According to report in a leading financial daily, Hero Honda has drawn up investment plans to infuse Rs 30 bn to increase turnover to Rs 30 bn in two years and to Rs 50 bn in five years.
Hero Honda, a joint venture between the Munjals and Honda Motors, is India's leading manufacturer of motorcycles (39% market share in September).
Hero Honda plans to invest Rs 10 bn in each of the years beginning from FY2000 to FY2002. The company will generate these funds from internal sources. Plans are afoot to employ a significant portion of this investment in launching new models with an eye on innovation. The company has recently undergone a capacity expansion exercise and manufactures at the rate of 700,000 motorcycles a year.
The company continues to focus on its dealership and has added 15 dealers in this year. It will continue to add more dealers in the next year and aims to breach the 400-mark soon. Its dealership is supplemented by about 150 service and parts outlets.
Hero Honda's ambitious plans is bad news for its competitors, Bajaj Auto and TVS Suzuki. The company is already streets ahead in terms of volumes (33% year on year volume growth in 2QFY2000), and has added market share at the expense of both Bajaj Auto and TVS Suzuki. But both these companies have learnt their lessons well and have outlined ambitious plans to launch innovative models to recoup lost market share. Add to this Honda Motors' 100% subsidiary and LML's proposed motorcycle launch, and the motorcycle segment is going to get extremely competitive with no room for complacency.
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