Monday, May 31, 2010

Honda Siel plans to place its small car above the volume market despite poor sales

Japanese automaker, Honda, is well on its schedule to roll out its small car for the Indian market. However, the car will not target the “volume-driven small car segment.” The upcoming hatchback car of Honda will be positioned above the volume market.

The new car was unveiled at the Delhi Auto Expo in January 2010. Honda Siel Cars India (HSCI) said that it would roll out the car in October 2011 and it would be priced less than Rs.500,000. Till now, the cheapest model of Honda is the Honda Jazz, which is priced at Rs. 7,11,000.

Fumihiko Ike, Honda Motor Corp. Chief Operating Officer Asia, Oceania said, “Our small car project is very much on schedule. We have not decided the likely price or the engine capacity of the small car, but the small car will be positioned slightly higher than the volume market……Everybody is looking at the volume market, while historically our cars have always been positioned slightly higher than the volume segment.”

Regarding the small car, Ike also said that his company would not launch the sedan version of the car.

The volume market is the most popular segment in the Indian car market. Cars are priced between Rs.200,000-400,000 in this segment. Popular cars in this segment are- Maruti Suzuki Alto, Maruti Suzuki WagonR, Hyundai Santro, GM Spark, GM Beat and Ford Figo (petrol version).

Last week, Takashi Nagai, the newly appointed President and CEO of Honda said that the company would focus on increasing localization of car components to make its small car more competitive in the Indian market. Honda is planning to produce 80% of the small car components in India.

Honda is now struggling in the Indian market. In the first quarter of 2010, sales of Honda models dipped 3% to 21,764 units against 22,376 units at the corresponding period last year. In March, sales declined 19.54% to 5,928 units. In April, sales declined 2.13% to 3,578 units.

Regarding the declining sales, Mr. Ike said, “It is a matter of concern no doubt, but we are not a volume player."

Honda is now planning to increase its sales up to more than 100,000 units in the next one year from the current 60,000 units per year.

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