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Fumihiko Ike | To minimize the impact of risks, we must localize

Fumihiko Ike | To minimize the impact of risks, we must localize
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First Published: Fri, Jan 08 2010. 12 48 AM IST

Reading markets: Ike, president and CEO, Asian Honda Motor. Tomohiro Ohsumi / Bloomberg
Reading markets: Ike, president and CEO, Asian Honda Motor. Tomohiro Ohsumi / Bloomberg
Updated: Fri, Jan 08 2010. 12 48 AM IST
New Delhi: Honda Siel Cars India Ltd , the local arm of Japan-based Honda Motor Co. , unveiled its concept small car earlier this week.
Honda hopes the car, expected to hit showrooms in 2011, will help raise its stake in India’s 1.2 million-strong car market. Honda currently sells the Jazz, City, Civic, Accord and CR-V models in India.
Speaking to Mint on the sidelines of the Delhi Auto Expo, Fumihiko Ike , president and chief executive, Asian Honda Motor Co. Ltd, spoke about Honda’s India innings, the hits, the misses and the immediate priorities. Edited excerpts:
How important is the small car concept in Honda’s scheme of things?
It’s very important. In India, we have a 10-year history of automobiles. We have always been in the high end of the market. But now that the Indian market is showing robust growth, specially in the very fundamental segment, this is the time for us to launch an offering in the volume segment.
Honda has been working on a localization programme. But with India considering a free trade agreement (FTA) with Asean (Association of Southeast Asian Nations), will it still make sense to produce vehicles locally?
Reading markets: Ike, president and CEO, Asian Honda Motor. Tomohiro Ohsumi / Bloomberg
The local content in the car that we are selling currently, City for example, is 60%. The remaining is highly impacted by the volatility of the currency. The weak Indian rupee has proved to be a disadvantage for us in terms of cost.
In order to minimize the impact of the currency fluctuation and price our products competitively, it’s important to localize. In order to increase the local content, we have to make changes to the design. The supplier’s contribution is key in this aspect.
Regarding the FTA, we don’t know yet the details of the agreement. For instance, for the FTA between Thailand and India, some very basic points were agreed upon. If the tax incentives part of the FTA comes into effect, it gives us (a) lot of opportunity in terms of export and import of components from Thailand. It offers benefits to us and to the customers.
Your presence in the sport utility vehicle, or SUV, segment has taken a beating of late. How do you plan to address it?
Our offering in the segment, CR-V, has been doing good numbers, but we are prioritizing the volume segment. We import the CR-V from Japan and it attracts very high duty. It, hence, doesn’t make sense to expand our presence in the segment with newer offerings. We would rather focus on increasing volumes of cars like City and Jazz, which are produced locally.
Are you happy with the response to Jazz?
In terms of hard work, yes. People like that car, but whenever they find out the price, they back out. Indian customers’ perception regarding the sedan and the hatchback is still very stubborn.
But I must say, thanks to the introduction of Jazz in this country, it has increased the sales of City.
So you are selling City at the cost of Jazz? How do you plan to enhance local content in the next generation model with such limited volumes? Any there any plans of paring the prices?
It may be lesser in volumes than what we expected, but people love the Jazz. There are no plans to reduce the price. As the Jazz shares a lot of parts with the City, an expansion in volume of either one of the models will help us heighten localization.
How do you view the Indian market developing in 2010 and the years ahead? Do you want to be a volume player like Toyota?
Not really the volume player like Maruti Suzuki, but we entered this market within a very limited segment and with premium products. Still, there is a big gap between our range and what the market desires.
We’ve observed that even in the high-end products, the market is segmented towards a higher end. Even our competitors are expanding their line-up to the higher end of this segment. So, we’re striving to introduce this new concept at the very high end of the segment, but within that segment.
Selling a car in that segment is very different from selling a City, Civic or Accord. How will you go about selling this car?
At the very high end of the segment, I don’t believe customers are different. So, may be the dealers’ approach might be slightly different and this is a very good opportunity for us to spread the dealer network. I don’t think customers at the high end of this segment will be fundamentally different.
Samar Srivastava contributed to this story.
shally.s@livemint.com
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First Published: Fri, Jan 08 2010. 12 48 AM IST