Honda's been in India for close to two decades. It needs a turnaround plan

Topics Honda | Auto sector

Honda also needs to be more open-minded as far as new business models go
Honda is Honda.” Over the years, those three words have come to mean something of a catch-phrase with a strong inference to top scores for reliability and strong engineering capability as far as automobiles go. Except that in India, those words haven’t helped the company garner volumes nor market share in the close to two decades that the Japanese auto-maker has been here.

In fact, over time, the company has actually started to decelerate. Recently, it announced that it would be stopping production of the new Civic that it launched a year and a half ago, as well as the CR-V, which represented its only full-sized SUV in its portfolio in the market.

The company also said it would consolidate operations with its Greater Noida plant, where it will close production, and continue manufacturing at the Tapukara plant in Rajasthan.

The numbers speak for themselves.  Last year, Honda sold 102,000 cars, down by almost 80 per cent from the year before, partly on account of factors that included the switching over to new regulatory norms, and partly because it lacks the right products.

“At this moment, it is difficult to produce Civic and CR-V in the current production line layout at Tapukara plant, which was conceived as an integrated plant with high efficiency to produce small and mid-size cars. Civic and CR-V are our global best sellers and it was indeed a very tough decision for us,” said Rajesh Goel, Senior Vice President and Director, Marketing and Sales, Honda Cars India.

But Suraj Ghosh, who leads the South Asia division of Powertrain & Compliance Forecasts at IHS Markit, said the problem could lie in a strategic mis-step. “While Honda has been here for close to two decades and invested  $1.4 billion in the country, it is yet to find what works for it here,” he said.

Ghosh added that it is possible that Honda underestimated the Indian market’s potential, holding off big-ticket investments and rather treating it with less importance than it deserved. “Its over-cautious product planning and hesitation in introducing latest tech/features cost Honda the advantage it gained initially.”

As he pointed out, despite having a wide array of products across segments, Honda didn’t bring them to India, whereas carmakers such as Kia and MG have come in and grabbed the space with latest tech/gizmos at competitive prices.

Many of Honda’s cars are considered over-priced. For instance, the Jazz, launched in 2009, was priced between Rs 7.10 lakh and Rs 7.60 lakh — high for a hatchback, even if it was built on the City platform. Most hatchbacks in India then were in the Rs 5 lakh to Rs 6 lakh band.

So much so that in 2011, Jazz prices were slashed by  Rs 1.5 lakh. That was the second time Honda cut prices. After launching the Civic Hybrid for Rs 21.5 lakh in 2008, it was forced to cut prices by almost 40 per cent within a year.

To be sure, there have been minor victories. The City has been a best-seller for Honda in India for over two decades with annual sales of 20,000 units only surpassed by the Amaze, another compact sedan that has been built for India, which clocks three times City’s volumes.

“Fortunately or unfortunately, Honda enjoys a premium status in India, but unlike other countries they are not leveraging it enough,” said Kaushik Madhavan,- Vice President — Mobility at Frost & Sullivan.

Product gaps are obvious for the Japanese giant. With no official word on upcoming plans, Honda’s future product pipeline is almost empty, with neither a mini car nor a compact SUV. Both segments are expected to grow in the current circumstances.

“They quickly need to revamp their product strategy. They are not present in two of the fastest growing segments in India. Unless they have models that will contribute to volumes, they will struggle,” said Madhavan.

Moreover, they’ve been laggards as far as electric vehicles go. “Honda has been lazy in pushing its electric portfolio for India and has used more of a Japanese ‘wait and watch’ mindset, which they need to get out of. The time is just right for EVs,” added Madhavan.

Honda also needs to be more open-minded as far as new business models go. “Partnership with the likes of Revv to offer Subscription-based models will boost volumes. This will also give Honda the flexibility to incorporate telematics and connectivity-based services,” Madhavan said.

Why is Honda so challenged in India? “We do not feel this is true,” Goel said. “India is an extremely important market for Honda and we enjoy a very strong brand position in the country. Besides our domestic sales business, we have a large scale export business for powertrain components, which are exported to Honda’s global manufacturing facilities. We are the largest facility of Honda globally for manual transmission and diesel engines.”

Paris-based automotive author Gautam Sen says that at the end of the day in India, most foreign players that make cars have Indian country heads who are heads only in name. At best, marketing or sales heads have been Indian with relevant experience, as in the case of Toyota and Honda. “What that means is that you have an executive who comes in from Japan and who is only here for three or four years and then moves on, so there’s no long-term objective or view,” he said.

For example, in the past, auto veteran Jnaneswar Sen was the de facto face of Honda and spent 12 years there after having worked at Maruti for over a decade. He left while he was senior vice president, sales and marketing. Again at Toyota, Sandeep Singh, who was instrumental in the success of Toyota’s early products such as the Qualis and the Innova, was deputy managing director — marketing, and second in command when he left.

“The obsession with Japanese leaders taking decisions for Indian executives in India is a speed-breaker. As a positive example, it is worth looking at Maruti Suzuki that has been able to balance out that aspect by retaining an empowered leader such as R C Bhargava in place,” Sen said. “Centralised command — out of Japan — doesn’t work when making cars for different geographies across the world.”

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