Honda needs to rev up as Ola, TVS and Bajaj electric bikes leave it in the dust

There’s a good case for the answer to be none of the above. Instead, it’s Honda, whose cheap and cheerful Super Cub motorbike deserves to be recognized as the most important road vehicle in history. Since its debut in 1958, cumulative sales have been more than 100 million, well over twice the Corolla’s numbers.

The Super Cub’s ubiquity in developing countries makes it transformative. Four-wheelers are mostly competing in affluent nations. 

The core customer for a Super Cub, however, is a rural farmer or newly minted urbanite in Asia, Africa or Latin America, getting a first taste of road freedom. That makes Honda’s slow response to the next revolution confounding.

In India, the world’s largest two-wheeler market, sales of electric bikes are growing faster by the month. Volumes were up 28% in 2023-24, even as the government wound back purchase subsidies. More electric two-wheelers were sold in the year than all battery-powered cars and three-wheeled rickshaws put together. None of them was sold by Honda.

Domestic players aren’t standing still. Ola Electric Mobility Ltd, led by Bhavish Aggarwal, has nearly half the local market and is working on an IPO of $658 million. TVS has sold more than 300,000 of its iQube e-scooters, and is starting exports. 

Hero Motocorp is also looking at overseas markets for its Vida V1 scooter, which it has been selling since 2022. The numbers of electric two- and three-wheelers from Bajaj Auto quadrupled last fiscal year. “We are just about getting started,” Bajaj’s CFO Dinesh Thapar told investors on 17 July, and will be “expanding this business in multiples in the times ahead.”

Honda has laid out ambitious plans, but it has been far too slow on the execution. By 2030, it wants to have 30 electric bikes on the road and be selling 4 million models worldwide a year, equivalent to about a third of its total bike volumes at present. It has promised $3.3 billion between now and 2030 for electrifying its two-wheelers, too.

Three years after CEO Toshihiro Mibe announced plans to convert the entire business to electric, we’re still waiting for a first Indian e-scooter that the Japanese automaker has promised for later this year.

Honda needs to accelerate. The cost of batteries means e-scooters still can’t compete with petrol bikes for rural dwellers who need to travel more than a few hours between towns. 

Still, their total running costs are already about two-thirds lower, according to BloombergNEF, making them an attractive option for a burgeoning market of urban commuters and delivery drivers. The palpable excitement among Indian manufacturers comes from the potential they sense in this.

How is Honda allowing itself to be left behind? Management has for years treated motorbikes as a cash cow to fund its less profitable but far more prestigious car unit. As two-wheelers electrify, though, that’s a hazardous strategy. 

The company risks ploughing cash into a four-wheeler business where it’s a middling competitor, while under-investing in maintaining its global leadership in motorbikes.

To be sure, Honda’s dominance makes it a formidable opponent. While it only has about a quarter of the market in India, in Thailand, Indonesia, Vietnam and Brazil the number is a monopolistic three-quarters. 

Scale is an advantage, too: Its combined capital spending and R&D budget last year, for instance, was about 16 times that of TVS, Hero and Bajaj put together.

The trouble is that confidence means Honda risks squandering what made it a transformative company in the first place. The automaker started life in the humble business of adding auxiliary motors to pedal bikes in a shattered post-war Japan. 

Since then, its most precious asset has been the loyalty it has established, as the brand that consumers in emerging markets indelibly associate with the fresh joy of powered mobility.

Those aspirational customers aren’t going to switch to electric for the sake of the environment, but they’ll reward the company that provides them the cheapest way of getting from A to B. That vehicle is already electric, and the advantage is only going to increase.

Over the past year, foreign carmakers have been shocked by the speed with which Chinese EV makers squeezed them out of the world’s biggest car market with cheaper, better vehicles. If Honda doesn’t move fast, it may see its Indian rivals repeat the trick on two wheels. ©bloomberg