Forbes India 15th Anniversary Special

Honda to shift focus to premium cars again

The Japanese company has seen a sharp fall in the volumes of its compact cars in India

Published: Feb 20, 2017 04:01:38 PM IST
Updated: Feb 20, 2017 10:17:58 PM IST

Honda to shift focus to premium cars again
(Image courtesy: Overdrive magazine)

Honda Cars India is at a cross road. Its strategy to enter the compact car segment with Jazz, Brio and Amaze has not played out the way the Japanese car maker had hoped for. In the April-January 2017 period the company sold just 57,739 compact cars compared to 86,679 cars in the corresponding period of the previous year – a fall of 33 percent. The compact car segment, during this period, grew by 4.5 percent. “The entry segment is shrinking [for us] and in future we will focus more on the premium segment,” said Yoichiro Ueno who took charge as President & CEO of Honda Cars India about 10 months ago. “Honda is a premium car brand and Accord Hybrid has only reinforced that perception,” he added.  This is a clear U-turn from the strategy the company had followed till recently – of straddling the entire spectrum of the car market. Its eight model line-up catered to the compact and premium segments.

The company is already rolling out its strategy of focusing on bigger cars. It recently launched its new Honda City model which has seen strong bookings. “We will also be introducing a cross-over based on the Jazz platform later this year,” he said adding that the company is studying the localisation aspect for the New Civic it has launched elsewhere in the world. “It will take some time to bring the car to India,” he added.

But the company’s problem does not lie in the compact car segment alone. Sales of its multi-purpose vehicle (MPV) Mobilio has also fallen. “Mobilio sales have been under expectation,” said Ueno. The company is now attempting to push the volumes by focusing on cab aggregators.  It is also re-positioning its other model BR-V. “It is not a compact SUV. It is between a compact SUV and a MPV. BR-V customers are unique and we have created a new segment,” he added.

Its flagship model in India Honda City too saw fall in volumes. . It sold only 45,395 units in April-January period as against 67,006 units in the same period last year. “The model was on a run-out phase as the new model was getting ready for launch,” explained Ueno. Has Maruti Suzuki’s Ciaz eclipsed Honda City?  Ueno disagreed. “If you look at the petrol version of the two brands, City is dominant and its volumes are several times higher than Ciaz. In Diesel version the volumes are closer,” he said. Where the Ciaz, it appears, has scored is in bringing in the smart Hybrid technology that also benefits from tax sops. “The new City has lot of features and an attractive design. It should help us negate Ciaz’s tax benefit,” Ueno added.

Falling sales are hurting Honda’s performance. Its overall market share has declined sharply to 4.95 percent during April-January 2017 period as against 7.03 percent in the corresponding period of the previous year. While it is fully utilizing the capacity at its Tapukara facility in Rajasthan, the Noida plant is operating only one shift. But despite this the company has acquired 380 acres of land in Gujarat for future use. “Volume of Honda cars has risen from 60,000 units to 1.8 lakh units over the last three years. This is a good foundation for us to build upon. Over time India will shift to bigger cars,” said Ueno.

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