October 1, 2012: Jnaneswar Sen, Senior vice-president, sales and marketing, Honda Cars India
Honda Cars India’s senior vice-president, sales and marketing, on the carmaker finally going diesel next year, increasing localisation levels in its Indian operations, and the launch of the automatic Brio next month. An interview by Shobha Mathur.
It is almost a year since Honda's Thailand plant was hit by floods which impacted production globally. How has it affected overall growth plans in India?
The impact was felt from November 2011 to mid-February 2012 when we were at 20 percent production. But since February 15 this year, things are normal and production is back on track.
The chances of floods recurring in Thailand cannot be ruled out in the future. Will Honda look at bringing its overseas suppliers to India to prevent a supply chain problem?
I am not aware that floods are likely to happen again. But localisation has been a focus area for us for quite some time. It is not because of the Thailand floods that we started localising but to be more competitive. Three years ago, we set up our R&D function for Honda Cars India at Greater Noida and have a team of 17 Indian and Japanese engineers whose top priority is to increase the localisation activity in the country and they are working on it for quite some time now. For instance, the Brio had a localisation of 80 percent last year and we expect it to touch 90 percent during this year.
Honda’s global CEO has, on September 21, announced the much-awaited launch of the diesel car in India during FY’14. Which model will roll out first with the diesel option?
Yes, the diesel engine is currently under development and it will be launched in India first in the entry saloon which will be based on the Brio platform. It will be used in new models across various segments in the future. We will also launch the Brio automatic at festival time this year.
With the diesel car market in India growing at a rapid pace, Honda has been losing on the sales front due to the absence of a diesel car.
Yes, the market is getting increasingly dieselised because of high government subsidy and not because of customer needs. As a result, in the last one-and-a-half year, the diesel portfolio has stepped up quite substantially in the market.It has put pressure on Honda but if you look at the current financial year, then our growth has been 54 percent from April to August and we have also increased our market share quite a bit. It was less than two percent at this time last year and now it is close to three percent.
The Union government has recently hiked diesel prices by Rs 5 per litre to counteract rising petrol prices. What does this mean for Honda?
As far as the increase in diesel prices is concerned, we have to look at it from two perspectives. On the one side, people are going in for diesel vehicles due to the subsidy. But even today the majority of customers drive petrol cars, which are very competitive in terms of total cost of ownership. It is a mindset that people are opting for more diesel. The second side is that the Union government is willing to look at an increase in diesel prices, but the gap between the two fuel prices is still substantial at Rs 22 and even more. So a rise in diesel prices does not indicate a sharp shift towards petrol cars immediately.
Among the recent Honda models, the new Jazz has done well but the City has been a tad slow due to the absence of a diesel version and the Brio is yet to really take off.
The Brio has taken off very well and has already garnered a 25 percent share in the petrol hatchback segment with sales of 2,500 cars per month. We do not have any waiting period for it at the moment. It has been well accepted and its overall sales volume, which has been 43 percent during the April-August 2012 period, has contributed largely to our sales growth this year. The Brio has been primarily targeted at a wide range of customers who are looking for a safe, economical and comfortable premium hatchback and has already sold 25,000 units in the first year of its launch. The customer feedback has been very positive for the Brio and we are confident that the model will do very well in the market in the coming months. Combined with excellent performance and best-in-class active and passive safety technologies, the Honda Brio is a perfect choice for customers who seek Honda’s durability, quality and reliability in their small car and are also conscious of styling and performance. The City, which is positioned in the C segment of petrol cars, has wrested a 52 percent share of the market with the rest of the cars trailing with 48 percent. The only problem is that the high diesel subsidy has dieselised the market and we are a player in petrol. The City does not have much of a waiting period either while the new Jazz is also doing well and has a waiting period of a month and a half. We have six products in India and our job is to focus on all of them.
Are you expecting the festive season to prop up sales for Honda, especially as the prime minister has announced a spate of reforms?
Yes, we expect improvement during the festive season because the entire industry has been going through a tough phase, so we expect customers who are waiting to buy as well as customers who buy during the festive season to come back to the market. And with the recent spurt in reforms, especially the decrease in Cash Reserve Ratio of scheduled banks by 25 basis points by the Reserve Bank of India, there will be a positive impact on interest rates for automotive loans as they are expected to come down a little. Besides, market sentiment also plays a large role in car sales; so if the sentiment continues to be positive, we expect improvement during the festive season.
Is Honda making any special offers this festive season?
Yes, in fact we are already giving some special offers to customers and that is only for this month. Honda will also launch the automatic version of the Brio during the festive season.
What is the status of the capacity expansion at the Tapukara plant?
We are making a lot of parts at Tapukara like body panel and engine parts including transmission cases, cylinder blocks, engine blocks and crank shafts. We have a capacity of 120,000 cars per annum at the Greater Noida facility, of which 40 percent is still to be utilised So once we utilise the Greater Noida facility fully, we will start planning for car assembly at Tapukara. Full utilisation will depend on the market demand. We export components like connecting rods, crankshafts and engine and body parts to our Thailand plant besides components are also headed to Indonesia and Philippines.
Will the new models planned by Honda roll out from the Tapukara plant?
At present, we do not have a car assembly plant there and what models we will make there will come later.
How do you view the growth potential and challenges for the auto sector in the Delhi-NCR region going forward?
Delhi-NCR has always been a big market and the most important market for Honda and we see it as an expanding market. With the amount of construction underway at Noida, Faridabad and Gurgaon, the market will continue to grow further.In terms of labour issues, as far as Honda Cars India is concerned, we have not faced those problems. We maintain a cordial relationship with the labour union and all other associates.
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