Honda Motorcycles and Scooters India (HMSI) is setting up a new ‘rural vertical’ to penetrate further in the rural markets to dethrone the current leader Hero MotoCorp. Honda is working to improve its 100cc motorcycles and also create a new entry level point for the company as it builds its distribution network by adding 1000 new sales points within a year across the country, 70 percent of which will come in rural markets. Hero MotoCorp on the other hand has its roots planted and boasts of a large rural distribution network. The market is one of the key volume pullers for the world’s largest motorcycle manufacturer by volumes.
The new rural vertical will comprise of 15 people who will oversee the strategy, communication and implementation. The vertical will not only see the communication in rural markets, but will also develop an all-new approach, very different compared to the urban areas; while giving feedback to the R&D department. Honda’s headquarters in Japan too feel the importance of rural markets and the potential they offer. For Honda, rural markets contribute about 30-33 percent of its overall sales today; and with the rural vertical in place, the aim will be to take the market share to 45 percent over a period of time.
Compared to other manufacturers like Hero which boast of 5500-6000 sales touch points, Honda has only managed to reach half way with 2850 touch points. The company is working on improving its presence and plans to have 4000 touch points by the end of 2015. Honda is also working to improve its entry level offering the Dream series (Neo and Yuga) for the rural market. In spite of an optimistic response, the sales from the motorcycles haven’t matched the company’s high expectations. In the span of 18-24 months, Honda managed to sell a total of 7.5-8 lakh units of Dream Series motorcycles in the country.
Honda currently is flying high on the success of the Activa scooter, which was the second best selling two-wheeler for FY2014 after the Splendor. While the company did not confirm, a rural specific entry-level motorcycle could well be on the cards from Honda to capture a larger market share. Honda managed to sell around 36 lakh units of its two-wheelers in the last fiscal, but is still a distant second when compared to 61 lakh units sold by Hero MotoCorp. However, the rural vertical will help Honda close in on the gap faster.