'Honda started with sedans, but we'll follow the market'

With the backing of the top management in Japan and fresh resources lined up for the future, Honda is re-aligning the game plan for the Indian car market. The new plan involves aggressive SUV product launches that are highly localised and feature-packed. The range will be heavily electrified with both EV and hybrid powertrains. The Japanese company also wants to capitalise on India as a key export hub in the future.

In an interview with Autocar Professional, Takuya Tsumura, president and CEO of Honda Cars India, shares his new vision for India and how the company is changing its gameplan to come back into reckoning.

In the age of SUVs, Honda Cars India is introducing a sedan. What are your aspirations and ambitions for the model?

The market itself is growing slowly. However, due to the recent launch of competition models and our introduction of Amaze, this segment will become a little more active. We are sure our products are well-equipped to meet the customers' needs, which will help us get a particular share of sales. I am expecting a lot, and with this product, I think we can sell more. We have also decided to offer a competitive introductory price. We have focused on offering quality fit and finish. Don't evaluate a car based on features alone. You can't compare it with SUVs.

What is the future of sedans?

We started our business in India with the City sedan. We still believe that even though the current market is small for the segment, the sedan represents our origins and will continue to be important in India. Hence, we are planning to have updates on our products in the future. However, as the market is moving towards SUVs, we have decided to offer more models in that segment.

Last year, we announced that by 2030, we will launch five models: one Elevate, one Elevate-based EV, and three others. We are now planning to introduce more to the market. The sedan remains essential, and we will continue to develop it. However, we cannot ignore the growing SUV segment, so we will be more aggressive there.
Carbon neutrality will also be an important issue in the future, which is why we are investing more in electrified vehicles. CAFÉ 3 also starts in 2027.

Are you looking at localising hybrids?

Not only hybrids but generally, if we want to expand the business in India, we should do more localisation. Amaze has relatively high localisation, but future technologies also need to be localised. It is part of the plan.

Is it possible to see a hybrid in Elevate?

With the CAFÉ 3 regulation coming, while developing the Elevate, we had to choose whether to develop more hybrid cars or BEVs to meet the norms.

We concluded that it is critical to have a BEV on the Elevate platform to meet the norms, but with the other models in the future, we have decided to go with hybrid technology. While there may be an Elevate-size new EV, Honda will also offer a future lineup with hybrids.

There are different hybrid technologies, plug-ins, range extenders, and strong hybrids. Which one would you consider?

At this moment, we are considering the strong hybrid to achieve our CAFÉ requirement and Honda's target of selling two-thirds of our vehicles as electrified vehicles by 2030. All our future product planning and development is happening based on these targets.

There will be a plug-in hybrid option in specific markets, which is costly in India. We have to consider what is the best fit in India's context, and at present, it is strong hybrids.

Unfortunately, in India, the hybrid benefit in tax is very small, only a 2% difference, which is why we decided to proceed with BEV as one alternative and strong hybrid as the other alternative.

How does Honda Motor view India and its market potential in the future? 

Despite the slowdown in the ASEAN and Chinese markets, where volumes are declining, Honda expects India to continue to grow in the future.

That is why they have decided to invest more resources in the country. We are now discussing how to introduce new models, powertrains, and technologies in the future. Compared to last year, we already have some models in the pipeline or under discussion, so we can announce them soon.

You have consolidated Honda's operations in the country. Given the market share challenge, is it time for the company to dedicate more resources to the Indian market?

Yes, I can say so, but the game has changed a bit. We cannot only chase the number of sales. We have to control carbon neutrality and, of course, profit as well.
If we cannot achieve a certain level of carbon neutrality, then we have to decrease the sales units. We must see this in its entirety. It is not the same as before when you looked at just pushing the numbers without addressing CAFÉ.

On the other hand, the market is growing, so we are asking why we can't reach certain numbers as well. So, we are seeking both now. We have to build volumes as it's the company's goal for the future, yet we have to balance it with profits and CAFÉ requirements.

