” Currently foreign Auto Companies sell their vehicles as well as their spare parts through franchised outlets, which is the industry practice “….
Two-wheeler major Honda Motorcycle & Scooter India ( HMSI ), a 100 % subsidiary of Japan’s Honda Motor Company, looks set to spark a new trend among auto firms by opening its Own Exclusive Retail Stores to sell its products.
It has sought the permission of the “Foreign Investment Promotion Board ( FIPB )” to start single-brand retail outlets in the country.
The products to be sold at these outlets would range from high-end imported motorcycles and all-terrain vehicles (ATVs) to specialised side-by-side vehicles (small ones designed for off-road use), spare parts, accessories and even Honda-branded merchandise.
At present, the industry practice is that foreign automobile companies sell their vehicles, as well as spare parts, through franchises. However, HMSI, justifying its strategy to roll out company-owned single-brand retail outlets, has said in its application that it would give “better visibility to our brand Honda in India which will help ensure access to the advantages of cutting-edge technology, world-class products and services to the Indian two-wheeler industry, resulting in competitive pricing for products and services”.
The firm has identified the products it wants to bring through these stores. For instance, it wants to introduce two all-terrain vehicles — TRX 250 TE (priced between Rs 2 lakh and Rs 2.5 lakh) and TRX 420 FA. Besides, two side-by-side vehicles — Pioneer 700 and MUV 700 — could also be introduced in the Indian market. HMSI has also sought permission to sell over 28 categories of Honda-branded merchandise. These include mugs, pen drives, key chains, t-shirts, wall clocks, wallets, riding boots and body protectors.
These sales outlets would also purchase and sell spare parts and accessories for its entire range of vehicles.
The spare parts and accessories for Two-wheelers manufactured in India would be procured from Indian suppliers, while those for imported products would be sourced from overseas facilities. Since the value of spare parts, accessories, apparel and merchandise sourced from domestic vendors would be significant, the mandatory local sourcing condition in trading of spares, accessories and merchandise would also be met, the company said in its proposal.
Under the existing FDI policy, a Single-Brand Retail company with foreign investment must source 30 % goods from India, preferable from micro, small & medium enterprises.
Honda has sought a waiver on this, saying it would not be possible to procure high-end technology from Indian suppliers for ATVs, high-end bikes and side-by-side vehicles.
The company is likely to get the permission, since the turnover of these vehicles is likely to be less than 1 % of HMSI’s total manufacturing turnover.