HERO HONDA BEATS RIVALS BY A MILE, SALES UP 12%

 Aphorisms linking crises and opportunities abound, but examples of entities that find opportunities in crisis situations are rare. Indias largest two-wheeler maker is a case in point.

At a time when the Indian automobile company has had to battle its worst crisis in a decade that has seen demand dwindle and sales tumble, Hero Honda has posted the best-ever performance in its 25-year history.

The company, the worlds largest two-wheeler maker for the past eight years on the trot, has posted a 12% sales growth to 33 lakh units in the first 11 months of this fiscal year, almost single-handedly keeping its sector in positive sales territory despite rivals like Bajaj Auto and TVS Motors reporting negative sales.

It is also the only listed two-wheeler maker in India to grow profits and margins in fact, its profit margins for the December 2008 quarter were the highest ever in the past three years. Its net profit rose 9.24% to Rs 300.42 crore for the quarter while its total turnover rose 5% to Rs 2,881.27 crore.

The companys share price hit a 52-week high at Rs 985 on March 13 this year, a stark contrast to the stock markets benchmark index, which has tumbled to less than half its record high in the past year or so. As on February 27, its market value stood behind just Tata Motors and Maruti Suzuki in the Indian automobile sector.

How has Hero Honda managed this? What makes the company tick? The answer, according to the companys managing director Pawan Munjal, is simple: We make products that customer wants and that is driving sales.

As an explanation, this may sound pedestrian, but it forms the core of the companys strategy. When rivals, including Bajaj Auto, decided to move up the value chain to focus on the more profitable 125-cc segment in motorcycles, Hero Honda decided to consolidate its position in what it did best.

It kept on launching new bikes in the largest segment of the entire two-wheeler industry the 100-cc category.

As the economic slowdown forced customers to maintain their preference for the 100-cc economy
segment instead of scaling up their purchasing dreams, Hero Hondas top-selling 100-cc bike Splendour was out there sporting a price tag cheaper than its rivals.

Sales grew and the company soon found itself with a 48% market share in the 7-million-units-a-year Indian two-wheeler market.

Its a single-minded focus to drive volumes which automatically leads to higher profits, said Munjal, whose family founded the Hero Group that started making bicycle parts. The Hero group tied hands with Japans Honda Motors in 1984 to manufacture motorcycles.