Honda Motorcycle and Scooter India's Senior VP of sales and marketing, Yadvinder Singh Guleria, talks to us about the market shifts because of BS6, Honda's big plans for their big bikes and localising production
At the launch of the all-new 2020 Honda Africa Twin Adventure Sports, we got talking to Yadvinder Singh Guleria, Honda Motorcycle and Scooter India's Senior VP of sales and marketing. He told us how the market has shifted with the upcoming BS6 norms and what challenges lie ahead after the onset of BS6. Yadvinder highlighted that BS6 will definitely be a game changer for all manufacturers, but the company is happy with the products they have launched so far. HMSI is putting a lot of focus into it's Big Wing network, adopting a three tier approach that will include a range of CBUs, CKDs and fully localised models too. The latter lineup will include a middleweight 500cc bike, that is currently on sale globally and will be brought to India soon, fully localised.
Finally Yadvinder told us about the developments in their motorsport division, where it started from and what it has become now. Bringing in the NSF250's for the local riders was part of a plan to give our country's talent more exposure and they have also employed the services of an ex-Moto GP rider to help give structure to the training program and development of their bikes. Below is the full interview:
Sirish Chandran: How's the business looking after the BS4 to BS6 transition?
Yadvinder Singh Guleria: In business there are two things. So far we are confident with the business and the acceptance of the product. Luckily for us since we were the first mover in September 2019 itself, we had enough time to get that feedback and raise awareness among customers, and we are very happy that despite the customers having a choice between BS4 and BS6 models in these six months, they still bought a Honda BS6 at a higher price point. So we are very confident that all the changes we have done, especially those including the ACG starter and silent start have been well accepted by the customers. We have already dispatched more than four lakh units as we are speak. Six of our products already made a transition, we realised 100 per cent production for BS6 in February itself. Customer response is excellent so all is what we have planned.
SC: Are the dealers sitting on a lot of BS4 stock?
YSG: As a company, we are very much in control overall for HMSI across the country. We are happy that we will be available to liquidate these stocks in another 10-15 days or so. However there would surely be some dealers with inventory for more than these two weeks or so. But since we have a large family of 1000+ dealers and monitor their stock on a real time basis, we are already enabling and arranging the inter-dealer stock transfer to control the situation. So already such things have been aligned and things are manageable so far.
SC: What do you see as the big challenges for the two wheeler industry going forward?
YSG: When there was a customer in the market on 31st August 2018 and he did not make any two-wheeler purchase, and today he wants to purchase, he has to pay more than 20-25 per cent premium. This is what has happened in these months so whether it is insurance premium or a CBS to ABS or BS6, all these things have added a cost to the customer. Once you go to a higher price point, for some of the customers, the two-wheeler has already gone beyond their budget so they have deferred their purchases or gone for a pre-owned two-wheeler. These are the challenges the market is facing and earlier since only one product was coming, then BS6, then another in the same segment with a gap of two-three months or so, customers were not clear what is going to be the price point of the new BS6. There were many who were going to see what is going to be the 100cc price, the 125cc price and all. Now all the products in almost every segment have been launched, price point is very clear in the market, 10-15 per cent and some are even at 18-20 per cent or so. So with the price point clearly established, the customer is aware that this is going to be the price point. Finance has to play a big role, we are seeing more people month on month buying two-wheelers on finance, and it has become more than 50 per cent now. Moving forward, there would be a big contribution which is expected from such enablers like how much we are able to realise retail from good retail schemes for the customer and we have also started introducing the credit cards, earlier with SBI and now ICICI is onboard and we are even giving cashback of up to Rs 5000. Digital buying experience, finance enabler, all those things are going to bridge this gap of market demand which has gone down because of the price. Other things are economic factors which are not in control of Honda or the market as such so we need to wait because globally we are also struggling, the Indian economy itself was struggling, NBFC initially struggled so all those factors which are external factors are also having a big factor on the demand. Combining all those things together and what we see in the next five-six months, this challenge is going to continue, it is not going to be any demand revival, any sudden growth in demand may be only visible in the next festive season. One could be the smaller base because we struggled more in the second half of FY-20, so maybe mathematically the second half of FY-20 should be better, but only time will tell. There have been some expectations from budget that also did not materialise especially for the auto industry. Then whatever the measures have been announced in the budget are not short term, they are good things but they are long term for us to see.
SC: Will the coronavirus impact HMSI?
