New Delhi: Faced with a contracting demand for cars in India, Honda Motor Co.’s unit here expects to raise prices on its models and maintain slower production for the next six months, even as it keeps its plans for its small car, christened Jazz, unchanged.
“Devaluation of rupee is impacting our business because 20-25% of our components are imported from Japan and Thailand. We need to adjust this cost impact,” Masahiro Takedagawa, president and chief executive of Honda Siel Cars India Ltd, said late on Saturday evening at a company awards function. “For the CRV it (the price increase) will be substantial.”
Honda Siel is working out the price increase for the other models but customers who had ordered the new model of the Honda City will be protected. Launched in November, the City, which has sold 12,233 units, helped Honda lessen the impact of the slowdown.
In the Indian market consumer confidence has come back slightly, Takedagawa added. Still, the company has seen sales of its models, other than the City, decline sharply. Its total sales in January fell by one-fourth, to 5,773 units when compared with the same month last year. This resulted in the company cutting production at its Greater Noida facility, which is operating on a single shift from the start of this year. It now makes about 200 cars a day instead of the earlier 380 cars.
The production cuts have helped the company trim its inventory to four weeks. Once car sales pick up, it’ll take Honda two months to get back to a two shift production schedule, Takedagawa said.
The Honda Siel CEO sees the downturn lasting for another six months and points out that his firm caters to buyers in the premium segment, where the impact of an economic slowdown is tempered. Even so, “customers are concerned with global economy so they have become naturally cautious”, he said.
Honda continues to push ahead with plans to launch the Jazz, a premium hatchback car. Trial production has started, Takedagawa said. Its 1.2 litre engine has been tailored to Indian regulations to avail of a 12.5% tax rebate.
Like its global counterparts, Toyota Motor Co. and General Motors Corp., Honda has also been wracked by slowing sales in India. But unlike them, it managed to close 2008 with a positive growth in unit sales due to its bike business.