Honda losing out on ageing models, pricing

Honda losing out on ageing models, pricing

Mumbai: Honda Siel Cars India Pvt. Ltd has been moving in reverse gear at a time when the sales of other car makers are zipping ahead, thanks to robust demand.

Industry analysts said Honda is losing market share because of an ageing product portfolio, while the company put down the slack sales to a strong yen that has raised the price of imported components.

In the four months ended April, Honda’s sales declined 2.7% to 21,746 units, while total car, utility and multi-utility sales in India shot up 30.8% over the same period. Sales of almost all its models—Jazz, Civic, Accord and CR-V—were hit; the only exception was the flagship City. The company could sell a mere 188 units of the Civic, a premium sedan, in April, down 69% over April 2009.

Jnaneshwar Sen, senior vice-president, sales and marketing, said the strengthening of the yen against the rupee has inflated the import bill on parts such as airbags, thus preventing competitive pricing. Most Honda models sold in India have local content ranging from 28% to 77%. The CR-V, a premium sports utility vehicle, is completely imported.

Honda had hiked prices of its entire range of cars from Rs30,000 to Rs3.5 lakh in March 2009. The CR-V saw the steepest price hike.

The yen appreciated 7.04% against the rupee in the six months ended April.

But industry analysts such as Neeraj Bandhu, director at sales forecasting and research firm CSM Worldwide, feel there is more to the Honda’s lacklustre performance than currency variations. “Unlike its competitors, Honda hasn’t introduced any new model," Bandhu said.

While its Civic model, the second largest by volumes after the City, has been facing the heat from newer entrants such as General Motors India Pvt. Ltd’s Chevrolet Cruze and Volkswagen India Pvt. Ltd’s Jetta, its compact car Jazz, which was already turning in low volumes, has been further hit by the price cuts announced by Hyundai Motor India Ltd on its i20 model, added Bandhu.

Honda’s Sen believes that the low volumes on premium cars such as the CR-V do not justify local assembly.

Honda will, meanwhile, continue to focus on expanding its product range. “Our top priority now is the small car," said Sen. To prepare for its launch later in 2011, Honda plans to increase the number of dealerships from the current 117 to 150 in the next year-and-a-half.