Honda Cars India is expected to resume its strong growth curve this year. After a blip in sales in 2016-17 due to the effects of demonetisation and shift in fuel preferences, the company is now hoping to the end the current fiscal with a strong double digit growth.
It recorded a growth of more than 17 per cent during April – October 2017 with total sales of 105,503 units compared to 90,422 units in the same period last year. Two new models – New Honda City and Honda WR-V – launched in this calendar year – have been bringing strong volumes for the company. Also, the company has been getting some incremental volumes for BR-V in the larger UV segment.
According to industry analysts, in absence on any external shock, demand environment in passenger vehicle segment is expected to remain strong in third quarter of this fiscal on account of low base of last fiscal, post demonetisation.
UV sales maintained strong double digit growth trajectory, as it is a key beneficiary of tax revision post GST implementation.
Domestic PV sales crossed 3 million mark in 2016-17. Considering strong growth in compact UVs and premium hatchbacks, overall realization of industry has improved by 5-8 per cent in FY17 which when coupled with healthy volume growth expectation augurs well for OEMs.
Given the low penetration levels in the country, the long-term prospects of the industry remain favourable. The domestic PV sales growth is expected to grow by 9-10 per cent in this fiscal, according to a report of Icra.
Jnaneswar Sen, Senior Vice-President, Marketing & Sales, Honda Cars India said early trends in November also indicated that the volume growth was in tact.
He also attributed to the strong correction measures that were undertaken by the company to ensure reasonable and healthy stocks at dealerships helped.
“As a result, dealers were able to focus on healthy retails through the year. With both City and WR-V doing well on retail level, we are confident of ending 2016-17 with a double digit growth,” he said.
City – the flagship brand
Actually, the calendar year 2017 has been a rewarding one the Japanese auto maker. Its bestselling mid-size sedan Honda City achieved sales milestone of seven lakh units since its first introduction in the country in 1998 and carries the record of being the only premium sedan to achieve this feat in the Indian market.
The new Honda City, now in its fourth-generation version, enjoys a huge brand loyalty and a special place in the hearts of the customers in the country.
With the new City, Honda is a staging a strong come back in the mid-size sedan segment to regain its top slot.
“India currently accounts for 25 per cent of worldwide sales of City. It’s a complete package of sporty looks with advanced safety, superb driving performance, high fuel efficiency, best comfort and a rich equipment list. We hope Honda City will retain its much-loved brand status in the years to come,” said Yoichiro Ueno, President & CEO, Honda Cars India Ltd.
Generation-wise sales of Honda City in India
Cumulative sales in India since launch 7 lakhs Fuel type
|Cumulative sales in India since launch||7 lakhs||Fuel type|
|1st Generation City (1998 – 2003)||59,378||Petrol|
|2nd Generation City (2003 – 2008)||177,742||Petrol|
|3rd Generation City (2008 – 2013)||192,939||Petrol|
|4th Generation City (2014 – till current period)||269,941||Petrol/Diesel|
During April-October 2017 period, City has narrowed the gap between its rivals Hyundai Verna and Maruti Ciaz. With the continuing sales momentum, it is hopeful of securing top slot in the coming months.
WR-V – emerging winner
Honda is also betting big on the WR-V, a subcompact SUV, which is taking on Maruti’s Vitara Brezza and Ford EcoSport.
With encouraging response, WR-V, the sporty lifestyle vehicle, has emerged as a strong brand in the compact SUV segment.
The company said the response to fully loaded top variant – VX MT variant offering premium features like sunroof, advanced infotainment system is overwhelming accounting for 80 per cent of WR-V sales. Honda Cars India has sold more than 33,000 units of WR-V in India since its launch in March this year.
With strong volume growth, India has emerged as the largest market for Honda in its Asia and Oceania business region. Last year, the company had sales of 724,000 units in the region with a growth of about 11.5 per cent.
“In our entire Asia Oceania business region (which excludes Japan and China), India is currently the largest market for Honda, and is expected to increase its importance in Honda’s global operations in the future,” said Sen.
