The Hindu Business Line : Honda for a small but value car

"We want to give the latest model to Indian customers. That is what they expect from us. Small is not necessarily cheap and uncomfortable." — MR MASAHIRO TAKEDAGAWA, PRESIDENT AND CEO, HONDA SIEL CARS INDIA

"Honda has 28 models running on development. All we have to do is to choose which will be suitable for us and then add Indian requirements," says Mr Masahiro Takedagawa, President and CEO, Honda Siel Cars India Ltd, in response to a question on whether the company has started developing the small-car that it proposes to launch in India. The company, he stresses, does not believe in introducing an existing model from Honda's line-up, but prefers to bring the latest, especially in terms of technology. The Government of India (through the Budget), he says, has set a direction for the passenger car market (by providing excise duty cuts for small cars) and Honda will follow what the Government has indicated. Mr Takedagawa elaborated to Business Line Honda's strategy in India.

Excerpts from the interview:

Some insights into the automobile industry and Honda's plans for India...

This is the emerging market in terms of volume and customers' high expectation. We see potential for Honda to enlarge the number of customers here. Our policy is focussed on single customer to make him/her satisfied as much as possible. We have been here for more than 20 years with the motorcycle business. We are dealing with over three million customers, motorcycle and cars... Our brand... the Honda brand... is well penetrated.

We foresee the possibility of jumping up our car business as well.

What position you want Honda to be in India?

Position? We want to be always unique and we want to be identified by our Indian customers that we are something special and our value should be well appreciated.

That is kind of a distinguished position. Not necessarily in market share or volumes, of course profitability is necessary.

Next year, you will achieve one lakh units in capacity. What kind of a milestone is it for Honda in India, when you have been here for almost a decade?

It is just a small step. It takes 10 years. The next one lakh will not take 10 years. How soon we achieve that depends on Indian customers. We don't have to be in a rush. We can wait.

What about your plans for a small car?

It will happen. We are so impressed that (the Finance Minister) Mr P. Chidambaram announced a small-car tax scheme, and that indicates the Government of India wants to set a direction... And that is also kind of a global trend. We can follow what Government of India indicates.

What are you waiting for?

Developing a car. We don't want to bring a current model. We want to give the latest model to Indian customers. That is what they expect us. I don't think Indian customer expects Honda to give old, cheap cars. They are reasonably priced, but good value of latest models.

Has work on developing the car started?

Always, Honda has 28 models running on development. All we have to do is to choose which will be suitable for us and then add Indian requirements.

Once you take a decision, how long does it take to come to the market?

Three years. Three years to develop the car from scratch. If we can utilise some platform, or suspension or engine or machine, it can be shortened.

Small is not necessarily cheap and uncomfortable and stable. The size may be small but it should provide value. Maruti has set a benchmark on value with the Swift.

So, at Honda, we will look for a car that is small, offers super fuel efficiency, comfortable, beautiful design. Honda has to be able to meet Euro 4, Euro 5... Safety.

There are some manufacturers in India who would not look at the Indian passenger car market in terms of a hatchback or a sedan, but in terms of price segmentation. Say, Rs 4 lakh to Rs 8 lakh, where there is maximum growth. What is your view on that?

Last month, you know the Rs 10-12 lakh segment is the largest growing (referring to the Civic).

But that is on a small base...

But you know 2,000 units are enough for us. You know small or large, how much volume, profit depends on the cost. If you minimise unnecessary investment, like I said utilisation is one of the key factors which nobody recognises.

If you think about it, we are making 60,000 cars a year and 2,000 units of the Civic every month, but if you have today one lakh of capacity and 60 per cent utilisation, we have to throw away 40 per cent of the fixed costs.

What about using India as an R&D centre?

The motorcycle business, it is possible to use it as an R&D base. We have 40 of our designers working on testing motorcycles. Both in Honda Motorcycle and Scooters India and Hero Honda.

Cars you don't think that will happen?

Initially no.

Honda's strength is also in hybrids and alternate fuels. Where do you see India in that picture?

We have a range of alternate fuel engines. Even Honda is not sure what the future will be. We know the future will be fuel cell, 10 or 20 years. We are preparing. Nearly 6 per cent of our gross revenue is on developing project. It depends on the market, what you want. For instance, Brazil wants ethanol. So we give 100 per cent ethanol, 50 per cent, 10 per cent... Europe wants diesel, we are giving them diesel.

And, then every one is saying small-hybrid is better. In the US they hate diesel, they hate ethanol. They prefer hybrid. The US Government is giving certain incentives — $2000 incentive for each car.

The Chinese are changing. Now they want hybrid and we are discussing with them... If a government offers customer incentive, then we will provide all these alternate technologies that are costly.

We are discussing through SIAM (Society of Indian Automobile Manufacturers) what the Government of India wants. It is the customer's choice. If the customer wants and if the government wants to support, we will provide alternate technology. We are the only manufacturer to have such a large choice.