Market watchers say the move by the HMSI, which at present has just one 150 cc motorcycle, Unicorn, in the local market, has the potential to shake up the market.
The 150 CC and above segment may be lucrative - Bajaj Auto's Pulsar, which comes in two variants of 150 cc and 180 cc, is its most profitable model - but volumes lie in the lower segment of 75 cc to 125 cc, which accounts for nearly three-fourths of all motorcycles and stepthroughs sold in India.
It is also a segment where Hero Honda, Honda Motor's other two-wheeler operation in the country in league with the Hero group, rules.
If HMSI can replicate Unicorn's 100 per cent localisation for the new motorcycle, it will be able to price it very competitively, experts say.
The executive segment, the largest group in terms of demand, has of late been moving upwards in terms of engine capacities, thanks to launches by market leader Hero Honda (Super Splendour and Glamour) and Bajaj Auto (Discover).
Then, Honda's compatriot, Suzuki Motors, has just announced its re-entry into the Indian motorcycle market, with Heat and Zeus, both of which are powered by 125 cc engines.
It is the fastest growing segment of the market but it is also the most crowded given that every manufacturer wants to cash in on it. The competition has made sure that over the years, prices in this segment hover around Rs 38,000-45,000. The two Suzuki's bikes, too, are likely to be priced just below Rs 40,000.
Honda's entry could sharpen the competition. In fact, it could also shake up the Indian motorcycle market, dominated by Hero Honda with 44.5 per cent market share and Bajaj Auto with 36 per cent of the market.
The third player, TVS, is a distant third with 12 per cent share. As acknowledged by investment bank JP Morgan recently, Honda Motorcycles is the only player which poses a credible challenge to Hero Honda and Bajaj Auto in the longer term.