Kinetic Honda: The Break-Up

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Survivor

However, after the breakup, Firodia's immediate strategy was to push up sales by getting the group's auto-finance companies - Kinetic Leasing & Finance Ltd. (KLFL), Kinetic Fincap and Kinetic Capital Finance (later merged with Kinetic Fincap) - to offer attractive finance schemes. Those finance companies were strategically located to service the three biggest markets for two-wheelers in India - north, west, and south. They offered a wide range of finance schemes (termed as Wonder Loans) to suit various customer needs. The move paid rich dividends as sales picked up considerably. Kinetic Fincap and Kinetic Leasing & Fincap contributed 20% of Kinetic Honda's sales in 1999.

Kinetic called dealer meetings in all regions of the country to assure them of the company's strong prospects even after Honda's departure, which had a very positive feedback. Kinetic also stepped up promotion of the Kinetic brand, using both television and newspaper ad campaigns. A considerable amount was spent on an image-building campaign for the group. Adspend was increased from Rs.12 crore in 1997-98 to Rs.20 crore in 1998-99. A new public awareness campaign on road safety was launched. The company set up a direct sales division as well, which had 50 teams of people going from shop to shop and door to door, informing people about the company's products and the finance schemes offered. The response was overwhelming and around 12% of the sales came from this division in 1999. A survey conducted across nine cities showed that Kinetic had maintained its hold, despite Honda's exit.

On the customer front, Kinetic launched a new, aggressive and consumer-focussed marketing strategy, with the new motto 'Closer to You.' The group launched 'Kinetic Care,' a package of post-sale and post-warranty benefits for the consumers. Several 'Kinetic Mileage Advantage' service camps were held across the country where more than 25,000 scooters were tuned for optimal mileage free of cost. Scooter service campaigns were organized, where spares and lubricants were offered at a discount and labor charges for replacing these spares were waived. For popularizing the K4-100, 'Customer Satisfaction' camps were organized across the country. These were attended by over 18,000 customers, who got free spare parts even though the warranty period had lapsed.

Kinetic's moves on the operations front, included opening of more depots around the country and a change in the credit policy. The Honda stake came with Rs.400-500 million as outstanding with dealers. Once these were recovered, interest costs came down considerably. Kinetic decentralized the distribution network and thus reduced inventory costs. Kinetic Engineering already had 20 C&F agents across the country. Kinetic used these agents to extend its reach to semi-urban and rural areas. For example, Kinetic was able to reach places like Anand and Gandhinagar from a depot in Ahmedabad within 24 hours. From its Pitampur plant, this would have taken almost three days. Kinetic also approached banks and negotiated deals to reduce its cost of borrowings. Material costs were reduced by reducing unnecessary imports. To improve the mileage of its scooters, Kinetic consulted experts from around the world and introduced a new technology in its new series of scooters, raising the mileage from 30kmpl to 50kmpl.

All these efforts soon translated into improved performance, proving the company's detractors wrong. Kinetic posted good results for both KEL (sales rose by 20%) and KMCL (sales rose by 23%) for the first half of 1999. KMCL also wiped off the previous year's loss of Rs 6 crore and posted profits of Rs 3.69 crore for the same period. In fiscal 2000, sales increased by around 25%.

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