BS-VI norms will help us gain market share: IDEAL STOCK

The company is reluctant to invest further towards adding capacity and is instead investing on preparing itself for the roll-out of BS-VI norms.

Honda Motorcycle and Scooter India (HMSI) the country’s second largest two-wheeler maker, grew by as much as 22 percent last financial year, and ended it with sales of close to 6.1 million units.
The company is reluctant to invest further towards adding capacity. In conversation with IDEALSTOCK, Minoru Kato, President and CEO, HMSI, spoke about where the company wants to invest, his outlook on the company's performance, and its future prospects. Edited excerpts...

Q. You announced an Rs 800 crore investment. Where will it be invested?
A. Almost all of this investment will be for Bharat Stage VI preparation. All models in the lineup need to upgrade to BS-VI. BS-IV and BS-VI are totally different. There will be a big change required.

Q. Will you look at add production capacity?

A. In the future we have a plan to expand. We need to look for more capacity. As of now today we don’t have any such plans.

Q. You sold 1 million more units last year than the year before that. Could we see a similar performance this year?

A. The 1 million (extra) sales was under an unusual situation. We had a plan of selling 5.4 million units, but because of demonetization in 2016 we dropped our plans to 5 million. The 1 million units jump in sales covers the loss in volumes two years ago.

Q. How will improving efficiency help your business?

A. We expect that in the future, there will be more growth. In 2020, because of BSVI norms, total motorcycle market may struggle to increase. But after that, we strongly believe it will grow again. From a long-term strategy perspective, we have a strong intention to grow sales.

Q. Will the assumption be correct that by 2020 there will be no new plant from HMSI?

Yes. BS-VI presents to us the biggest chance to grow our market share. We have lots of technology.
Q. Will some of the existing models be phased out due to BS-VI?
A. Yes some of the models I want to discontinue.

Q. You have a capacity of 6.4 million units now and your production is at 6.1 million units. Considering you free up capacity by improving efficiency, you will still run out of capacity in 2019-20.

A. This fiscal year we are going to maximise existing capacity to meet our double digit growth target. But of course, after that we have the BS-VI norms coming, and from a long term point of view, we have a plan to increase capacity again.

Q. How is BS-VI an advantage to you?A. It depends on pricing strategy. Our competitors also have some strategy. Thanks to BS-VI, we also have some strategy on how to compensate or sacrifice our profitability to offer reasonable price to the customer. I hope to price our products competitively compared to our competitors.

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BS-VI norms will help us gain market share: IDEAL STOCK BS-VI norms will help us gain market share: IDEAL STOCK Reviewed by Ideal Stock on April 10, 2018 Rating: 5

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