Will Jazz's brand new avatar work?

The last two years have been a dream run for Honda. Products like City, Amaze and Mobilio pushed volumes to a new high despite a challenging environment. While the industry's sales growth flattened to four per cent, Honda marched on with a growth of 41 per cent in 2014.

The only missing piece has been the Jazz, which made its debut in 2009, but was withdrawn four years later. Honda is now plugging the gap by bringing back the premium small car after a two-year hiatus. Jazz, which is set for launch in the second quarter of this financial year, will be Honda's second offering in the hatchback segment after the Brio.

What had gone wrong with Jazz, which was a segment-defining entry into the hatchback space for Honda six years ago? The answer to that question is short: Pricing.

Built on the same platform as City, the premium hatchback had a price tag of Rs 6.98 lakh (ex-showroom, Delhi),. Its closest rivals like Hyundai i20, Fiat Grande Punto, Volkswagen Polo and Maruti Suzuki Swift cost at least Rs 1 lakh less.

The initial results, however, were encouraging. Honda loyalists kept the production line busy in the first year. Jazz volumes closed at 7,541 units (June 2009 - March 2010).

However, it was too good to last. The following year, Jazz volumes dipped 36 per cent to 4,862 units. Volumes went down further to 4,146 units in next year , according to data provided by the Society of Indian Automobile Manufacturers. Saddled with excess stock, Honda slashed price by Rs 1.62 lakh.

The strategy worked as monthly volumes went up more than three times from around 400 units in 2010-11. But the good times didn't last as that was also the time when demand moved heavily to the diesel segment after petrol prices moved up sharply.

Rivals, which had diesel options,, made the most of the opportunity.

There were other reasons, too. The City cost only about Rs 1 lakh more than the Jazz, as a result of which City's monthly volumes were the same as Jazz's yearly sales.

In 2012, the management finally decided to pull the plug on the model.

Having learnt from its mistakes, Honda says it is better prepared this time. Jnaneswar Sen, senior vice president, marketing and sales, HCIL, says, "It would be unfair to look at the new Jazz in the context of the performance of the previous Jazz. We need to realise that neither it is the same market nor the same product".

Sen says "almost six years have passed since the launch of the previous Jazz and the Indian automobile market has evolved massively in this period. The new generation has shown an appetite for premium B+ segment cars. Six years back, this segment had very few takers. Also the new Jazz is a completely new product".

Though the Jazz will share platform with the highly successful City, Honda remains secretive on sharing product details. Sources say that the new Jazz will be powered by a 1.2 litre petrol engine (also seen on Brio and Amaze) as well as a 1.5 litre diesel engine (seen on City and Mobilio).

"The upcoming Jazz will be third generation of the car. It is doing exceptionally well in all the markets where it has been launched including the US and Japan. The styling, look, performance and high versatility will be key differentiators", adds Sen.

The new car will have a high level of localisation compared to its earlier version. Honda wants to pit it directly against the segment bestseller Hyundai Elite i20 and the to-be-launched Maruti Suzuki model, codenamed YRA.

This is a segment that is increasingly getting crowded by new kinds of models priced at Rs 5-9 lakh, a notch higher than the Maruti Swift segment. Dominated by the Hyundai Elite i20, other models in the segment are Volkswagen Polo GT and Cross Polo, Toyota Etios Cross and Fiat Avventura.

Launched in September last year Hyundai has clocked an average monthly sale of 12,000 units for the Elite i20. Maruti Suzuki's YRA will be longer and bigger than the Swift and is expected to be powered by petrol and diesel engines.

"Like the way buyers moved to Swift from Santro they will also look to go beyond the Swift. It's a natural progression," says an auto analyst. That should be music to Honda's ears before the launch of the new Jazz.