Mumbai: Price wars and new product launches from rival manufacturers are threatening Hero Honda''s leadership in the two-wheeler market. The company, which has 54 per cent market share, is now feeling the heat in the economy and executive segments as other players have been introducing popular new models.

The company currently enjoys market leadership in both the ''economy'' and ''executive'' segments, which are now witnessing intense competition, say industry analysts.

It is expected that a series of new models is likely to be launched by the competition in the next three or four months, aiming at the company''s top products, ''Splendor'' and ''Passion'', in the executive segment and ''CD-Dawn'' in the economy segment.

Further, the company has not been able to make the required dent in the premium segment despite launching new variants of ''Ambition'' and ''CBZ''. Analysts speculate that its 54 per cent market share makes the company more vulnerable to erosion of market share and it is unlikely to see more than 15 per cent volume growth during this fiscal.

With Hero Honda and Bajaj offering steep price cuts and discounts for various models, the two majors are locked in a fierce price war going on in the two-wheeler market. Hero Honda has already announced a price cut of Rs1,000 on its ''Splendor Plus'' and ''Passion Plus'' models, while Bajaj and TVS have announced discounts on their lower-end models.

The company is also under threat from its joint venture partner Honda Motors of Japan, which entered the motorcycles market on its own in September last year.

Hero Honda was able to outstrip the industry in the last financial year due to robust demand in the rural areas (good monsoons last year and a decent response to its new models). It is felt that on both fronts, the situation is likely to deteriorate. In the first quarter of FY''05, the company reported a lower-than-expected treasury income, leadimg to lower bottom line performance.

The company''s ''other income'' (investment in bonds and in government securities through mutual funds) fell by 36 per cent, YoY, to Rs230 million. The return on bonds has dropped to 4.5per cent, from 12.5per cent last year. This caused the company to take a big hit on its treasury income. The steep decline in ''other income'' due to lower treasury income led to unimpressive earnings.