Hero Honda rescues Honda from skidding in recession

Japanese auto major Honda, the only global automobile company to survive the downturn with a small growth, says it owes its sales growth to the top-gear performance of Indian joint venture Hero Honda. Honda Siel Cars India president and CEO Masahiro Takedagawa told ET NOW that Hero Honda’s performance has helped Honda buck the global skid riding on the demand for small, commuter motorcycles.

“It’s true...since September last year, the entire global industry has been impacted a lot and Honda is no exception,” Mr Takedagawa said.

“We were damaged in the US, Europe and Japan. The Chinese, Asian and Latin American markets were so-so. It’s the commuters motorcycle business in Asia, particularly India, that has supported our business both in terms of profitability and growth. That’s the main reason why Honda is showing a small but still positive growth,” he added.

Honda Motor Corp in the first quarter ended June 09 of the current financial year clocked a $77.64 million net income, among the only two auto companies worldwide to do so. Fellow Japanese auto major Suzuki also drove home a positive profit growth in the same quarter at nearly $22 million. Like Honda, Suzuki
Motor Corp’s growth and profitability tally is thanks to its top-gear run in India with Maruti Suzuki.

Unsurprisingly, Honda sees no reason to disturb the applecart in the motorcycle market in India, now or after 2014 when the technical agreement with Hero group come up for renewal. “Since last year, Hero Honda has been showing lifetime records every month,” Mr Takedagawa said.

“Our business is showing good growth, profitability and giving good dividends. As a result the share price of Hero Honda is at record high. So logically there is no reason for us to split,” Mr Takedagawa said categorically.

Like Honda, Suzuki too has already gone on record to admit the importance of its Indian arm in the global pecking order. In an earlier chat with ET NOW, Maruti MD Shinzo Nakanishi said: “Maruti is definitely becoming more and more important in the Suzuki stable given that it’s net sales had risen 14% during the last fiscal, a period that saw Suzuki’s net sales fall 14% to ¥3.05 trillion.”

Hero Honda’s performance all through the downturn not only bucked the industry trend but also set records. It hit a million units for the first time in the first quarter of this fiscal. It managed to keep its operating margins up, using its tax-free manufacturing facility in Haridwar (Uttarkhand) and the relief in raw material prices to improve its profitability substantially. Its sales growth, which beat the industry average at FY09’s 12% clip, doubled to 25% in the first quarter of this fiscal.