Malaysia and Indonesia will supplement Thailand as nerve centres in ASEAN region

The launch of the Brio paves the way for India to becoming a key hub for Honda's auto business in Asia.

The company has also decided to look beyond Thailand as the nerve centre for its ASEAN operations. Malaysia and Indonesia have now been brought into its fold as strategic pillars in the region.

“Indonesia and Malaysia are growing economies whose needs must be met by Honda more on an exclusive basis. Thailand used to be our hub at one point but times have changed now and divisions within the ASEAN region are now inevitable,” Mr Takashi Nagai, President and CEO of Honda Siel Cars India, told Business Line.

It is still not clear if the Brio will be produced in Malaysia or Indonesia though it is already part of Thailand's eco car project. “Brio is an Asian exclusive car as of now which is solely meant for Thailand and India. In addition, there will be small exports from here to Sri Lanka, Nepal and Bhutan,” he said.

Mr Nagai said India was “particularly important” for Honda given the size of the market and rapid economic growth. Further, it is tipped to become the Japanese automaker's largest two-wheeler base in the next five years as it fast-tracks its business following the split with the Hero group.

“India could play a bigger global role in the future for cars too though the domestic market is top priority for the moment,” he added. The not-so-distant future could see Honda export fuel-efficient cars such as the Brio to Europe but all this will depend on the state of the global economy which is still relatively fragile now.

Honda also exports key engine parts from India to Thailand, Malaysia and Indonesia which analysts believe is a “remarkable turnaround” from the time the reverse business model was prevalent.

“Traditionally, Japanese automakers preferred to ship out components from Thailand which was their manufacturing base. This was because they had greater faith in the quality of their Thai joint ventures. It is now clear that Indian suppliers have come into their own and ready to take on bigger global challenges,” they said.

The localisation level for the Brio is already 80 per cent and Honda plans to increase this to 90 (per cent) in the coming months. “Eventually, we would like the local content in our cars to be as high as our motorcycles but this will take some time,” Mr Nagai said

This exercise is crucial to make Honda's costing structure competitive enough to consider cars cheaper than the Brio in the future. Once this happens, it will give the company a foothold in the sub Rs 3-lakh segment where the Maruti Alto rules the roost but now faces a new rival in the form of the Hyundai Eon scheduled to debut next week.

(This article was published on October 6, 2011)
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