Why Honda's CBR recall could be a game-changer

N. Madhavan        Last Updated: November 26, 2012  | 18:00 IST

N. Madhavan
N. Madhavan
For decades it was a seller's market. Now, India's two-wheeler sector appears to have finally become a buyer's market. At least, that is what the November 19 announcement by Honda Motorcycle & Scooter India to recall 11,500 units of its CBR 250R model signifies. The bikes have been recalled to fix a faulty front brake system.  

The recall is a first for a two-wheeler manufacturer in India.

Though the market is highly price-sensitive and competitive, none of the 10 manufacturers - Indian and global - has ever recalled its vehicles.

Such a move, many in the industry felt, would only result in bad publicity. It was also the belief that the goodwill such a move normally generates would be missing as the market is not mature enough.

Another reason is, of course, cost. Recalls would also mean an immediate cash outgo - something two-wheeler manufacturers operating on wafer-thin margins can ill-afford. The fact that awareness among consumers about their rights is limited also helped.

Thus, the move by Honda will set a precedent.

In India, Honda has been very proactive in recalling defective products . Its car arm, Honda Siel Cars India Ltd, has announced a few recalls in the last few years. In September 2011, it recalled 72,115 City sedans to fix faulty power window switches. Last year as part of a global exercise, it recalled 57,853 City sedans to replace a faulty engine part. In 2007, it recalled 4,000 CRVs and 2,300 Accord luxury sedans. The company believes that being proactive helps build trust amongst its customers and enhance ownership experience.

Experts see Honda mirroring its car recall strategy in the two-wheeler business. The company believes the goodwill and long-term benefits of a recall far outweigh the short-term pain .

The company has been making impressive market share gains. In the first six months of 2012/13 it upstaged Bajaj Auto to become the second largest company in the segment, with a market share of 19 per cent. During this period Honda sold 1,290,356 units, as against 867,203 units in the same period last year. Bajaj Auto sold 1,220,365 units to garner a market share of 18 per cent.

According to SIAM data, the total number of two-wheelers sold between April-September 2012 stood at 6,779,219 units.

Product-recalls are relatively new in India, though some car makers have announced them. In the last few years Maruti has recalled close to 100,000 units of its A-Star model to fix a defect in the fuel tank. Toyota has recalled 41,000 Etios and Liva models to replace a faulty fuel inlet pipe and Tata Motors has recalled some units of the Nano to replace a defective starter motor.

But manufacturers, in many instances, have also refrained from recalls for fear of the negative fallout from such an exercise. Recalls being new to India, they feared the entire product would be seen to be defective.

If Honda's move is perceived in a positive light, it may help the company gain some market share in the two-wheeler market. And, of course, go some way in narrowing the huge gap with industry leader Hero MotoCorp, which has a market share of 43 per cent.

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