Hero Honda: Brand power
Recommendation: HoldB. KrishnakumarAided by its strong brand image and proven product quality, Hero Honda has successfullyexploited the growing demand for motorcycles.Backed by the technical support of the global major Honda, the company is No. 1 in thefour-stroke motorcycle segment.Hero Honda's Splendor range of motorcycles is the country's top selling brand. It has beenconservative in new product launches, instead coming out with variants of its existingrange. Splendor, Sleek, Street and CBZ were the major model launches of the 1990s.Of these, CBZ was the most recent launch and has steadily gained market acceptance.Positioned at the premium end, the CBZ range offers a combination of power and fuel-efficiency. Recently, Hero Honda launched cosmetic variants of its top-selling brand --Splendor. While Splendor roared, Street and Sleek enjoyed muted success.As for future prospects, the company will continue to benefit from the growing demand formotorcycles. With capacity expansion completed, the company will be able to exploitdemand growth. However, the entry of players such as TVS Suzuki, LML and Kinetic into thefour-stroke segment could bring pressure on profitability.A cause for concern is Honda Motor Company (Hero Honda's collaborator) setting up a 100per cent subsidiary. Honda is to initially manufacture scooters and could eventually move tomotorcycles. Though Hero Honda has indicated that it would be retained as the preferredproducer of the Honda range of motorcycles, it is premature to come to any conclusionabout the long-term impact of this move.These concerns apart, Hero Honda is now the top player in the motorcycle market. Besidesthe range of popular brands, its presence across the entire motorcycle spectrum marketshould help the company retain its top position.For Hero Honda, maintaining volume growth will not be difficult. However, growingcompetitive pressure could check profitability. Existing shareholders may remain investedand contemplate fresh exposures on price weakness.