India ops to feed Honda’s African expansion

It is among the top two-wheeler brands in India which is now staging a remarkable revival in its car business.

Honda Motor Company is clearly on a roll and its Managing Officer, Yoshiyuki Matsumoto, wants to ensure that the momentum continues. As a result, India will play an important role not only for the Asia-Pacific operations but also Africa, which Honda has identified as the future growth driver.

Matsumoto, who is also Representative of Development, Purchasing and Production (Asia and Oceania), believes the company has a big opportunity in Africa. This is where India will help out through supply of parts for Honda’s cars and two-wheelers.

The company’s two-wheeler arm, HMSI (Honda Motorcycle and Scooter India) is reportedly exploring this possibility. Its upcoming plant in Gujarat, scheduled for commissioning towards the latter half of 2015-16, has easy access to the port which could facilitate shipments to Africa.

India is also likely to emerge a hub for export of diesel engine parts to ASEAN. “Indonesia and Thailand are seeing their share of diesel vehicles increasing thanks to MPVs and SUVs which are getting popular,” Matsumoto told Business Line. Thailand also has a large population of pickups and Honda will eventually have to fit its range with new diesel engines. It was India which pretty much set the company’s diesel agenda especially when it was getting increasingly evident that buyers here were giving petrol the cold shoulder. This was largely due to the price differential of over Rs 20 per litre which tilted the market towards diesel.

Honda was virtually relegated to the sidelines because it only had a petrol engine portfolio to offer. It was only with the diesel version of the Amaze launched last year that it managed to hit the sweet spot again.

Yet, even here, what began as an 82 per cent customer component for diesel is now down to 55 per cent. The City has an equal share of petrol and diesel, while the initial order book for the recently launched Mobilio has a staggering 85 per cent opting for the diesel version. This kind of a diesel wave is peculiar to India and the fact that it is being replicated, albeit in smaller doses, across ASEAN is good news to Honda from an export perspective.

“India has great potential for Honda. It has a large population with many youngsters who are important customers,” Matsumoto says. This includes the company’s sprawling two-wheeler business which has been around for nearly three decades here and clocks up 3.5 lakh units each month.

The long stint includes joint ventures with Hero for motorcycles and the Pune-based Kinetic group which ushered in the gearless scooter revolution. Today, HMSI is the sole face for Honda’s two-wheelers where the Activa has been the biggest success story in scooters.

In contrast, the company’s car business is relatively young at 15 years and Matsumoto acknowledges that there is a great opportunity to draw its huge base of two-wheeler riders when they decide to graduate to cars.

The Amaze re-established the Japanese automaker in India and the new City that followed in January this year has kept the crowds coming. The significance of India was especially evident at this juncture as it was the lead country for the launch of the City which will now make its way across the world.

“The Indian market is price-sensitive and customer expectations are also different. However, the big volumes here help us localise faster and keep costs in check,” Matsumoto says. This is where Indian suppliers have shown their mettle and are now part of some key Honda global projects. From the company’s point of view, the India story has just begun.