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Honda labour problem reverses scooter market momentum

Neha Kaushik

New Delhi , July 28

THE labour unrest at Honda Motorcycle & Scooter India's (HMSI) unit in Manesar has taken its toll on growth in the domestic scooter market as well.

The segment which had seen a turnaround largely due to popular launches from HMSI's stable, fell by almost 15.7 per cent to 66,035 units last month from 77,234 units in the same month last year.

HMSI, which suffered loss of production in the past few months, saw its June sales drop 22.4 per cent to 25,530 units.

According to an industry analyst, the growth revival seen in the scooter market over the past couple of years was largely driven by HMSI.

For example, in the last fiscal while the scooter market grew by 4.2 per cent to 923,566 units, HMSI and TVS Motor were the only two companies to see a positive growth, with the remaining five scooter manufacturing firms seeing a decline in growth in the year.

HMSI, in fact, accounted for about half of the domestic scooter market with sales of 450,967 units last year.

The last month, however, saw the company's market share slip to 39 per cent, with analysts warning that the current month's numbers may show the company taking a even bigger hit in its sales and market share.

The loss in market share however has not translated into much growth for other scooter manufacturers. For example, in June every scooter manufacturer except TVS (which saw a marginal rise) saw a decline in sales.

Meanwhile, HMSI which has restarted production at 1,000 units per day today (which is half of its normal production level) said that the loss in production has till date resulted in a Rs 125 crore loss for the company.

Industry watchers, however, add that the loss in market share for the company is only temporary and is bound to recover once production reaches normal levels.

"However, the fact that the company's image has taken a beating following the incident cannot be ignored.

"It may take a few months for HMSI to not only straighten out its labour problems but also to restore its image in the consumer's mind," an analyst said.

The labour unrest has also hit HMSI's aggressive plans for the motorcycle segment. Sales of HMSI's maiden offering in the bike segment, Unicorn, which had stabilised at about 10,000 units per month, had declined to 4,500 units in June.

Analysts add that the company's plan to launch a 125 cc bike later this year may also be delayed.

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