Honda Motorcycle and Scooters Ltd, the fully-owned Honda subsidiary, is now a relatively small player in the motorcycle market, with a 14 per cent share, selling mostly large engine capacity (125cc and 150cc) bikes. It is also content to sell more scooters than mobikes.

This is now set to change. For, HMSI is taking on its own long-time partner in India, Hero Honda (in which Honda has a 26 per cent stake), and in the latter's key area of dominance, the 100cc mobike market.

The Honda company is working on entering the same segment, with a sporty bike, in 2010. It hopes to sell a few lakh of these a year, to begin with. "The 100cc motorcycle that we plan to launch in India will be a totally new offering. It'll not be a basic version and will be the sporty type," says Shinji Aoyoma, president & CEO of HMSI.

That's not all. Aoyoma is also planning to ensure that in the next few years, mobikes make up for half of total sales. This would be a big change from its current mix, where scooters comprise 65 per cent of all sales. And he is clear that he hopes to do so by entering the 100cc bike segment, which is two-thirds of the 5.7 million per year mobike market.

Industry experts and competitors say Honda's aggressive entry in the segment could give Hero Honda sleepless nights. The latter commands 80 per cent market share in the 100cc segment, far ahead of its nearest competitor, Bajaj Auto [Get Quote]. The segment accounts for 60 per cent of its sales.

Says a senior executive of a competing two-wheeler company: "Till now, Hero Honda was not really affected by HMSI as it concentrated on scooters and avoided the 100cc space. But it's now clear that those days are over and they will clash in the same market intensely."

The 100cc motorcycle market is currently divided into two basic segments, entry and deluxe. The sales, too, are equally divided. The entry-level motorcycle segment is pegged between Rs 30,000�35,000, while deluxe models are priced at Rs 37,000�45,000. Industry experts say it is in the upper end of this price band that Honda is planning to position its 100cc bike.

At the moment, the two players say they will not be at each other's throat at all and there is enough scope for everyone. Also, the two companies have a joint committee which knows in advance what the other is planning to launch in the Indian market.

"When a customer buys a motorcycle from the Hero Honda stable, he buys a package, which includes the brand, design, the value-for-money promise, and the largest servicing network in the country. We field six brands in the 100cc segment, where each brand is uniquely positioned without cannibalising the other. The same will happen when Honda enters the segment," says Anil Dua, senior vice-president, sales & marketing, Hero Honda.

Dua says there is a large untapped market in the 100cc segment as 70 per cent of the urban population and 90 per cent of the rural one have not bought their first motorcycle. "There's room for everyone," says Dua.

HMSI notes that the 100cc market has many segments and it will operate in areas where its partners do not. "If you divide the 100cc motorcycle segment into 10, starting from the entry to the deluxe level, there's potential in every segment. So, our entry into the top end of the motorcycle segment does not mean we are taking on our partner, Hero Honda. We don't sell our brands based on engine cc classification or pricing. We cater to a particular segment of customers who value the brand Honda," says NK Rattan, divisional head, sales & marketing, HMSI.