Will Honda's 'Dream Yuga' lessen Hero's 'Splendor'?

After breaking away from the 27-year old joint venture with Hero, Honda Motorcycles and Scooters India, has made its debut in the commuter bike market with its 110 cc mass commuter bike ‘Dream Yuga.’ But will Honda’s strategy of pricing its Dream higher than the market leader, Hero Motocorps Splendour pay off?

Honda’s launch of the Dream Yuga was expected to stir up the bottom end of the two wheeler market and challenge the supremacy of erstwhile partner Hero Motocorp. However, with a starting price of Rs 44, 642, the Dream Yuga is Rs 2,500 more expensive than the entry level Splendor NXG, the current market leader.

The high-end version of Dream Yuga too with a self-start and alloy wheels would cost Rs 48,125 or Rs 3,000 costlier than Hero’s Passion Pro Even Bajaj’s Autos recent offering the Discover 100 is priced lower. The Japanese giant seems to be betting on the Honda legacy to extract a premium but analysts feel the pricing could be a let down.

“As far as Dream Yuga is concerned it is very competitively priced bike. First time we are entering into the mass segment. Dream Yuga comes with perfect combination of power, performance and economy – which customers of this segment are looking for. Its 110 cc engine gives a mileage of 72 km/ltrs,”

The question is will the consumer buy the Honda Dream? The company is confident and hopes to sell up to 3 lakh units of its newest bike by the end of the fiscal year. It also expects India’s contribution to its total global revenues to more than double to 30% from the current 13% in the next eight years. HMSI is also ramping up production to 4 million units in the next 12-18 months from 2.8 million units at present.

Honda will hike production of the Dream Yuga based on the response it gets. But what will be interesting to note is if Honda sacrifices margins in its quest to dislodge Hero Motocorp as the number 1 two-wheeler company.

“Frankly, no company can survive only by increasing volumes. We need to have operating margins to be a healthy and profitable company,” Guleria says.

This is among the most price competitive models Honda has launched anywhere in the world. The company is really hoping that the Dream Yuga can help increase its motorcycle share to the total sales to 50% in the next few years from less than 40% today. But the big question everybody is asking today is whether it can compete with brands of its erstwhile partner Hero – Splendor and Passion?