Resurgent Honda Cars aiming high in Indian market

A year ago, Honda Cars was battling for survival in India as sales fell sharply and lack of diesel cars hurt it badly. The Japanese carmaker, known for its quality vehicles, had to pull out some models such as Jazz, City, Civic and Accord from India. However, Amaze compact sedan, launched in April 2013, changed its fortunes for better and its sales are back on track now. First model to be offered with diesel engine in India, Amaze clocked sales of over 90,000 units since the launch. Also the City sedan came back with a bang in January 2014 and its diesel version helped it to race to the top of premium sedan segment, till then dominated by Hyundai Verna. “Our sales increased by a staggering 83 per cent to 1.34 lakh units last fiscal despite the sluggish market. Our target is to reach 3 lakh units in sales by 2016-17 and we are confident that upcoming new models including Mobilio MPV and Jazz hatchback will help realize the goal,” Jnaneswar Sen, Sr Vice President (Sales & Marketing), Honda Cars India, told The Hans India in an interaction.

Excerpts:

What kind of new models Honda Cars intends to launch in India?

We are launching Honda Mobilio next month. It marks our foray into the multi-purpose vehicle (MPV) segment in the country. Mobilio will be followed by Honda Jazz premium hatchback later this year. Both of them will be available in petrol and diesel versions. In MPV segment, there are several models already. If you look at the entire MPV segment, there is Maruti Suzuki Ertiga at the lower (compact) end while at the top end (large size), Toyota Innova dominates. Besides, Chevrolet Enjoy, Nissan Evalia and Mahindra Xylo also compete in the segment. Today, MPV segment in India is seen as one category. But we expect Mobilio to create a sub-category called midsize MPV segment and attract new customers into the Honda fold.

Are you looking at the other segments such as compact SUV?

We are already present in the SUV segment through CR-V, but it caters to the premium segment. The country saw large growth in the compact and midsize SUV segments in the past two years. So, we are also looking at these segments actively, but we are yet finalise our plans. At present, we have Brio hatchback and CR-V which are available only with petrol engines. Besides, Amaze and City are also there. The launch of Mobilio and Jazz expands our lineup to six models.

What is contribution of diesel models to the Honda’s overall sales?

At present, the diesel versions of City and Amaze account for 55 per cent of their total sales while the remaining sales come from petrol variants. When we launched Amaze in April 2013, the sales of diesel version accounted for 82 per cent as everyone wanted a diesel version whether they needed it or not. As diesel fuel prices started going up and gap between petrol and diesel prices narrowed, customers shifted to petrol versions gradually. Moreover, many realized that buying a diesel version at higher price would make sense if their monthly usage was below 2,500 km. Customers are a matured lot now and they are taking informed decisions depending on their need.

Is Honda Cars exporting vehicles from India?

We do export both components as well as the vehicles from the country. Last year, our components exports were worth about Rs 300 to 400 crore. Coming to the vehicles, we exported 5,000 units last fiscal. This year, our target is to increase exports of both components as well as vehicles. We are planning to export 9,000 units of cars.

What is your current market share in the domestic market?

If you look at just cars, then Honda Cars is third largest carmaker in the country after Maruti and Hyundai. We stand at fourth place in the overall passenger vehicle segment which also includes MPVs and SUVs. Our market share was five per cent last fiscal. We expect to increase our market share as long as we grow faster than the industry. But we can’t quantify the increase because it also depends on the models launched by competitors. However, we have a clear goal when it comes to the volumes. Our objective is to increase our annual sales from 1,34,339 units last year to 3 lakh units in the fiscal year 2016-17 which is two years from now. Mobilio and Jazz will contribute to our growth, in addition to the existing models. We may also launch some more new models.

How did excise duty cuts benefit the industry?

Excise duty cuts announced in Interim Budget in February this year revived sentiment and led to increase in footfalls into showrooms. Though the revived interest did not translate into sales initially, we could see some positive growth in May. Therefore, the cut would benefit the auto sector in the long-run.

What are you expectations from the Budget 2014?

We expect the government to implement GST (Goods and Services Tax) as fast as possible. The multiple taxes are adversely impacting the auto industry. Currently, there are a lot of taxes on vehicles, which include excise duties, central sales tax, education cess, VAT, Octroi as well as registration tax. There is a need to simplify this complex taxation system and the GST will do that. In addition, we are also expecting more clarity on fuel policies and whether subsidies on fuels will continue. If there is clarity on this, we will be to decide on investments plans for diesel and petrol models.