Honda plans entry-level small car

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Honda is gearing up to take on the Maruti Alto, the country's largest selling car. The Japanese major is studying the idea of getting in a low-price small car below the Brio compact, apart from driving in entry-level sedan Amaze in India. For this, the company is looking into a variety of options, which include an all-new car and even the 660cc famed Kei cars that it makes for the domestic market in Japan. 

Hironori Kanayama, president & CEO of Honda Cars India, said the entry car market will continue to remain strong, prompting the company to look at the option actively. "We are studying the market... (but) we do not have such a small engine, except for the Japanese market where we have the 660cc Kei cars," Kanayama told TOI, adding that the option of 660cc engine may not be viable in India, considering the different kind of liking displayed by customers here. "The taste of the Japanese customer and the Indian customer is totally different (and) so we cannot bring that model (Kei cars) into India." 

He said the company is finalising the direction to be taken for the development of the entry compact car. "We need some time to make a decision on what needs to be done in this market. But we know that this market will be very stable, and will grow more," he said when speaking of the market below its Brio compact, which carries an entry price of Rs 4.12 lakh in Delhi (ex-showroom). 

Honda's plans to go for the entry segment of the Indian car market can have major repercussions for other industry players. Currently, the segment is dominated by cars under Rs 3 lakh and manufactured by companies like Maruti (Alto), Hyundai (Eon) and Tata Motors (Nano) and other companies are absent from the category. While the Maruti Alto sells over 20,000 units on an average, the Eon clocks around 8,000-9,000 units monthly. Analysts say a product from any company seen as upmarket by customers can see a larger adoption of its model, directly hitting companies like Maruti and Tata Motors. 

Honda has so far struggled to keep prices of products under check, but a recent focus on localisation and India R&D has made the company confident of making cars at competitive cost. The company has made a senior-level appointment for this purpose and has brought in Yoshiyuki Matsumoto as representative of development, purchasing and production in Asia & Oceania Region. Matsumoto will be based in India and his chief responsibilities include keeping production cost under check. 

The company is investing Rs 2,500 crore as it doubles production to 2.4 lakh units annually from the current 1.2 lakh units. Kanayama said the focus on indigenization and local R&D will help contain costs during the development of the entry compact car. "Yes, it will accelerate our localization speed." Asked whether the company will develop an all-new engine for the new small car, Kanayama said that appears to be the most probable option. "We have not yet made any decision, and this depends on the market and the result of our study. If necessary, Honda can develop the other capacity of the engine."