BackWhy Honda Cars has hit the slow lane in India
Honda ended fiscal 2015-16 with 1,92,059 units, up 2% over a year ago, a massive slowdown from the 41% growth that it clocked in 2014-15
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Mumbai: There are very few carmakers in India that have seen their sales chart hit the crest and trough with a frequency that can match that of Honda Car India Ltd.
The local arm of the Japanese car maker has everything going for itself, including a strong product pipeline, an expansive dealer network and most importantly, an enviable brand. Still, the maker of the flagship City brand has been losing traction. So what has gone wrong with Honda’s India innings?
An inability to respond quickly to changing market dynamics has slowed down Honda’s progress in India. Whether it is making a switch-over from diesel-powered models to petrol powered ones, or being able to attune itself to fast changing customer preferences, Honda has taken much longer than rivals in the car market to react.
This has reflected in company’s sales, which have been declining not only year-on-year but also month-on-month. Honda saw sales go down 26% to 9,954 units in May over the same month last year. It sold 10,486 units in April and 17,430 units in March. At one point, in October 2015, sales breached the 20,000-mark. Honda ended fiscal 2015-16 with 1,92,059 units, up 2% over a year ago, a massive slowdown from the 41% growth that it clocked in 2014-15.
In a trend that should set alarm bells ringing for Honda, even City, the company’s flagship model that enjoyed a dominant position in the premium sedan segment, has been under pressure since February.
And the competition has come from a model that was never considered a serious threat—Maruti Suzuki India Ltd’s Ciaz sedan has been delivering a consistent 5,000-plus units every month. After closing the gap in April, the Ciaz outsold the City by a wide margin in May. Maruti sold 5,188 units of the Ciaz in May to Honda City’s 3,305. Among other reasons, the launch of a hybrid variant of the Ciaz, which came just around the time when authorities began to move against diesel vehicles in Delhi and NCR, helped its fortunes.
To be sure, Honda’s sales have been dwindling despite the company launching new models to keep up the momentum. It launched the BR-V, a 7-seater sports utility vehicle on 5 May. With a dispatch of only 2,300 units in the first month of its launch, the new model has yet to pull up the overall volumes which have been in the negative terrain for the seventh consecutive month.
But Jnaneswar Sen, senior vice president, sales and marketing at Honda Cars, is not worried. “The response to the BR-V has been beyond our expectations," said Sen adding that he expects the volumes to improve in the subsequent months. “What you see are wholesales figures (dispatches to dealers)—which is a function of what we can make." Honda has received bookings of 9,000 units since its launch.
Sen attributed the drop in the overall monthly sales to a sudden shift in demand for petrol models. In the quarter that ended in December, the contribution of petrol models in India’s overall passenger vehicle market was 60% and that of diesel 40%. After the Supreme Court ban on diesel vehicles in the national capital region, the contribution of petrol increased further to 72% in the March quarter while diesel was down to 28%, pointed out Sen. The sudden change, he conceded, caught the company off guard. There was a waiting period for petrol cars even as diesel cars piled up, he said attributing it to the lead time involved in making changes in the supply chain. “We are in the process of correcting it," said Sen.
However, not everyone is convinced with Sen’s rationale.
“I think there’s more to Honda’s falling sales in India. If buyers were rejecting diesel, Maruti Suzuki’s Brezza, which doesn’t even have a petrol variant to offer, wouldn’t have been such a big success," said an analyst at a consulting firm who declined to be identified.
Honda India has got all the support from its parent company, but it hasn’t been able to capitalize it optimally, says Puneet Gupta, associate director at IHS Automotive, a sales forecasting and market research firm. “Over the last three years, Honda India has got every possible support from its parent company. This is unlike manufacturers like Toyota Kirloskar Motor India Pvt Ltd who are still on the task to convince their parent company to invest more in India," said Gupta.
“Having said that we strongly believe, Honda can still make a strong comeback if they fire all their cylinders," said Gupta adding that “it has enough ammunition in the form of strong product line up, a premium brand image, a robust dealer and supplier network, and confidence of Indian consumer."
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