Do you see yourself utilising the Tapukara factory in the next two or three years?

We are currently producing about 1.4 lakh to 1.5 lakh units at the Tapukara factory, which can be expanded to 1.8 lakh to 2 lakh units. We still have Greater Noida, so we always maintain and keep possibilities [in mind] when we decide to expand. We hope that Greater Noida will come back, but at the moment, there is no clear plan.

It is part of the thought process, as the expansion of the portfolio may call for more capacity in the future. At some point, we need to think about electrification. If we produce more BEVs, we may have to consider how to make the batteries. There are various considerations, but we are yet to define and decide.

Is India a critical export hub for the future of electric vehicles?

The EV based on Elevate is a critical model. India will be the first country to produce it. We can cover the demand of many markets, but the plan is yet to be finalised. India will play an essential role in the future in terms of exports.

What share of production do you see exports contributing?

We have seen exports move up to 49% thanks to strong demand for Elevate in the overseas market. However, that share has also moved up because domestic market growth has slowed down. Exports will be significant, but the exact share is hard to share.

Why do you think Elevate is facing a challenge in the marketplace?

I think Elevate is in a very different segment. Even this year, five new products were launched in the segment. Today, about 22-24 players fight each other for a share of about 70,000 cars in a month, so it's a very crowded segment.

The second point is that within this segment, 55% or 52% of sales come from diesel vehicles—which is not a market we cater to. The balance is petrol. So, we cater to a smaller segment than the other players.

This year, fresh demand is under pressure, pent-up demand has gone, and players in the market have been giving huge discounts.

Some players in the market have a long waiting period; they give discounts of 1-2 lakh, whereas Elevate has not travelled that path. We are providing more value-added services like a seven-year extended warranty, a free maintenance package, or some cash discount; we cannot afford to fight a head-on battle in terms of discounts, and this definitely impacts the volume as well.

Moreover, by giving high discounts, we don't want to disappoint the Elevate buyers who recently bought the car. At the same time, 74% of what we sell is CVT; the customers who want CVT do not go to rivals.

How can you appeal to non-Honda loyalists?

We have recognised that our products need to be more feature-packed, especially in terms of connectivity, and that there has to be more gadgetry on board – that is what younger customers want. We are implementing that in our future products.

On the powertrain front, we are concentrating more on electrified vehicles, so you will have BEVs, hybrids, and software-defined vehicle features from us in our cars. We are focused more on those areas.

We have partnered with IIT in Mumbai and Delhi for autonomous features that will help in our future programmes as well. We are also partnering with many players globally, like Nissan, for Software-Defined Vehicles. All this will call for hefty investments in development; we are committed to it.

What is your vision - where will India figure in your global operation?

We have to be in the top five [markets] shortly, and our potential is to look higher at the top three markets for Honda Motor Company. It is possible, as India is the third-largest market in the world. In motorcycles, we are already number one in the world—we have to come back to a better position in cars. India has the potential to be in the top three markets in the world for Honda; hence, there is more focus on this market now.

How do you see the Indian market evolving in the coming years?

Given the strong demand for personal mobility and the growing economy, the Indian market has the potential to more than double to 10 million in the coming decade and a half. We need to strike the right balance between volumes and profits and deliver sustainably, both from an organisational perspective and from an environmental perspective.

India will continue to grow. The only challenge is increased regulations—on CAFÉ and safety, amongst others—which could add to the cost and slow growth. We also need clarity on EV support for the long term. A sudden change in that may impact business.

The market growth is there, electrification is necessary, and we will decide what is best based on the regulations. If there is long-term clarity on the direction, it will help sustain the growth.

Like our rivals, Suzuki and Hyundai, Honda needs to do more in India regarding localisation and developing new technologies, which is the direction we are considering. We must also take inspiration from the two-wheeler business to evolve and grow. Our motorcycle division has proven this over the last twenty years, and we need to follow a similar direction.