1, HHML was rubbing shoulders with
Bajaj in volumes and had overtaken it in value terms. In the four months
of 2001-2, Hero has led the two-wheeler industry both in value and volume
of sales.
In its trail-blazing ride to the No. 1 position,
HHML has crossed many spectacular milestones (see graphic). In 1999, its
Splendor became the world's largest selling motorcycle model. In 2000-1,
the company sold more than a million motorcycles and became the largest
two-wheeler company in the Honda family worldwide. In the five years between
1996-97 and 2000-1, HHML's sales have zoomed at an average 40 per cent
and its profits by roughly 49 per cent annually. "We have always
been ahead of the market growth rate," points out Pawan Kant Munjal,
Brijmohan's son and a director in HHML.
For part of its sensational success, HHML has
to thank the Indian middle class which suddenly swung in favour of motorcycles
in recent years. Till as late at 1996-97, scooters accounted for 44 per
cent of two-wheeler sales in the country and motorcycles only 33 per cent.
By 2000-1, the motorcycles' share had climbed to 58 per cent (see charts).
HHML gained from the change. "Hero Honda was in the market with the
right product at the right time," says Sulajja Motwani, joint managing
director of Kinetic.
This success by default is only one part of
the story. Its core strengths of world renowned technology from Honda,
a strong international brand and excellent business practices have stood
HHML in good stead all along. Add to that the foresight of the company's
management. Hero Honda was the first-and for many years the only-company
with a four-stroke motorcycle in India. The Plain Jane CD100, the first
motorcycle to roll out of the company in 1985, was no match for its competitors'
two-stroke bikes in looks and instant power. But for years it outsold
every other motorcycle in the market. Reason: except HHML, all companies-including
big names like Suzuki, Yamaha, Kawasaki, Bajaj and TVS-focused on urban
youth as the primary customer for motorcycles.
In retrospect, all motorcyle manufacturers except
Hero Honda missed the wood for the trees. The biggest chunk of demand
for motorcycles was to come from villages, small towns and middle-class
officergoers in metros for whom the fuel economy of a four-stroke engine
was a bigger draw than the looks and the power of two-stroke bikes. "Looking
into the rear view mirror today, the choice of a four-stroke bike in the
1980s may sound providential, but we knew that buying a product is one
thing and running it for a long time quite another. That is why we wanted
the running cost of our vehicle to be low," says Brijmohan. That
message was best conveyed by the company's first advertising slogan: "Fill
It. Shut It. Forget It."
Honda's winning technology and brand name found
a perfect match in the Munjals' long-practised and well-honed skills in
supplier and dealership management. Even before the Munjals formed the
joint venture with Honda, they had demonstrated their ability to successfully
run partnerships. In the 50 years of its existence, Hero Cycles has seen
its national-level competitors dwindling from a peak of over 100 to just
four now. According to the Munjals, the key difference between them and
other cycle makers is their dedicated and time-tested relationship with
a large army of suppliers and dealers. A peaceful partnership has also
been a trait of the Munjal family. The 21-member, three-generation family
has had no splits so far. Though there have been cases of soured partnerships
(with BMW, for instance), the successes far outweigh the failures.
That's one reason why HHML is the most successful
of all the four Honda joint ventures in India. Honda has broken off with
Kinetic for scooter manufacturing and its joint venture with the Shrirams
for cars is now virtually controlled by Honda. Admits Kazumi Yanagida,
one of the two Honda representatives on the HHML board: "What drew
Honda to Hero was the philosophy and values of the group. It's good man-management
and customer-oriented thinking."
It's not that the Honda Hero partnership has
seen no failures or disagreements. But lessons from these have not been
forgotten. One instance of HHML's failure is its model Street-the Indian
version of Honda's international bestseller Cub. Launched with much fanfare
in January 1997, Street has been an unqualified failure, selling just
about 15,000 units a year. The product is undone by its resemblance to
a moped. Since mopeds did not exist in any other country, Honda's Cub
was a hot seller in all markets. In India, however, it is perceived as
no better than an expensive moped. Honda was also keen to withdraw Splendor
from the HHML stable once its variant Passion was launched in January
2001. The logic was simple: all over the world, old models are taken off
the market when new ones are launched. It took some convincing on the
part of HHML's marketing division before Honda agreed that products survive
much longer in India than elsewhere in the world. After all Bajaj Super
is still selling after 35 years of being introduced. Honda finally agreed
to keep Splendor and Passion-a decision it now admits was correct.
|
|
METRO TODAY
Web
Exclusives
