The battle for the top spot in the two-wheeler market is intensifying.
The gap between Hero MotoCorp and Honda Motorcycle & Scooter India (HMSI) in retail sales narrowed to just 45,607 units in June.
This improvement comes as HMSI has clawed back market share after dipping to a historic low of 18 per cent in May 2023.
Now, the retail market shares of the two companies are 28.86 per cent and 25.54 per cent, respectively, compared to 35.54 per cent and 18.05 per cent in May 2023.
According to industry experts, one of the major reasons for Honda’s dip in sales last year was non-compliance with on-board diagnostics (OBD) norms.
Although certain models of the Honda Activa were updated, other products in the mass market segment were not on track by April 1 last year when the new norms were introduced.
"While the industry transitioned to OBD-II norms last April, Honda was not prepared.
"They were not able to build up production. Hero took advantage of this and retained higher numbers and a higher market share as well,” said Manish Raj Singhania, president of the Federation of Automobile Dealers Associations (Fada).
Simply put, OBD is a computer system on the vehicle that monitors and regulates its operation.
The computer onboard the vehicle receives data from sensors across the vehicle and alerts the user in case of any improper functioning.
It also helps service technicians view information on what may be going wrong with the vehicle and serves as a diagnostic tool.
“If you look at historical market share, Honda hovers around 25 per cent. That is their rightful market share, which has gone down to around 18 per cent in some months.
"This was because they didn’t have any vehicles," Singhania said.
Speaking to Business Standard, Yogesh Mathur, director of sales and marketing at HMSI, said that as of April 1, 2023, their inventory did not have all the models that were compliant with OBD-II.
“Production came online in the second quarter, and by August-September, we had 100 per cent of models that were OBD-II compliant,” he said.
HMSI claimed that a lack of clarity on the transition led to the delay, and once the government notification on the same came out, they pooled all resources to ensure compliance.
This took about four to five months.
“The festival season last year was challenging for us as dealers wanted stock, and we did not have it.
"We slowly made it available across India in a uniform manner,” Mathur said.
Hero did not respond to questions from Business Standard.
Singhania felt that this window of opportunity was over for Hero.
“Honda had ramped up production and is making good dispatches to dealers,” he added.
However, Hero still has an advantage in terms of existing stock, with 45-50 days of feeder stock, compared to HMSI’s 10-12 days, based on Fada estimates.
“One particular quarter or month in isolation does not reveal the true story.
"If you look at the last financial year, Hero’s market share was 32 per cent and Honda’s was 25% in the internal combustion engine segment.
"This has only changed to 31 per cent and 26 per cent, respectively, during the first quarter of the current financial year. Hence, the change is not drastic in the long term,” said an industry source.
In June 2024, Hero sold 397,029 units compared to 351,422 units by HMSI.
This was against 427,203 units by Hero and 283,398 units by Honda in June 2023.
Last June, Hero had a market share of 33 per cent while HMSI had 23 per cent.
In April, immediately after the new norms were introduced, HMSI’s market share was 20%, dipping further to 18% in May.
Mathur did not wish to comment on when they are eyeing the top position in the two-wheeler market, but he said that products like Shine 100 are doing well for them and are helping them gain market share in both rural and urban areas.
“In rural areas, our presence is a little low,” he said.
Moreover, there is room to grow in the 100 cc segment where HMSI now has a 10 per cent share.
The two-wheeler industry is expected to sustain a steady volume growth rate of 7-9 per cent in 2024-25, which would be slightly lower than the 9.8 per cent growth achieved in 2023-24 (FY24), according to a recent CareEdge report.
The analysts further noted that in the first half of FY24, growth was restricted due to an increase in vehicle prices after the implementation of Phase-II of Bharat Stage-VI emission norms, as well as higher interest rates and stressed rural incomes.
However, sales revived in the second half of FY24 due to festival season demand and an uptick in rural sentiment.
Sales grew at a robust double-digit pace in each of the two quarters that ended in March 2024 year-on-year (Y-o-Y).
“This double-digit volume growth on a Y-o-Y basis continued during the months of April and May 2024 as well,” it added.
