UPDATE 2-Honda low-cost bike for India steps up emerging market drive

Tue May 15, 2012 6:22am EDT

* Honda launches lowest-cost motorbike in emerging mkt drive

* Aims for 30 pct of motorbike revenue from India by 2020

* Targets sale of 300,000 commuter bikes in FY to March 2013

* Honda racing to catch global rivals in low-cost segment

By Anurag Kotoky

NEW DELHI, May 15 (Reuters) - Honda Motor Co launched the lowest-cost motorbike in its line-up on Tuesday for sale in the India market, aiming to double India's share of its motorcycle revenue by the end of the decade while racing to catch up with rivals in fast-growing emerging markets.

Honda, the world's largest motorcycle manufacturer and Japan's third-biggest carmaker, has struggled to make major inroads in high-growth, price-sensitive markets such as India, where a former joint venture deal once excluded it from the key commuter motorbike segment.

Commuter bikes account for around 70 percent of India's motorcycle market, which grew 14 percent over the last financial year to 10 million sold and is second only to China.

"It's very positive for Honda that they can finally compete in the mass market here," said Vineet Hetamasaria, automotive analyst at PINC Research in Mumbai.

"The pricing is in the right area ... and given Honda's brand equity, the bike is definitely going to make a dent in the market shares of others."

The motorcycle is Honda's cheapest worldwide, Keita Muramatsu, president of Honda Motorycle & Scooter India, said at the bike's launch in New Delhi.

Honda, the top seller of scooters in the Indian market but lagging in larger commuter bikes, has been steadily raising production and sales across the two-wheeler segment since it ended a 26-year joint venture with India's Hero MotoCorp in March of last year in an $851 million deal.

It has since announced fresh investment worth 20 billion rupees ($373 million) as it looks to chase down Hero, its former partner and the current market leader in commuter motorcycles.

The Japanese company is constructing its third two-wheeler factory in the country and overtook Bajaj Auto as the country's No. 2 in two-wheeler sales in March.

PRICE-SENSITIVE MARKETS

Honda expects India to account for 30 percent of its global motorcycle revenue by 2020, up from 13 percent now, Muramatsu said.

The Japanese automaker, which also builds cars in India, has been less aggressive than global rivals such as General Motors Co and Volkswagen AG in targeting emerging markets such as India and China.

It abandoned a one-size-fits-all global parts sourcing approach in its car business in 2010 to search for local suppliers for its global plants to help it reduce costs.

Dressed in a Honda T-shirt, Bollywood acting heart-throb Akshay Kumar unveiled the 110cc Dream Yuga motorcycle on Tuesday, touting the advantages of a motorbike over a car on the clogged roads of India's cities.

Sales of motorbikes, a family vehicle for millions of Indians, outstripped car sales by five to one in the last financial year, partly helped by high interest rates and fuel costs that pushed up the price of automobile ownership.

"India will be the most important market and will continue to be in focus for the next 10 years," said Yadvinder Singh Guleria, marketing head for Honda India. He added that Honda expected to boost exports from India to 150,000 two-wheelers in the year to March 2013 from 111,000 the year before.

Globally, two-wheelers accounted for about one-sixth of Honda's revenue in the latest financial year to March 2012.

Other Japanese motorcycle makers are also ramping up capacity and targeting volumes in India.

Yamaha Motor Co this week announced a new $280 million factory in India to nearly triple capacity to 2.8 million motorcycles by 2018, while Suzuki Motor Corp, which will likely launch a mass-market offering this month, is building a new factory to take its India capacity to close to 1 million motorcycles by 2014.