Honda to roll out two new utility vehicles in India

Getting its act together in India, Honda Motor after launching Amaze in the growing compact sedan space is readying to roll out in two to three years a slew of diesel variants and two new utility vehicles that will enable the Japanese car maker to participate in the fastest-growing segment in the Indian passenger vehicle market. 

An MPV (multi purpose vehicle), based on the Brio platform codenamed 2NH, is likely to hit the market at the end of 2014, which will be followed by a compact SUV (sports utility vehicle) based on Jazz platform in 2015.

Hironori Kanayama, MD, Honda Cars India, who underscored India being a "strategically important market" for Honda's global operation, said: "Our counter attack in India has just begun with the Amaze. We have a lot to do. Small cars, UVs are all under study. The SUV market is the fastest growing segment and we are studying every segment surrounding the UV space, small or premium. You can anticipate some interesting moves from Honda."

Even as the two new UVs get ready, Honda is preparing the next generation hatchback Jazz and flagship City sedan complete with diesel option for 2014. The UV segment in India grew by over 50 per cent in FY13 with sales of close to 5.53 lakh units, which explains why every carmaker is interested in getting into the fast-growing segment.

The MPV and SUV from Honda will hit the market when its peers such as Maruti Suzuki, Ford, Nissan, Mahindra & Mahindra, Fiat-Chrysler are preparing to roll out UVs.

The MPV will be pitted against Maruti Suzuki's Ertiga and Honda has directed its vendors to gear up for annual volumes of 35,000 units. The work on the compact urban SUV in India is yet to begin, but the company had showcased the concept at the Detroit Motor Show.

With the launch of new models, including full model changes (Jazz and City), Kanayama says Honda will cater to 50 per cent of the overall Indian passenger vehicle market from the current 10 per cent.

Honda Motor Corporation has set itself a target of selling 6 million cars, up from 4 million at the end of 2012, and the company believes a large part of this growth will come from emerging market like India.

Amaze is just the first product of Honda's turnaround plan in India. The company has been incurring a loss year after year since FY09. With expected higher volumes from Amaze, and resultantly, the Greater Noida plant getting fully utilised, Honda is hoping to break into profits in FY15.

"With five new models that come along with a diesel option and having presence in the growing UV space, Honda Cars India is aiming to cross 2 lakh units of sales in FY15. And once the 2-lakh-unit sales is crossed, the company will break into profits after almost 5 years," said a person who's aware of the financials of the company.

The company enjoyed a market share of close to 4.05 per cent in the passenger vehicle space at the end of FY08, but as the demand started veering towards diesel cars, Honda Cars India's market share almost halved to 2.07 per cent at the end of FY12.

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However, thanks to the new small car Brio, Honda Cars India regained some lost market share in FY13 to 2.73 per cent posting an impressive 34 per cent growth selling over 73,000 units (all petrol) in FY13, in an otherwise sluggish market environment. For FY14, the company is expected to use up its entire plant capacity of 1.2-lakh units in Greater Noida.

VG Ramakrishnan, MD, Frost & Sullivan, South Asia, says with the kind of brand strength Honda enjoys in India, the market share penetration is still very low.

However, with a new line of products, Honda Cars India can aspire to grab at least 5 per cent market share in the next two to three years. These products will help Honda move from being a fringe player to a serious player in the market giving its rivals — Maruti Suzuki and Hyundai India — a tough fight for market share.

"A Honda SUV or an MPV offers a perfect aspirational fit for the growing middle class of India and they will be accepted well. But for me, how the company stacks up in the small car space will be very crucial.

The Jazz positioning will be ultra crucial. They have got it right with the Amaze pricing and value package, if they can repeat it with Jazz, Honda can give Maruti Swift a real run for their money," added Ramakrishnan.

To deliver just that, Honda Motor Company, as part of its global restructuring, appointed Yoshiyuki Matsumoto as managing officer 'representative of development, purchasing and production in Asia & Oceania region' based out of India to control the entire region.

Kanayama said, to ensure that HCIL is "battle-ready" for the next phase of growth, Honda Motor Company has made some strategic decisions to strengthen the organisational structure.

The company is investing Rs 2,500 crore for setting up an additional assembly line in Rajasthan, Tapakura, which will take up the company's total capacity to 2.4 lakh units per annum by the end of 2014. This can be further scaled up to 3.6 lakh units per annum.