New City starts Rs 50,000 lower

Honda Siel, which launched the face-lifted City sedan on Wednesday, said that it is now trying to increase local sourcing of raw materials such as steel, apart from manufactured components.

Higher domestic sourcing is helping it price its models more competitively in the domestic market, while “de-risking” itself from an appreciating Yen (versus Rupee) and the erratic supply of components from Japan and Thailand.

“We're increasing pure localisation from India apart from components, this refers to raw materials. This has just started and is reflecting in our new pricing strategy on the cars,” said Mr Jnaneswar Sen, Senior Vice President, Sales and Marketing at Honda Siel Cars India.

The New City, expanded to five main variants from three, has seen a second lowering of its entry price after June this year (Rs 66,000 cut). With deliveries only from January, the current range now starts Rs 50,000 lower at Rs 6.99 lakh (from Rs 7.49 lakh), going up to Rs 10.22 lakh. Similarly, prices for the Jazz premium hatch were also dropped by Rs 1.6 lakh in August this year, leading to a significant increase in demand.

Plant output

Honda expects output at its Greater Noida plant to come back to maximum levels by February-March this year, through alternate component supply from China and Japan.

This will help it meet the order backlog and reduce the waiting period of around four months both for the recently launched Brio small car and Jazz hatchback. The plant has been operating at about 20 per cent of the 10,000-unit monthly capacity in November due to a shortage of key components.

“We will start increasing production with the City in January and then the Brio and Jazz in February. In November, we produced at 20 per cent of our levels and December is expected to be even worse,” a company official said.

Though demand has been rising after the price repositioning and Brio launch, production ramp-up has been stalled due to component shortage, first after the Japan tsunami in March and then the flood in Thailand in September-October.

The Japanese carmaker had increased the annual capacity at the plant in mid-2011 to 1.2 lakh units from 60,000 units on expectations of higher demand and has been preparing a second plant at Tapukara, Rajasthan.

(This article was published on December 14, 2011)
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