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The 'Street' is off the road ... for now - Views on News from Equitymaster
 
 
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  • Nov 8, 1999

    The 'Street' is off the road ... for now

    Hero Honda Motors has stopped production of 'Street' (its step-thru model) and will re-launch it in March 2000. This was reported by a leading business daily.

    Hero Honda, a joint venture between the Munjals and Honda Motors, is India's leading manufacturer of motorcycles (44% market share in 1HFY2000). Some of its famous brands include Splendor, CBZ(ee) and CD 100/SS.

    The Street is the black sheep in the Hero Honda family in the sense that unlike the company's other brands, the Street has failed to impress consumers. In 1HFY2000, the Street (priced at Rs 35,000) sold a paltry 6,600 units. Compare this to Bajaj Auto, which sold 75,000 units of M-80. Both the Kinetic K4 (at Rs 32,000) and the Bajaj M-80 (Rs 21,000) have cornered larger market shares as they are perceived as being more affordable.

    Hero Honda has decided to reposition the Street in the scooter segment. It will be re-launched in March 2000, and will be targeted at city riders.

    The company's strategy to push the Street as an alternative to scooters is no guarantee for higher volumes. The step-thru segment is already very crowded with TVS Suzuki, Majestic Auto, Kinetic Engineering and Bajaj Auto battling for market shares. The Street is a little pricey so the company will have to offer some excellent features to post volumes at Rs 35,000. That there is a market for a higher priced product is something that the company has realised with the successful launch of the CBZ(ee). But it won't be easy for the company to duplicate that with the Street.

    Market view:
    Analysts have flagged the stock as a 'BUY', as the company has been riding the motorcycle boom with well-acknowledged brands, and future launches will help it sustain market share, if not enhance it. Its excellent 2QFY2000 results (44% net profit growth) has lent credence to analysts' views.

     

     

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