Honda Cars will stick to premium lane in India

Yoichiro Ueno slips in a detail, which is more than a broad hint on the importance of India in his company’s global automobile roadmap.

“The Indian market was the fifth largest for Honda last year and was just behind Germany,” says the President & CEO of Honda Cars India. “This year, it has overtaken Germany and is the most vital emerging market for us.”

As a result, headquarters in Japan is taking a far more aggressive stance for countries such as India, which could play a pivotal role in the overall automobile strategy. This also goes in line with what Honda’s global CEO, Takahiro Hachigo, highlighted some weeks ago in his Vision 2030 presentation where greater regional cooperation will drive change in the coming years.

The WR-V, recently launched in India, is testimony to this strategy as it was jointly developed with Brazil. What is even more heartening is that it has been notching up good numbers with nearly 40 per cent coming in from smaller towns.

“This is good for brand Honda since we have a strong premium image in big cities but perhaps a relatively weaker presence in Tier 2/3 regions,” says Ueno. “The WR-V is helping us become more popular in these parts of India.”

This was also the first model where the local R&D team was “deeply involved” with the project. Till then, they were mainly working on local component development but the WR-V marked the first instance of developing a product. “A lot of our young engineers learnt a lot and will now be ready for future challenges,” he adds.

Going forward, there could be some more “interesting cooperation” with R&D in Japan, which is constantly getting market feedback from India to develop global models for the future. To that extent, this could also be interpreted as a new phase of development in Honda’s strategy for emerging markets keeping in line with Vision 2030.

Yet, it is not as if things have been hunky dory for the Indian arm that has gone through more than its share of headwinds. It struggled without a diesel model when the entire market had pretty much turned its back to petrol some years ago. When a diesel alternative was offered, customers queued up for petrol all over again when fuel price deregulation followed knocking off the diesel subsidy. In addition, products such as Mobilio and BR-V just did not do the trick that puts in context why the good response to WR-V is critical.

Ueno is reasonably confident that things are gradually looking up for the company. “In the beginning of last year, we had a bit of an inventory issue with the diesel-petrol shift in the market, he recalls. “However, we got back on track in 5-6 months and were in a much better position by end-September.”

Then came the domonetisation shocker, which took the wind out of the automotive market with two-wheelers, in particular, facing the brunt of the move. Honda Cars managed to weather this storm too and Ueno says the situation is much better coupled with the success of new models. To that extent, the momentum is back with dealers far more optimistic of “a very good year going forward”.

In a way, the setbacks also helped the team introspect and put things in perspective. “We are now in a better position to understand expectations for a Honda brand, which is premium and different from others,” says Ueno. “While market share is important, our focus is to establish the brand not only in volumes but image.”

As he candidly adds, it is not as if brand Honda is losing its sheen in India but the truth is that others are catching up and the gap is narrowing down. The challenge, therefore, is to grow the brand image even more and ensure that the gap stays reasonably wide vis-a-vis competition.

So, how did things go wrong in the first place from the image point of view? Ueno believes this perhaps had to do with the fact that Honda products were launched to directly compete with Maruti and Hyundai . “We tried to achieve a similar price range and set of specifications, which caused a slight discrepancy with customer expectations of Honda,” he explains.

“We are developing future models and, even for existing ones, we are reviewing the lineup in terms of specifications,” says Ueno.

Interestingly, in the case of the new City, the company decided to add “a very expensive variant with a host of features”. Despite this, nearly 60 per cent of the bookings during the first month were for the top-end version.

The response showed that, even in a price-sensitive market such as India, “expectations from Honda are a little bit more premium”. Ueno reasons that if the company can provide “proper positioned” cars, customers would be happy to pay a little more. He adds that in emerging markets, keeping the right positioning is important along with a differentiator product. “Awareness and presence is important for cars to become successful,” he says. From Honda’s point of view, it is perhaps more pragmatic to be patient in India, which is on its way to becoming the third largest car market .

As Ueno says, a lot of new buyers will come when real motorisation happens (ideally the period when annual production is around 10 million units) and affluence levels increase.“We have to achieve some kind of premium position in each segment by offering features, quality and experiences of buying that is typically Honda. The key is to offer excellence at each point,” he says.

The market here is also “gradually globalising, which is beneficial” to Honda. For instance, the sub four metre rule is unique to India and clearly meant to promote small cars. However, he adds, some customers may be becoming more mature with “a desire for a large variety” of cars.

“If some of these regulations are globalised, India will become more open as a market. In most car companies across the world, mainstream models are over four metres and if this regulation is reviewed, customers in India will have more opportunities to get globally mainstream models,” says Ueno.