Hironori Kanayama is quite content with what India has to offer as a standalone market for his company’s cars. He is actually happier steering clear of exports.
“Frankly speaking, exports have become risky, in fact riskier than domestic sales, because they are affected more by exchange rate fluctuations,” the President and CEO of Honda Cars India told Business Line on a recent visit to the city.
Imports from japan
As Kanayama puts it, the global economic situation is “changing rapidly especially the exchange rate.” The (Indian) rupee had reached an all-time low last year, but has since recovered lost ground. Likewise, the yen was strong not-so-long ago but has since depreciated considerably. As a result, imports from Japan have become a lot cheaper.
Ideally, companies like Honda could not have asked for anything better (the cheaper yen did wonders for Maruti’s financials which were announced last week). “We can take advantage of the situation though this does not obviously mean that we can shift production from Indonesia to India,” Kanayama quips good-naturedly.
Yet, Honda is only too aware that the yen’s rollercoaster ride is an aberration and the job on hand is to focus on localisation. “Our task is to control costs and constantly enhance quality. We do not know how much further the yen will depreciate and cannot, therefore, build our business model around this assumption,” Kanayama says.
Till the 1980s, Japan was the best option for exports thanks to a strong yen. Companies such as Honda and Toyota have since focused on local production and built plants across the world. As a result, India is now a strategic location in Asia while Thailand and Indonesia are critical points in the Asean region.
“We export parts from India to Thailand and Honda UK but not so much across Asean,” Kanayama says. This is because countries here operate in the free trade zone which makes movement (of parts) cheaper without tariff barriers.
Little wonder that Japanese auto-makers are hoping that India will join the FTA (free trade agreement) parade soon. “When that happens, it will change India’s role in Asean. We have the engine parts facility in Rajasthan which can hopefully be a gateway for exports to Asean,” Kanayama says.
Honda is a lot more upbeat on its car business in India with the launch of the Amaze and the availability of a diesel engine option.
“We were left behind in the market simply because we did not have a diesel model,” he adds. There was little the company could do in the interim though its “presence in the petrol segment continues to be very strong”.
Kanayama came to India a year ago and his top priority was to increase customer satisfaction and trust in his company’s products. Time was spent creating the foundation for the Amaze over the last year.
“Word-of-mouth was critical before we launched our diesel model so that the Honda universe would expand dramatically thereafter,” he says.