In an interview, Honda Cars India president and chief executive Yoichiro Ueno speaks about brand transformation, customer feedback, dilution of the Honda brand and his company’s stand on electric vehicles. Edited excerpts:
You have had a quiet period in terms of sales, new model launches, etc. But, the Auto Expo display seems to suggest a change in strategy.
Previously, Honda entered here as a luxury brand and shifted to smaller car segments. At the same time, we also eliminated the premium product line-up such as Accord and Civic. So, may be, the brand image suffered when we tried to go towards the mass segment. Expectation from the customers is slightly different. They expect Honda to be in a premium position and not luxury. So, we reviewed the whole specification and tried to add contents that the customers are expecting. We also decided to relaunch some products, which belong to more premium segments. So, we are reviewing our product lineup to become more premium. We also want to have some volumes. What we are trying to achieve is premium positioning in each segment, including the entry-level segment.
But Honda did have a premium appeal in the market and business strategy also revolved around that...
What were now trying to do is to be premium in each segment. For example, the Amaze segment is not a premium segment. It is a kind of a ‘very affordable’ segment. So, we would like to achieve premium position within that segment.
How much has the brand been diluted in the last 4-5 years?
We extended our lineup to the smaller and entry-level segment and at the same time we eliminated upscale models. Also, when we extended our lineup to the entry segment, the market share was occupied by Maruti Suzuki and Hyundai. We tried to compete with them rather than differentiating because there were big volumes. But that was not a mistake. Maybe customer expectations were slightly different.
What is the strategy in the entry segment, where you sell Brio?
The segment is attractive and the volume is very large. Also, it is a very competitive segment. Price points are very tough. So, we are discussing how to set our strategy in this segment.
You have announced land procurement for a facility in Gujarat when your current facilities are not utilized fully. Isn’t that a concern?
Currently, we have two factories where manufacturing capacity can be expanded to 300,000 without major additional investment. As of now, our volumes have not reached there. So far, the target is to achieve that figure in sales to make our operations more efficient as idle capacity increases the cost. We are making some money but if we can minimize capacity that is unutilized, cost can be reduced. So, of course, our priority is not to chase volumes but achieving full capacity is quite important. But currently, my boss is saying establish the brand.
Currently, the Indian market size is three million units a year. It is slated to be 10 million in the future. We want to instate the brand not only to traditional automobile customers but also to people who have not bought cars yet and can be our future customers.
What is happening on the electric vehicles front?
It is not clear why the Indian government wants to have electrification of vehicles. We understand that the main objective is to reduce CO2 emissions. For electric vehicles to achieve very less CO2 emissions, it is very important that electric vehicles are combined with renewable energy. Otherwise you cannot reduce CO2 emissions. Also, if you continue to use fossil fuel in power stations, emissions will happen. So, it is very important that the source of the electricity becomes renewable. That discussion is not very active yet. We would like the government to discuss a comprehensive social system including electric vehicles, and it is very important that our EV is operated by renewable energy. So, we are trying to propose an ecosystem.
What will that ecosystem be?
One proposal is that swappable batteries can be used for vehicles.
Do you prefer hybridization of the industry or electrification?
Our mission is green skies for children. Honda is one of the most environment conscious companies. Nikkei newspaper selected companies for being environment friendly. Honda won that award in the automobile segment.
Solution can be plural. Electric vehicles still can’t achieve long-range travel. May be it is suitable for inter-city commuting but they need improvement to meet demands of customers who want to travel long distances where there is no charging stations. So, a combination of both is required.