Scotching any speculation that Honda Cars India may join the likes of American auto majors General Motors and Ford and exit the Indian market, newly appointed President and CEO of Indian operations Takuya Tsumura has said the company is looking at expanding its business in India and there is no question of an exit.
Honda is gearing up to launch its maiden made for India compact SUV next year, which will follow the launch of its City hybrid this year. Lack of SUVs is a major pain point for the Japanese firm at a time when they are all the rage in the market. In fiscal 2022, utility vehicles outsold passenger cars for the first time ever and the likes of Honda suffered while others like Kia, Hyundai and Tata that have a SUV heavy portfolio, gained.
Honda has seen its market share shrink from a high 7.26 percent in 2015 when it sold 192,059 units to under 3 percent today with less than 90,000 unit sales in a year. As a result in 2020, it decided to shut down its oldest factory in Greater Noida which had a capacity of 120,000 units per annum and discontinue its premium models like CR-V and Civic. It now has only four models–City, Amaze, WRV and Jazz, and operates one factory in Tapukara in Rajasthan which has a capacity of 180,000 units per annum.
“We are not going anywhere. There is no question of an exit. I am coming here to expand the business,” Tsumura said. “This is a very important market….world’s fourth biggest. Compared to three four years back, we are a bit scaled down but our business is now becoming stronger. Fortunately, with the actions that we took (shutting down Greater Noida), we are back in profits.”
“The foundation is still strong. After 25 years, City is a very strong number one in its segment with 8.5 lakh unit sales so far and Amaze is also a strong number two. It is a very good starting point for me,” he added.
While details of the upcoming SUV are sketchy, it is likely to be a rival to the Hyundai Creta and Kia Seltos. It is a belated attempt but it is not the first time Honda has been late to the market. Its foray into diesel technology happened quite late in 2013. The very next year, diesel prices were deregulated and the bull run for diesel vehicles started to ebb.
“The SUV segment is growing but it is also getting saturated. Alongside Creta and Seltos, Volkswagen and Skoda have also launched their products and by the time Honda’s SUV comes in, Maruti and Toyota would have also launched their models. It is a very crowded space,” said an industry analyst. “It is tough to say if it will do the trick. A sense of fatigue might set in by then and consumers may start looking at other form factors.”
“The SUV segment is growing and we should have (ideally) had some products but we do not. But we can fight back in the market and with people shifting to SUVs we can get them to Honda,” Tsumura said. “We cannot delve too much into the past. I see a bright future ahead. We have to believe in it.”
For this year, the company is launching the strong hybrid version of the City–e:HEV, which will offer 40 percent better fuel economy than the petrol powered City. Earlier this week, Honda Motor Corp announced its global electric vehicle plans wherein it is investing $ 64 billion to launch 30 EV products by the end of this decade. Tsumura said while India would play a role in it, the market was still too raw for pure electric vehicles as lack of charging infrastructure meant hybrids made more sense. He also made a case for lower GST on hybrids.
“The direction is to go fully electric and we understand that but the first step towards that is hybrids. We are sure about the technology, it is stress free with no need for charging,” he said. “It is a good solution for reduction of carbon emissions and pollution as well. Our President (Global) has already explained our overall stance on electrification and we would also take steps towards that in India in future. No doubt about that.”
“The GST rate for hybrids is very high in India, there is no tax concession for it. If we have lower GST based on less pollution then the consumer gets to pay less for it and that is a good opportunity for us to expand the hybrid line up,” said Yuichi Murata, director, marketing and sales, Honda Cars India.