Consumer sentiment in rural India, though, is yet to recover fully and sales in these markets have declined, Atsushi Ogata told ET. “However, we have seen some green shoots this festive season and expect both rural and urban centres to grow next fiscal.”
Rural markets currently contribute a third of sales at the local two-wheeler unit of Japan’s Honda Motor. Sales of two-wheelers in the Indian market have fallen by nearly a third in fiscal 2022 from the peak of 21 million units in FY19, amid higher cost of ownership. Acquisition cost of two-wheelers has risen by about a third in the past couple of years. A sharp increase in fuel prices has further increased the ownership cost, denting demand, especially in the entry-level segment.
The market has started recovering gradually with sales of motorcycles, scooters and mopeds in the first nine months of the fiscal year growing by a fifth to 12.26 million units. HMSI outperformed the industry, with a 30% increase in volume at 3.32 million units.
Ogata, who is also the company’s chief executive, said: “Two-wheeler sales in the Indian market had peaked at over 20 million units five years back. Our internal estimate is that the industry will take another five years to get back to this level.”
Ogata was speaking on the sidelines of the launch of the new Activa (compliant with on-board diagnostics regulations), priced upwards of ‘74,536. The company is targeting its entire portfolio compliant with OBD2 by June 2023.
HMSI, which dominates the scooter segment with a market share of 56%, said it would introduce an entry-level motorcycle this fiscal year to boost volumes in the category. Plans are also being firmed up to launch the company’s first electric scooter in the upcoming financial year. “We are drawing out a long-term roadmap for launching EVs in India. We do not want to convert ICE (internal combustion engine) vehicles to EVs. But are looking at the space as an added business opportunity. We are looking to launch the first electric model in March 2024 … it is being developed on a completely new platform and is based on the requirements of the Indian market,” Ogata said.
While the first model would have a fixed battery, the second one with specifications like that of a futuristic Activa would come in later with a swappable battery system.
Ogata declined to share the amount of investments being done on the EV business but added that the highest investment was going towards the development of the motor system. Some additional investment would also be required to prepare the existing manufacturing unit to make EVs.
When asked if the company still believed that it could grab the top spot in the domestic two-wheeler market, Ogata said: “Theoretically yes … But we do not know what they (market leader Hero MotoCorp) are thinking … what is their plan of products … finally it is the customer who decides the market share.”
One vertical where the company lacks a product currently is the entry-level bike segment, where it plans to bring in a model next month, he said.
Ogata said if the government were to extend some support in terms of tax incentives for the industry, it would help revive sales, especially among entry-level buyers.