To further consolidate its presence in India, Honda Cars India has an aggressive plan of launching 6 models in the next three fiscal years. The new models will come starting from next fiscal to 2020-21. These would include both new cars and as also the next-generation version of existing models.
Among other models, Honda is also expected to introduce a new version of its compact car Amaze, which has been facing challenges after the introduction of new Maruti Dzire.
Described as the family sedan, Honda Amaze has received overwhelming success in the Indian market ever since its launch in India. It had sales of over 2.4 lakh units in India.
According to market estimates, A3 segment is dominated by Dzire, Hyundai Xcent, Tata Tigor, Honda Amaze and Ford Aspire.
Elaborating on the new launches, Sen categorically said that it would not enter entry segment as it wouldn’t want to steer away from its premium focus in India.
“We believe the premium image comes from the entire experience with a brand. Our focus has always been to provide best quality products to our customers in India. We have also consistently achieved top rating for quality in studies done by various agencies year after year,” he pointed out.
Honda has also been involving its Indian R&D team in a bigger way in its new vehicle development.
Its WR-V was a regional model developed mainly by the Honda R & D centre in Brazil. But, Indian R & D team played a significant role in designing the new WR-V along with Honda’s other R&D teams. Indian R & D base is expected to play a crucial role in the launch of upcoming models too.
Meanwhile, the company has also started works to devise a strategy for the launch of electric vehicles in India. Though Honda feels India will need a different type of strategy as it is a price-conscious market, Honda India’s parent has started accelerating the work on electric vehicle technologies for different markets.
But Sen felt that hybrid models could be encouraged in India with the government support for a smooth transition to electric vehicles.
Vision plan for electric vehicles
Honda’s headquarters has set out a vision under which it will have two-thirds of all its automobiles in electric format by 2030.
It recently introduced Clarity series, its first model with a line-up including plug-in hybrid, battery EV and fuel cell variants. Concerning battery EVs, Honda will introduce a China-exclusive model next year.
“In addition, dedicated EV models for other regions are also under development,” said company’s latest annual report.
To strengthen its capabilities in EV space, Honda established an EV Development Division within Honda R & D in October 2016. A specialised team will be in charge of developing the entire vehicle, including the power train and chassis.
While its Headquarters is aggressively working on future technologies, Honda Cars India seeks to expand network and improve service quality to boost its sales and market share over the mid term.
The company has a network of 348 dealer outlets across 234 cities in the country. The dealership network has been doubled in the last four years and the company has established a strong presence in Tier 2 and Tier 3 markets. It plans to increase the network to 360 by the end of this fiscal.
Sen also explained that the Honda Cars’ service cost were reasonable as against the perception in the market.
He said the perception was due to its legacy in India. The company started selling its models in India from 1998. But it was present only in the premium segments.
“People still perceive that we are expensive to maintain. It is not true. We are working hard to prove that we are reasonable to maintain. There have been several initiatives in terms of reducing labour costs and parts pricing,” he said.
It has also launched a new service website dedicated to its valuable customers on its corporate website www.hondacarindia.com. The new website has been developed by understanding the need of customers to access the service related information for their vehicle in an online, transparent and convenient format.
Sen stated that the company had been extensively digitising customer service operation and the new service portal will help establish a direct connect with its customers.
Though Honda’s car exports from India are evolving, it has been exporting vehicle parts in a big way to its plants in other parts of the globe. It has been shipping crankshafts, manual transmissions and other components. It recently started exporting 1.6-litre diesel engines to Thailand, from its manufacturing facility in Rajasthan. In 2016-17, its parts exports’ value stood at Rs.1140 crore.
Honda Cars India has two plants – Tapukara in Rajasthan and Greater Noida at Uttar Pradesh. The combined capacity of the factories is 2.4 lakh units. But it can be increased further upto three lakh units if needed. The company’s annual sales are in the range of 1.6-1.7 lakh units.
The company has so far invested about Rs.8700 crore in the Indian market across areas and is employing close to 10,000 people.
With favourable growth outlook for the Indian passenger vehicle industry and upcoming new launches, Honda Cars India expects improvements in its capacity utilisation over the medium term.