New Delhi: Honda Siel Cars India plans to launch its compact car in the first quarter of 2009 and hopes to sell 40,000 units a year, according to component makers who have been asked to submit bids for supplying parts.
This would be Honda’s first attempt to break into a car segment that accounts for 70% of the Indian market.
Honda is building a factory for 50,000 units a year in Rajasthan where it plans to make the compact car. The car is likely to compete with the Maruti Swift, Chevrolet U-VA and Hyundai Getz in the premium hatchback segment. The Swift sells around 61,000 units a year while the Getz sells 15,000 units.
While Honda has 1.3-litre and 1.5-litre engines that’ll fit in the small car, it’s also reportedly working on a 1.2 litre engine to avail the tax breaks given in last year’s budget, say some component makers. Currently, Honda sells its compact car brands, a hatchback called the Jazz in Europe and the Fit in Asia, but in markets outside India.
“Every manufacturer works on full and minor model changes, we can’t comment on specifics,” said N.K. Goila, vice-president at Honda.
The small car will be preceded by the introduction of a new City sedan in 2008. The company expects to sell 60,000 units of the new vehicle a year, said the suppliers, who wished to remain unnamed. The City is the highest selling sedan in India at 40,000 cars a year.
Honda, which entered the Indian market in 1997, leads all the car segments in which it operates. The company dominates the mid-sized, premium and executive segments with the City, Accord and the recently launched Civic sedan.
In the last budget, the government cut excise tax by as much as 8% for small cars, which it defined as vehicles that are less than four metres in length and additionally with an engine capacity that doesn’t exceed 1.2 litres in petrol and 1.5 litres in diesel.
That cut led to a fall in the prices of models such as WagonR and Santro by as much as Rs15,000. It also prompted General Motors and Hyundai to work on smaller engines for their Chevrolet U-VA and Getz vehicles to avail of the tax break. However, the government in January released its 10-year blueprint for India’s automotive industry, which reduces the car size to 3.8 metres, potentially derailing the investment plans of car-makers who have developed models to specifically avail of the tax breaks announced in last year’s budget.
Honda officials also declined to comment on whether they would build new engines for the Indian market. “We’ll wait and watch” for the budget announcement, said Goila.
A 9% economic growth is creating more jobs and putting money in people’s hands. Only seven in every 1,000 people own a car in India compared with 12 per 1,000 in neighbouring Pakistan.
India’s market is growing rapidly and demand may cross 2.2 million units by 2010, from 1.3 million passenger vehicles now, according to the Society of Indian Automobile Manufacturers. This has prompted car-makers such as General Motors and Volkswagen AG to spend Rs 30,000 crore to build factories.