Home >Opinion >Will Honda be able to Jazz up the small car market this time around?
Honda phased out the Jazz in 2013 to make way for the new generation. Photo: Bloomberg
Honda phased out the Jazz in 2013 to make way for the new generation. Photo: Bloomberg

Will Honda be able to Jazz up the small car market this time around?

Value-seeking Indian buyers refused to pay a high premium for the small Jazz and preferred a sedan at the same price

Sometime next month, Honda Cars India Ltd will unveil its third generation Jazz. It will be the second shot by the firm at the small car market that sells seven out of 10 cars in the country and where Maruti Suzuki India Ltd and Hyundai Motor India Ltd have held pole positions for several years.

According to Jnaneswar Sen, senior vice president, sales and marketing, Honda Car India Ltd., the earlier generation failed to take off as it was ahead of its time. So what gives the local arm of the Japanese car maker a lot more confidence?

Over the last two years, ever since Honda discontinued Jazz, car buying behaviour has evolved. The buyers are getting younger and they don’t have the traditional mindset of a typical car buyer who considers only a sedan or a sports utility vehicle when scaling up to a higher segment from an entry level model, says Sen citing consumer surveys.

The brisk sales expansion in the premium hatchback segment that includes models such as Maruti Suzuki Swift and Hyundai Elite conforms to Sen’s hypothesis. In 2014-15, the segment advanced 10% to 1,078,589 units against a year ago. However, of this, seven out of 10 models were sold either by Maruti or Hyundai—a reason good enough for any new entrant to be worried about. Honda currently sells the Brio in the segment but the volumes are far from satisfactory.

Having received flak from the buyers in its earlier avatar, the company plans to price the model more competitively — a result of high share of locally sourced components as against imported parts.

So why did the earlier generation fail to take off? Priced at 7.13 lakh to 7.56 lakh, Honda launched the second generation Jazz for the Indian market in 2009. Even as the model scored high on performance, the price positioning didn’t go down well. Value-seeking Indian buyers refused to pay such a high premium for a small car and would rather prefer a sedan at the same price.

The company had no choice but to acknowledge the market reality as it sought to revive sales amid slowing numbers—500 units a month, and a competition that was counting on every customer. It was forced to cut prices by as much as 1.65 lakh and launch a new model that was packed with lot more features than the outgoing one. But the undoing had been done and sales continued to plummet. Subsequently, in line with its global strategy, Honda phased out the Jazz in 2013 to make way for the new generation.

To be sure, this time around, the confidence to crack open the mass market also stems from the structural transformation the company in India underwent. A push towards localisation in 2011 when the rupee slid against the Japanese yen, a diesel engine in the portfolio and many new competitively priced models across segments of the passenger vehicle market has not only helped the firm recoup the share it had lost in 2010-11 but also catapulted it to the number three position in the car market in 2014-15.

During the year, Honda sold 157,617 units, up 18% over the previous year, outselling the broader car market which advanced 5% to 1.8 million units, over a year ago, according to industry lobby Society of Indian Automobile Manufacturers.

But the road ahead is not without challenges for the Jazz.

An increasing share of competitively priced SUVs and MPVs in the overall market—many more will enter the market in the course of the year—and a renewed aggression by the market leaders to further strengthen their hold could pose a potential challenge. A further increase in the fuel prices, one of the biggest variables in the total cost of ownership, could be yet another factor.

Subscribe to Mint Newsletters
* Enter a valid email
* Thank you for subscribing to our newsletter.

Click here to read the Mint ePaperMint is now on Telegram. Join Mint channel in your Telegram and stay updated with the latest business news.

Close
×
My Reads Redeem a Gift Card Logout