New City, midsize SUV to drive Honda Cars India on a faster growth path

Japanese carmaker’s Indian arm, Honda Cars India (HCIL) is expecting to outpace the passenger vehicle (PV) market in the next one year with the introduction of City facelift, and the new midsize SUV which is planned to be launched in mid-CY2023, around July-September timeframe.

HCIL’s president and CEO, Takuya Tsumura, told Autocar Professional that the company will try to grow faster than last year with the new launches expanding the addressable market. The company is presently in a ramp-up mode and is set to increase its daily vehicle manufacturing at its plant in Tapukara, Rajasthan, from 540 vehicles in the present day, to up to 660 vehicles, starting April 2023, when it will be closer to launching the new SUV.

To strengthen the Honda brand in the Indian market and ensure long-term business sustainability, Honda Cars India plans to introduce one new model every year, starting 2024, in the Indian market. These new products will include hybrids and EVs as well in the future. The company will be launching the all-new mid-size SUV in the middle of 2023, the management said.

Honda Cars India, on Thursday, launched a facelifted variant of the new City with prices ranging from Rs 11.49 lakh to Rs 20.39 lakh, ex-showroom. The company has also expanded the reach of the hybrid-powered variants by introducing it in two variants – V (Rs 18.89 lakh) and ZX (Rs 20.39 lakh) – of the facelifted City. The prices of the revised City are around Rs 15,000-35,000 higher compared to the previous car, however, the company claims that the value extended to the customer is a lot higher, with ADAS features also being uniquely offered even in the manual-transmission variants of the facelifted City.

“With the facelifted City, we reaffirm our strong commitment towards electrification by introducing the extremely-efficient Hybrid technology in more variants and therefore, enabling more customers to experience the technology,” Tsumura said.

Higher allocation for City Hybrid
The company is expecting higher allocation for the hybrid variants of the updated City in FY24, and it expects the dual-powertrain alternative to account for 15-20% of the City’s sales in the next financial year.

Tsumura said that the demand for hybrids has been very high in India and due to lower allocation from Japan, HCIL was not able to cater to the rising demand. "With the introduction of the facelifted City, we should be getting higher allocation for hybrid variants, and we expect about 15-20% of the City’s sales to come from hybrid trim. We are pleased with a strong acceptance for hybrids in the market, although the tax difference between EVs and Hybrids is big. Going ahead if hybrids are viewed favorably from a taxation perspective, it will really help," he added.

Revamping operations, eyeing more models
After consolidating its manufacturing footprint from two factories to one, Honda Cars India was able to break into profit in FY22, and Tsumura assured that the company is likely to sustain the profitability even in the current financial year. The market is also moving up the price ladder, and there is an inclination towards feature-rice, and more premium models and variants, says the company.

While almost 60 percent of the sales of the Amaze and City come from the top trims, the ratio of automatic buyers too has gone up to the range of 40-50% for HCIL’s portfolio. The company says that the market is graduating up in terms of product price points and Honda Cars India will continue to focus on the premium end of the market.

To reinforce the brand Honda in the country, the company is yet again exploring the potential of bringing in premium models through the CBU as well as CKD route to India.

From a branding and retail perspective, HCIL is investing Rs 260 crore in the new customer interface (CI) of its showrooms, which will be rolled out along with the new SUV later this year. In terms of the footprint, presently, HCIL has about 326 outlets across 238 cities in the country, and it says there is a strong traction for the brand’s existing offerings – Amaze and City - in the smaller cities. The company claims the Tier 3 cities account for about 30% of its overall sales.

While it optimistically estimates the growth momentum to continue in FY24, it cautioned that the rate of growth is likely to come down on account of a high base, as well as rising headwinds in the form of rising costs on account of new safety regulations and interest rates.