Honda bets on diesel cars, localisation

Dec 26 2012, 02:56 IST
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SummaryHaving ended its partnerships with Indian firms — for two-wheelers in 2011 and cars in August this year — Japanese auto giant Honda Motor is working on a twin strategy for the Indian market.

Having ended its partnerships with Indian firms — for two-wheelers in 2011 and cars in August this year — Japanese auto giant Honda Motor is working on a twin strategy for the Indian market.

It plans to capture the top slot in the two-wheeler segment, where it is present through Honda Motorcycle & Scooter India (HMSI), and replicate the same success in cars by foraying into diesel engines. While the company’s growth in the two-wheeler space has been impressive since the break-up with the Hero Group, the company saw its sales plummeting in cars mainly because it does not offer a diesel variant. Also on the cards is a higher level of localisation to bring about competitive pricing.

“We want Honda to become a household name for cars,” said Jnaneswar Sen, senior vice-president, sales and marketing, Honda Cars India (HCIL). The company will be introducing its first diesel model, Honda Brio Amaze, in India in the first half of 2013. “Amaze is going to be the first diesel car from Honda in India and will be launched in the next financial year,” said Sen, adding the new 1.5L iDTEC engine for the Honda Amaze had been designed for the Indian market. “Our future product portfolio is being aligned with Indian needs with high levels of localisation. The current City and more recently the Honda Brio model, both have been developed keeping India as the lead country of development.”

For Honda, which in August bought out minority partner Siddharth Shriram-led Usha International’s stake in its car venture, focus on the car business is important as sales have been floundering for the past two years. In FY12, sales fell 8.47% to 54,427 units, when the overall passenger car sales were up 2.19% to 2.01 million.

In FY11, volumes were down 4% to 59,463 units. Many reasons have been attributed to Honda's problems and failure to secure a top position, despite being present in India for the last 16 years. Premium pricing issues were solved in 2011 and 2012 when increased local sourcing led to price cuts of up to R1.5 lakh for Jazz and City models, bringing them closer to the competition from Maruti Suzuki and Hyundai. The second issue was the delayed foray into the small car segment, something that has been addressed with the launch of the Brio in September 2011.

The last and most pertinent issue was the lack of diesel car models, which

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