Honda Cars India eyes larger share of the pie

Honda Cars India had been hamstrung by the lack of diesel engines in its portfolio till last year. But, it has since recorded rapid growth after the introduction of the Amaze in 2013 and with the multipurpose vehicle Mobilio during the current year, following up on the roll out of its new City powered by its i-DTEC diesel engine.

Now, the Indian subsidiary of the Japanese automobile major is eyeing the compact SUV segment. It is in the process of taking up feasibility studies for a Sports Utility Vehicle, a segment which has created a big buzz in the country’s automart since the launch of the Ford Ecosport and Renault Duster.

Honda India finally seems to have gotten on to a cruise mode in India and gained back some of its lost market share. With two manufacturing plants in India at Greater Noida in Uttar Pradesh and Tapukura in Rajasthan, the three new models from its portfolio now command solid numbers.

If the current trend continues, the company, which commissioned its second plant in India earlier this year, taking its installed capacity to 2.4 lakh units per annum, would have to ramp it up further by 60,000 units in one of the locations, according to Hironori Kanayama, President and CEO of Honda Cars India Limited.

During his recent visit to Hyderabad, Honda’s 200th in India, Kanayama explained that dealership expansion was a critical aspect of the company’s plan to hit a sales volume of three lakh by March 2017. The network growth plans envisages 230 dealers by March 2015 spanning 150 cities, a growth of 35 per cent during 2014-15, and later to 300 dealerships by March 2016. It took 11 years to reach 100 dealers for Honda Cars and another five years to hit 200. The next 100 dealerships would be up in 16 months, with 70 per cent of them in Tier II and Tier III cities. Network expansion is critical for the company’s overall strategy for growth in India as Honda wants to be closer to the customers for better after sales and to build trust and loyalty, he explained.

The success of Amaze, City and Mobilio, which have helped the company notch up sales of over one lakh units in the first seven months up to October 2014 this fiscal, has forced the company management to delay the proposed launch of its upgraded bigger hatch Jazz to facilitate sales of these models. The company has also started second shift to meet growing demand.

When asked if the company would consider introduction of a mass market small car below their smallest offering – Brio, Kanayama says that he believes there is no need as most buyers are already looking to upgrade in the Brio range.

A measure of the confidence stems from the growing numbers. In April-Oct 2014, Honda sold 1,01,442 units as against 70,831 units during the same period last year, registering a 43 per cent growth. Last year ended March 2014, it closed with 1,34,000 units, up 83 per cent.

Honda expects that the diesel versus petrol ratio is likely to settle at about 50:50 over time since fuel prices have now become market driven. But it also expects big numbers coming in from Tier II and III cities.

Undeterred by the recent slowdown in sales, after about six months of growth, Kanayama believes that the Indian automotive market is poised to grow like the Chinese market, where the turning point was 1998. The long term market is extremely positive, he feels.

On the entry into SUV segment, possibly bringing some of the models from its global range, Kanayama said no decision has been taken as yet as feasibility is underway.

Given the segment potential, the new SUV could be the next big bang offering from Honda.