The Hindu Business Line : Honda Siel chalks out long-term strategy for India

Growth plans
Honda`s small car will be India-specific and not a common model for emerging markets.
Honda not keen on setting up its own finance arm to fund car purchases in the domestic market.

NEW LAUNCH: Mr Masahiro Takedagawa, President & CEO, Honda Siel Cars India, at the launch of Honda Civic 1.8 V in the Capital on Wednesday. — Kamal Narang

Bangalore June 6 With Honda set to develop a small car for India, it is chalking out a 10-year growth plan as part of a long-term strategy for the country. Honda has also said that its small car will be India-specific and not a common model for emerging markets.

"We are looking at a 10-year plan because of the success of our products in India. We want to plan long term now as we believe that the Indian car market will grow substantially," the Honda Siel Cars President and Chief Executive Officer, Mr Masahiro Takedagawa, told Business Line. He did not share specific details of the long-term plan.

Common Model

He also ruled out a common small car model for BRIC (Brazil, Russia, India and China) countries as it could lead to marketing hassles. "Each of these countries need a different approach to marketing because their culture is different from one another," he said.

"We are not a volume-driven company. For us quality is far more important," he added. Mr Takedagawa, who later unveiled the Civic 1.8V range priced at about Rs 11.51 lakh, said a common model might sell well in one country and may not do so in another.

"A car specifically for India will be tailored to the needs of the domestic customer and hence it will be easier to market the model much better," he said.

He also said that there would be no diesel variant of the small car as it was cost-effective to build petrol-driven small cars.

Mr Takedagawa said Honda also plans to start exporting auto parts to ASEAN countries by 2010 once the free trade regime between India and these countries comes into effect.

Currently, Honda imports 20 per cent of the parts it requires to build its models in India. Honda plans to make these parts through its vendors itself and export them to ASEAN countries. At present, the imported auto parts attract 12 per cent duties.

Honda Honda has a base of 100 vendors. Of these, 10 are joint ventures between Indian and Japanese companies, 40 are technical tie ups while the rest are domestic.

Even though the small car— which could be over 1 lt capacity — will be India specific, it will be designed outside the country with inputs from Honda's engineers in India. The car could probably be designed in Thailand where Honda has an R&D centre. He also ruled out plans to set up an R&D base in the country.

Auto Finance

He said Honda was not keen on setting up its own finance arm to fund car purchases in the domestic market. Even though interest rates for car loans had gone up substantially, Honda wishes to work through its network of external auto finance companies.

"The current volumes don't justify such an approach," he said. He, however, said there is a possibility of manufacturing its sports utility vehicle, CR-V in India and some other models as well once the volumes start picking up.

Mr Takedagawa said Honda's second plant, which is in Rajasthan will start functioning in 2009.

The second plant has been allotted 600 acres of land and can produce initially upto 2-lakh units. It is at least four times bigger than the existing plant near Delhi.

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