Honda raced past Hero MotoCorp in September. Was it a flash in the pan?

Puthran has been storehopping every weekend, test-riding one bike or the other. His first port of call was a Hero MotoCorp showroom to try out the Splendor, India’s best-selling motorcycle. Next, he checks out the TVS Radeon and for some time is seduced by its bigger sibling, the Raider. Finally, he zeroes in on a Honda Shine. Though there is a cheaper, 100cc version on offer, he settles for the 125cc variant.

“Splendor would have been adequate, but it is too commonplace. I am stretching my budget a bit with the Shine 125cc, but the dealer offered me finance and the difference in EMI was about ₹500," he says. Puthran reckons the higher power and better styling makes it worth the extra amount. He wants to make frequent trips to his hometown in Kudligi, 300 kilometres away, once he gets the bike.

While the Splendor model in Bengaluru would have cost Puthran ₹92,000, he paid around ₹100,000 for the Shine 125cc.

A decade or so ago, somebody like Puthran would have probably settled for the Splendor, a tried and tested workhorse that offers good mileage, a critical deciding factor for entry-level bike buyers. The desire for something extra and the willingness to stretch the budget a bit, is leading to a shift in India’s commuter motorcycle market. It has also helped Honda Motorcycle and Scooter India (HMSI) edge closer to Hero MotoCorp in monthly sales.

In fact, if the first half of 2024-25 is anything to go by, it has a decent chance of overhauling Hero over the full fiscal year. That would be seismic—something that has not happened in any automotive segment in India in three decades.

“Everything rests on this month. If it is business as usual then the trend suggests Honda will be ahead by the end of the year. So, there is a lot riding on October for Hero and they have rolled out aggressive schemes. It is make or break for them," says a Hero MotoCorp dealer from Delhi/NCR, who did not wish to be identified.

While break is an overstatement, Honda constantly nipping at its heels is not a threat Hero can ignore.

Catching up again

It happened for the first time in September 2022. Against the odds, Honda registered higher monthly retail sales than market leader Hero MotoCorp. Hero had been unbeatable for close to three decades and Honda’s feat sent shockwaves through the industry.

But Honda’s charge appeared to be a flash in the pan and it soon fell behind in the race. Following the festive season in 2022, Hero once again consolidated its position at the top. But two years on, Honda found itself ahead of Hero again. It managed to sell over 334,000 units in September against Hero’s 272,000 units. This time, it promises to not be a one-off but at the very least the beginning of a protracted sparring session.

“This is a significant development to watch, as a leader being pushed down is a rare event in the automotive sector," says Pramod Amthe, head of institutional equities at Incred Capital, a brokerage firm. “In the peak of scooter season, Honda has been able to push Hero down, but the rural recovery and bigger festivals can favour Hero. So, the verdict is not fully out."

The tightness of the race is also showing up in wholesales, which represents the number of motorcycles and scooters dispatched from factories to dealerships. While retail figures show actual sales by dealers to customers, wholesales are a key barometer gauged by the industry to calculate market share.

A solid month of wholesale almost certainly means good retail sales a couple of months down the line, as happened with Honda this time. In July, it overtook Hero for the first time ever in wholesales and dispatched over 90,000 units more. It matched Hero’s tally in August as well.

But analysts are not convinced yet. “In this fiscal, Honda has aggressively pushed dealer inventory due to which it has been able to post close to Hero’s wholesales. However, in September, Hero typically reports its lowest retail market share in a fiscal before increasing during the festive season in October and November," says Jay Kale, executive vice president, institutional research, Elara Securities. “Hence, to conclude that Honda will continue to post sales above Hero will be incorrect."

Indeed, Hero loaded its dealerships in September with its best monthly tally for over five years at 617,000 units to Honda’s 536,000 units, in anticipation of a bumper festive season this month. This once again gave it the lead in wholesales. Without a doubt, industry observers will be watching in fascination over the coming months as the former partners turned rivals vie with each other in a battle for supremacy.

The two companies got into a partnership in 1984 as a joint venture which ended in 2010 when Honda decided to sell its entire 26% stake to the Munjal family. Honda’s fully owned subsidiary, HMSI, was established in 1999 and it entered the market with the Activa the following year.

Both Hero and Honda did not respond to Mint’s requests for comments and clarifications.

Turf war

The battle between the two erstwhile partners is being fought on multiple turfs, with each trying to make inroads into the other’s stronghold. For Hero, that means finding a way to broaden its presence in scooters—a segment that Honda has dominated since its entry in the early 2000s, and the fast-growing 125cc motorcycle segment.

Thanks to Activa, Honda has a dominant 45% share in scooters in 2024-25 (April-August, see chart). Hero has become a fringe player here, with its share down from 19% in 2013-14 to just 5% this fiscal year. This has contributed to its overall reduction in market share, as scooters have outgrown the two-wheeler market for much of the last decade. In the first five months of this fiscal year, for instance, one out of every three two-wheelers sold in the country was a scooter, the highest level since 1996-97.

