Honda developing entry-level hatchback and compact SUV

  • Jul 30, 2014
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A sub-Rs 4 lakh car and sub-4 metre compact SUV are under development

Honda developing compact SUV and entry-level hatchback

Honda Motor has started work on developing a small car and a compact sports utility vehicle (sub-4 metre) targeting India, as it aims to break into the country's mass market segment, people familiar with the company's plans said. Part of the development will be carried out in India with a focus on maximising the use of local products to keep costs low. The process has moved from consideration stage to real development work in the past couple of months, they said. Yoshiyuki Matsumoto, president and CEO of Honda Motor India, said the process to develop the small car has just begun. "It (introduction of the car) is not very far, but we can't give you an exact time," he said. He didn't comment on the SUV. 

The Japanese firm also sees a market for the small car in other South Asian nations as well as Africa and Indonesia, and has code named it the 'World A Entry Car' to signify this potential. 

In India, small cars including hatchbacks and sub-4 metre sedans rule the market, accounting for more than two-thirds of total passenger vehicle sales and driving the performance of companies such as Maruti Suzuki and the local unit of Hyundai Motor. Compact SUVs have done well too. The EcoSport compact SUV, for instance, has helped Ford shrug off years of underperformance in India. 

Honda's Amaze, a small sedan, along with the mid-sized City, has driven its India sales in the past year. Honda launched the Brio hatchback in India a few years ago to drive sales, but that hasn't delivered the kind of success the company would have expected. 

Honda Brio

The new car and the compact SUV will be built on a re-engineered GSP platform, which the Brio too is based on, the people said. The Amaze and the new Mobilio utility vehicle are also based on the GSP platform. The small car is likely to be positioned below the Brio and is expected to be Honda's first car costing less than Rs 4 lakh the Brio starting at Rs 4.24 lakh in Mumbai showrooms is the cheapest in its car portfolio now. It will be pitted against Maruti Suzuki's Wagon R, the Chevrolet Beat and Hyundai i10. 

The sub-Rs 4 lakh car market accounts for almost 35-40% of the overall passenger car market. The new SUV (sub-4 meter) is expected to compete with the EcoSport and M&M's yet-to-be-launched micro SUV, as well as compact utility vehicles that Maruti and Hyundai plan to launch in the next two years. 

Honda's new vehicles are expected to hit the market in 2017 and give a major boost in volumes to the Japanese company, which is already knocking at the No. 3 position of Mahindra. Matsumoto said it needs to put in infrastructure in terms of sourcing, manufacturing and distribution network for the new car. 

While Japan will be the lead country to develop the vehicles, Matsumoto has stressed on India's role in developing the small car, saying it "will come out of the R&D centre in India". "After a few years, India will be the No. 1 country in the Asia Oceania region, that's why we already have a setup of R&D in India," he said. 

On the positioning of the small car in the Indian market, Matsumoto said: "The definition of entry car can vary. Our concern is quality and originality. Price is very important in this market, that's why we are considering developing in India." 

Apart from India, Honda also sees the small car fitting into Indonesia's LCGC Program (low cost green car). The company is expected to use India also as a base for exports to Africa, which Matsumoto calls as a next big frontier for Honda. 

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