Honda has no plans for a sub-Rs5 lakh car in India

New Delhi: Honda Cars India Ltd will look to introduce more premium and bigger automobiles as it seeks to lift sales that have sagged 23% so far this financial year.

In the meantime, the Honda City sedan and the sub-4 meter notchback Amaze will be the two mainstays of the Japanese carmaker in India.

On Tuesday, Honda launched a new Honda City priced at Rs8.5 lakh (ex-showroom, Delhi).

“We receive a lot of request to launch more premium and bigger cars,” Yoichiro Ueno, chief executive and president of Honda Cars India, said in an interview. “We launched Accord Hybrid, which is quite premium segment as it is a CBU. It is receiving quite good acceptance. We are studying the potential for this sort of a bigger market.”

CBU is short for Completely Built Up and refers to a car that is completely imported.

Honda needs to do something to boost sales in India. The Japanese carmaker is way off its target of selling 300,000 cars per year in India by March 2017. Even globally, Honda has scrapped its sales forecast of achieving seven million units by 2017 amid recall woes.

In India, sales of Honda Cars during April-January declined 23% to 124,000 units compared with an increase of 9% to 2.5 million units for the broader automobile industry in the same period.

To be sure, Honda is still a premium brand and its customers seem to be happy with its products. It has performed consistently well in the JD Power survey for customer satisfaction.

But the Indian car market itself has changed. There are more companies seeking premium play—a phenomenon that Honda pioneered in India. At the same time, Honda does not have a strong presence in some key market segments.

Honda has no plans to introduce a car in the sub-Rs5 lakh category in the near future, said Ueno. The sub-Rs5 lakh segment accounts for about 50% of total passenger vehicles sold in India.

It does not have a compact sports utility vehicle either—another hot-selling segment although in March it plans to launch the WR-V, a derivative of the Jazz hatchback reminiscent of an SUV. The multi-purpose vehicle Mobilio didn’t do too well and nor did the BR-V, which Ueno says is a cross between an SUV and MPV.

Honda launched the Brio hatchback and the Amaze in 2011 and 2012—long after its rivals had entered these segments.

“We are not a late entrant, but careful. We’re careful about India,” Ueno said.

“Below Rs5 lakh...we are not launching. Maybe it is not our market. We are talking about a couple of years. In the long term, (when) big motorization comes and this sort of small cars become very popular, we might consider. For a while, we aren’t considering,” Ueno said.

When “big motorization” actually happens, Ueno says, the Indian market can be as big as 10 million units per annum.

As for the demand for SUVs, Ueno said that the trend may not last.

“SUV is a boom and we have seen that kind of a boom in many countries. It will be there for some time, maybe a few years. We have seen that in the US, there was a big boom and even in Japan—and then it dropped,” Ueno said.

“But at some stage of the maturing of motorization, SUVs do become popular. At this moment, many customers are choosing SUVs because of the rough road conditions... Improvement of infrastructure is very, very fast in India. So, some customers will come back to sedans or other segments. Always, the market trend can be changed,” he added.