“There will be big action on scooters within this fiscal. First will be the fully refreshed Destini followed by models in Xoom, where we already have a 110cc, followed by 125cc and 160cc as well," Niranjan Gupta, chief executive officer (CEO) of Hero MotoCorp, said during an investor concall on 14 August.

For Honda, the obvious place to hurt Hero is 100/110 cc motorcycles. But it is almost as difficult for a product to match up to the latter’s Splendor as for any scooter to upend Activa. The Japanese company has tried to breach this fortress multiple times in the past with little success. But it has not given up; last year, Honda launched a 100cc version of its bestselling Shine brand, which undercut Hero’s 100cc offering, Splendor, by 10%.

Unfortunately for Hero, the entry-level segment has not grown much since the pandemic—its share in overall motorcycle sales has fallen from 65% a decade ago to just 46% this year. Alongside its inability to gain traction in other segments, this is the prime reason for Hero’s steady decline—the company’s market share has come down from 49% in 2008-09 to less than 29% in 2024-25 and has fallen for 13 of the last 16 years.

“Honda has been able to ramp-up capacity and also launch a 100cc motorcycle, which it did not have until two years back," says Elara Securities’ Kale. “The 110cc segment, where Hero has a very high market share, has underperformed. Hence blended market share for Hero has not seen an uptick on a year-on-year basis despite all the new launches."

Fight down the middle

With their respective hold in commuter motorcycles and scooters well fortified, the real battle is shaping up in the 125-149cc executive motorcycle segment. As the second largest category in motorcycles, accounting for 30% of sales, it is one of the fastest growing, up from 19.5% a decade ago.

Better and easier finance options—not just in big cities but also smaller towns—are fuelling upgrades by customers from 100cc to 125cc bikes. And every manufacturer is looking to ride the trend.

“Currently, the entry-level motorcycle [segment] is growing by around 2% under 100-110 cc. But the major growth is coming in 125 cc, which is growing by 55% and above 150 to 180cc is declining by around 9% till now," Yogesh Mathur, director, sales and marketing at HMSI, said on the sidelines of an industry event on 10 September. “So, the entry-level is shifting towards 125 cc and then the customer will eventually upgrade to a higher category above 150 cc later."

Honda is the top dog in this segment with a 45% share, followed by Bajaj with 24%. But it does not enjoy the kind of stranglehold here it does in scooters. For one, unlike scooters and commuter mobikes, this segment has seen its fair share of change in leadership. Hero, in fact, was the leader as recently as 2019-20, when it had a 49.5% share.

“Hero needs to expand its product portfolio in the mass premium (125 to 150cc) and scooter segment to regain market share. Considering that operating margins in the industry are back at historic levels, it is time for Hero to address the market share challenge," says Incred’s Amthe.

Post pandemic, Hero’s share went down for four consecutive years but a turnaround may be in the works this year. Following the launch of the Xtreme 125 in January, there has been an uptick in its share to over 19% in 2024-25 to date.

“With the launch of the Xtreme, our 125cc portfolio is pretty strong. The task now is to ramp up capacity and increase our market share in every quarter," Hero MotoCorp CEO Gupta said in the 14 August concall. “Already the capacity for Xtreme is up to 25,000 units per month and we will be taking it up to 40,000 units within the next two months itself."

Who will win the EV battle?

The electric vehicle segment will be the next battleground for the two bitter rivals but both have a lot of catching up to do. Honda has nothing on offer here currently and will be the last of the big four to make its debut, later this year. Hero does have a presence but, its Vida brand lags Ola, TVS, Bajaj as well as sister company Ather, in which it is a promoter shareholder.

“The EV segment doesn’t seem to have any early-mover advantage because the speed of technology change is steep. This is seen in both 2-wheelers and car EVs, so any company that rides technology change well is better placed," says Incred’s Amthe. “We are still in the early days of electrification but the stakes are high for Honda to get EVs right as penetration is higher in scooters as compared to motorcycles."

Honda will launch the electric Activa only by March 2025, so is it late to the party? “It is entering after the others but the market is still in the early-growth stage. The company’s extensive engineering expertise, along with its well-established sales and service network, combined with a very strong brand, certainly bode well," says Ashim Sharma, senior partner and group head, business performance improvement consulting, Nomura Research Institute, a management consulting firm.

“We are not late, it is a business decision we have taken. There are other segments, too. One-third of the motorcycle market was in the 100-110cc segment and we were missing there. So, we came up with Shine. We were prioritizing our own challenges," HMSI sales and marketing director Mathur said in September.

EVs’ nearly 20% share in scooters is the highest in any segment in the country, barring three-wheelers. Though the pace of growth has suffered this year, partly due to the reduction in subsidies, Honda’s entry could provide a boost. That could be critical in its race with Hero.

In Formula 1, it is often said that it is one thing to catch up, quite another to overtake. Honda has done the hard part, but it will now have to prove that it can leave its partner behind in the dust.