Honda - stepping up the price competition in the mass market segment :: JPMorgan

 Honda has introduced its lowest priced products in the Indian market
over the past month – the ‘Activa i’ and the ‘Dream Neo’. These
models are priced in line with the competition in the scooter / mass
market bike segment – thus addressing gaps in HMSI’s product
portfolio. We re-iterate our UW stance on Hero Motocorp and Bajaj
Auto, given that: i) industry growth remains weak, ii) scooters are
gradually expanding in the product mix, and iii) competition is
intensifying across segments.

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 Honda is plugging gaps in its product portfolio – after having
expanded capacity (the third plant has been commissioned) and broad
basing their distribution network to over 2,000 touch points
(particularly in semi urban / rural areas), the OEM is launching mass
market products. Thus, the Dream Neo will compete with Hero’s
Splendor and the Activa i is priced inline with the ‘Pleasure’ scooter.
 The OEM is pricing products aggressively: As HMSI has achieved
localization levels of over 95%, they are pricing products
competitively. The ‘Activa I’ has been launched at Rs.44,200,
(significantly lower than the existing Activa). The product will
compete with models such as Hero’s ‘Pleasure’. Further, the Dream
Neo has been launched at an introductory price of Rs.43,150 – which
will enable it to compete with Hero’s flagship motorbike ‘Splendor’
in the executive segment.
 Honda inaugurated its third two wheeler production plant
recently: The new plant is HMSI’s largest with an installed capacity
of 1.8m units (40% of total capacity). Post the expansion, the
Japanese OEM’s installed capacity will rise significantly to 4.6m
units by Mar’14 (+64% y/y). The investment in the facility is
Rs.13.5B ($250m).