Mumbai: The local arms of Japanese car makers Honda Motor Co. Ltd, Toyota Motor Corp. and Nissan Motor Co. Ltd have begun tweaking their global product development, pricing and marketing strategies to suit the Indian market to increase their share in the country.
Honda Cars India Ltd, known for its petrol engine technology, deviated from its global strategy to develop a diesel engine for the Indian market and is set to launch a diesel sedan, Amaze, in the country next month.
“Had it not been for India, there would have been no Amaze,” said a company spokesperson.
Honda kept the length of the Amaze less than 4m to conform to India’s definition of small cars that draw an excise duty of 12%, against 30% for longer cars, said Jnaneswar Sen, senior vice-president (sales and marketing) at Honda Cars India.
The firm, slow in localizing its models, began research and development initiatives in India in 2009 as it geared to introduce its Brio small car in the country, which shared parts with the Jazz. The Amaze, based on the Brio platform, has 90% of its parts made locally.
The Jazz compact car, launched in 2009 in India, was priced a little over Rs.7 lakh, but lower than the Honda City sedan, unlike in other markets. Yet, buyer response was tepid, which prompted Honda to re-launch the car and price it between Rs.5.99 lakh and Rs.6.56 lakh (ex-showroom, Delhi), still considered expensive for a car its size.
Honda will now stop production of the Jazz in India from April until it introduces a new generation of the model in early 2014, the company spokesperson said.
Such tweaking of global strategies, analysts said, is unprecedented since the Indian arms of most Japanese car makers account for less than 5% of their parents’ global revenues, giving them little say at the boards—the only exception being Maruti Suzuki India Ltd.
In India’s passenger vehicle market (cars and utility vehicles), Japanese car makers account for a 48.87% share, with Maruti cornering the lion’s share of 38.82%, according to April-February data from the Society of Indian Automobile Manufacturers.
Japanese car companies “are willing to go that extra mile for the first time. They don’t make big moves or decisions, (but) watch, study and then move forward”, said Rakesh Batra, a partner and national leader (automotive sector) at consultancy Ernst and Young.
The move to sharpen focus on the Indian market, said analysts, will also help the Japanese car makers offset the drop in sales in the US and Europe.
New passenger car sales fell 10.5% in Europe in February amid rising unemployment, the Financial Times reported last week. Moreover, despite sales rising nearly 4% in the US on strength in the housing market, according to a 3 March Reuters report, Toyota, Honda and Nissan posted weaker-than-expected sales.
Toyota, which propounded the philosophy of genchi gunbutsu, or “experience on site”, tweaked its global strategy to launch virtual showrooms in India in the middle of last year, said Sandeep Singh, deputy managing director (sales and marketing) at Toyota Kirloskar Motor Pvt. Ltd.
This enabled buyers in small towns and villages that didn’t have Toyota dealers, to visit these virtual showrooms to see the company’s cars. The approach helped the company increase contribution from such places to 16% from 9% earlier, Singh said.
Toyota also engaged music composer A.R. Rahman to endorse the Liva—its first compact car model—that Singh acknowledged was a rarity at the car maker. Also in 2010, the company launched Toyota ‘Q’ World—an exhibition of Toyota’s models for potential buyers across 10 cities—to coincide with the launch of the Etios sedan. “It was a unique format adopted by Toyota in India,” said an analyst at a consulting firm, requesting anonymity.
Nissan Motor India Pvt. Ltd—a late entrant to India’s volumes car market—adopted a partnership and joint venture (JV) model.
“We have adopted a unique business model and work with local partners to gain knowledge of the market,” said Takayuki Ishida, managing director and chief executive of Nissan Motor India. He was referring to the company’s JV with Ashok Leyland Ltd for light commercial vehicles and with Hover Automotive India for marketing and distribution.
Nissan, which sells the Micra hatchback and the Sunny sedan in India, accounts for less than 2% share in the passenger vehicles market. The company, which shares its manufacturing facility with French auto maker Renault SA, is hoping to gain volumes once it introduces the low-cost Datsun brand in 2014 and a Nissan-badged compact sport utility vehicle, said Ishida. “This will help the company corner a 16% market share,” said Ishida.
Hormazd Sorabjee, editor of Autocar India, said a customer-centric approach has given the Japanese car makers an edge over their European counterparts. “While Japanese car firms’ product strategy is consumer-driven, Europeans’ is engineering-driven, one of the reasons the former is excelling,” he said.
The Indian car market, however, is going through a low phase. The country’s more than 2.5 million passenger vehicles market, which was expanding at 16% annually from 2007 to 2011, has seen sales sputter from July 2011, according to rating agency Icra Ltd’s estimates. Cars sales fell 4.64% in February—the biggest drop since a 40% slide in December 2000, as slowing economy forced buyers to push back purchases.
Despite this, Shinzo Nakanishi, the outgoing managing director at Maruti Suzuki, believes the Indian market is important for Japanese car makers. During his tenure, Maruti Suzuki developed local engineering skills and launched models that were designed at home and not at parent Suzuki Motor Corp.’s Hamamatsu base in Japan.
On the sidelines of a media briefing in New Delhi on 22 March, Nakanishi—who has been at the helm of the company’s India operations since 1981—said, “I would love to see an Indian on the board of Suzuki globally as Maruti is so important now.”