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Honda steps on the gas

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September is proving to be yet another busy month for the auto sector as a slew of launches are expected across the board. From luxury cars to SUVs to diesel variants of existing cars and new motorcycles, the run-up to the festive season is proving to be promising. One manufacturer who hopes to really make a big dent in the market is Honda Siel with the launch of the Brio hatchback, their cheapest car at a time when their marketshare has taken quite a beating.

Ever since the launch of the Jazz in 2009, Honda Siel hasn’t had any single new model launch, apart from the odd-facelift. The lack of a diesel engine too has hurt Honda. ‘It hasn’t and won’t be easy without a diesel engine’, says Jnaneswar Sen, Senior VP, Sales and Marketing, Honda Siel. ‘Our diesel engines are still some two years away at the very least’, he says. So how do they plan to counter it in a market where diesel car sales have gone from being 70 per cent to 85 per cent in a span of a few months? HONDA'S MARKET SHARE IN 2011* Jan  3.42 Feb  2.61 March 1.81 Apr 1.23 May 1.45 June  2.40 July 2.92 August 3.90 *Passenger vehicles (in %) 
Source: SIAM data

The answer could lie in their pricing strategy. Two months ago, Honda launched the City with a price-cut of Rs 44,000 to Rs 66,000. Net result? July saw a revival in sales of the City, beating the likes of the Volkswagen Vento and Maruti Suzuki SX4, only to come second to the Hyundai Verna. The same strategy has also been adopted for the slow-selling Jazz, which saw a price drop of nearly Rs 1.5 lakh earlier this month, positioning it against the likes of the new Maruti Suzuki Swift.

Sen is quick to point out the reasons; ‘We’ve managed to attain manufacturing and supply chain efficiencies, increased localisation and even increased our supplier base by 25 per cent.’ There's more. ‘The Jazz and City share a lot of parts and therefore the price-drop with the City has helped the Jazz. The Jazz also shares the powertrain with the upcoming Brio and even our overall fixed costs have come down.’ None of which, he claims has been at the cost of durability and quality of the products.

Does the price drop mean Honda wants to be perceived as a value brand? ‘We are at the threshold of increasing volumes significantly, but our brand promise and positioning doesn’t change’, says Sen. But are these stop gap measures until the diesel motor arrives? The Civic, Accord and CR-V come with a diesel option in Europe and is quite likely that it could be offered here as well, but could the key lie with providing a diesel engine for its smaller, volume based-cars?

“We are now in the process of developing a compact diesel engine for India. Europe gets such an engine in 2012 and it’s likely it could make its debut here”, quips Sen. Sources in the industry have suggested that a 1.4-litre diesel engine is being developed for India. Until then, the future of Honda may very well lie with the Brio hatch and its iterations, the Jazz and City to ensure Honda has a healthy marketshare in the ultra-competitive Indian auto sector.