YSG: Till yesterday there has been no impact thanks to the global sourcing network available with Honda that we were able to change the sourcing country with the same supplier base and that really helped us and the production was on till yesterday. But now it is reaching a stage of daily management. So far, no impact but since it is still continuing, moving ahead we see there will be some day where we will also start feeling that impact. Now it is being managed on a day to day basis.
SC: Talk us through your Big Wing network?
YSG: In case of Big Wing network we only showcased the model network which we are looking at and the main purpose was, as a strategy and overall plan we have decided that we would like to go ahead with our existing network to expand exclusively in this experience. So we identify the town where we have potential not only of the superbike but also the middleweight category because that is one segment we see has a good future and in future we will also have our presence in middleweight so based on that we identify the towns and then we have discussed with our probable dealers and business partners from our existing family and many have declined and that's the time we have showcased what kind of network and investment we are looking at through the first model showroom in Gurgaon and based on that many have come on board. So, within this financial year we will be in high double digits, in case of the network which will be becoming operational to take care of both sales and service of this network. Now, since we also have to handle the mass segment, and the four factories to run, we do not want to mix the responsibility and pressures of realising sales and scaling the business as a mix. Hence we put the new organisation structure at an operational level, and they will have all the functions of sales, after sales and network development as well as the marketing which is exclusive and only for the expansion of this big bike business.
SC: You were talking about mid-weight. So would that be 600cc for you?
YSG: Yes, up to 500cc is what we are looking at.
SC: And is that the bike you are going to develop and have 100 per cent localisation?
YSG: That will be one of the bikes.
SC: Can you elaborate on your localisation strategy for the big bikes?
YSG: We will have a mix of three levels, in case of the premium bike business, we will have the CBU for sure, and we will continue with the CKD assemblies for some models and also have a lineup for the middleweight category as a mass production.
SC: This middleweight is not available in your global lineup currently?
YSG: It is available.
SC: Will you look at India becoming a source of export for this middleweight?
YSG: Till 2023, there will still be some countries we will not be open to, for example advanced countries like USA or Japan will only be available to us for export from 2023. Till that time we do not comply with their regulation norms. Globally, Honda decides which model needs to be sourced from which country because we have more than 30 countries for production.
SC: Your four production plants, what capacity are they running at right now?
YSC: Close to 90 per cent.
SC: You see this year also remaining at that close to 90 per cent?
YSC: Looks like, yeah.
SC: In terms of your growth toward market leadership, any developments?
YSC: Let's see, we always maintained that BS6 is going to be a big game changer and we are very happy with the products we have launched so far. We took this opportunity to make our products not only regulation compliant but bring in the latest global technology, for example, we always have ESP which was there in the other ASEAN countries and it has not come up to 125 or lower than that. So we have already brought in, even to our 110cc scooter, we have brought in Enhanced Smart Power technology. With these technologies we feel that the edge is there on our side and moving forward it is up to the customers to decide. Our preparations are on and we will be going full out on reaching out to the customer, giving them that experience of the product, doing our basics right again, these are the things which are planned.
SC: Finally on the motorsport front, how has the development been for HMSI?
YSC: A decade back it was only a few people in the after sales area looking after this activity. Today we have the motorsport division itself in the company. It means we have evolved over the years, activities have enhanced our international exposure to the riders who have also started coming in and there is a good improvement on the local talent identified, nurtured, trained, also on their international results. They may not be winning today, but their timings and their position, race to race, season to season, is improving. Finally we did realise that such talent should be spotted, a little earlier than at the age of 17 or 18 because most of the riders even start thinking of retiring at 23 or 24. For Indian riders, this is the time when they are becoming professional. We have interviewed them and even met their parents as a process and overall that talent has been shortlisted, now there is grooming which is happening and we hope this talent will one day reach the next level of our expectation. Then we are now also getting the services of an ex-Moto GP Honda rider, he is already there in India and he has also started working, not only on the technical aspect but on the training aspects also. One sample I can share with you is the existing riders when we got them on a track, with just half an hour of his few tips, were able to improve three to four seconds on their lap time. So once it goes as a total organised training, you can imagine the kind of lap times they can produce. So we hope this expertise of the global Moto GP rider will also help us improve our motorsports footprint. We also got the NSF 250, which is a racing bike, more powerful for the local riders to handle so they are very happy to see those bikes. With the new outlook for this season we already painted them in a new form, maybe you will like them once you see them on the track and it is all ready for next season.