Honda Motorcycle and Scooter India makes sharpest production cut ever – Report

17/04/2019 - 13:30 | ,  ,   | Suvil Susvirkar

Lacklustre sales and increasing inventory have forced Honda Motorcycle and Scooter India (HMSI) to cut its June quarter two-wheeler production, reports Mint. The Indian arm of the Japanese two-wheeler band has implemented a 15-20% cut – its sharpest reduction to the date.

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HMSI has implemented a 15-20% production cut in the June quarter due to lacklustre sales and increasing inventories. This is the sharpest cut since the company started operations 18 years ago.

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HMSI stated that the increased insurance cost and the low festive season sales caused an increase in the inventory. This is what the company said:

Increased insurance premium in September 2018 dampened the festival sentiments, and pre-festival stock buildup was converted into high inventories for the two-wheeler industry. Recognizing this situation early, we realigned our supply with the domestic demand to correct inventories and support our business partners.

Things are not likely to change in terms of sales in the coming times, as two-wheelers have witnessed a price increase due to the new safety norms that mandate the installation of ABS and CBS from 1 April. So, while the increased insurance premium led to a hike in the on-road prices last year, the safety upgrade has bumped the ex-showroom prices now.

One of the suppliers of HMSI told LiveMint:

This (production cut) can be attributed to their over-reliance on scooters. Secondly, the company does not have its own financial arm in India to finance its own scooters and motorcycles like its rivals Hero MotoCorp and Bajaj Auto do. Availability of attractive financing schemes is an influential factor in boosting demand for two-wheelers in the domestic market.

A large chunk of HMSI’s sales comes from scooters, which were hit more than motorcycles and mopeds in FY2018-19, as reported by Society of Indian Automobile Manufacturers. While the domestic scooter sales saw a 0.27% fall in FY2018-19, motorcycles and mopeds witnessed a growth of 7.76% and 2.41% respectively.

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One of the reasons behind HMSI's dampened sales is its dependence on scooters. A Society of Indian Automobile Manufacturers report revealed that scooters were hit the most among two-wheelers in FY2018-19.

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HMSI aims to overtake Hero MotoCorp and become India’s number one two-wheeler manufacturer by 2020. However, Hero MotoCorp widened the gap between its former partner in FY2018-19, reporting 78,20,745 units sales as against HMSI’s 59,00,840 units. Last month, TVS Motor Company overtook HMSI to become the country’s second best-selling manufacturer. TVS sold 2,47,710 units sold in March, as against Honda's 2,22,325 units.

[Source: livemint.com]

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