At 20, Honda City is still going strong

Rewind to 1998 and it was the year of some truly important product launches in India.

The Tata Indica hogged the headlines while Hyundai announced its intent with the Santro. And then there was the Honda City, which is not only still around but growing from strength to strength quite unlike the other two models.

To that extent, it is one of the longest surviving, and still popular, brands in this part of the world and has also become synonymous with its manufacturer, Honda Cars India. With cumulative production of over seven lakh units thus far, the country has also become the most important City hub worldwide for the Japanese automaker.

It is almost hard to believe now that only 800 Citys were sold in the first year, which is also a reminder of how affluence levels have grown since. Yet, as Jnaneswar Sen, Senior VP (Marketing & Sales) of Honda Cars India says, it still created enough resonance among car buyers for its fuel efficiency and performance. “It helped establish the brand even though numbers were not so great,” he adds.

The first generation City did nearly 60,000 units during its five-year term while the second generation saw volumes grow three-fold to over 1.8 lakh units. In the process, this helped the brand get more visibility and enhance its reputation of quality and comfort.

The third generation outsold the second, though only marginally, which could have been a result of being disadvantaged without a diesel option. The fourth generation, which entered the market in 2014 with a diesel alternative, has taken the story to the next level with numbers soaring at over 2.7 lakh units and still growing.

As Sen points out, the City has always had competition right from the time it was launched 20 years ago. Also, when dieselisation began happening in a big way around 2012, Honda literally had its back to the wall simply because its portfolio was entirely petrol-driven. Despite this, the City held its own even as customers were moving to diesel offerings from other manufacturers.

Sen believes that what has kept the City ticking for two decades is the conscious effort by Honda to keep some of its traits constant be it quality, space and ergonomics, “which are at a high level”. Changes are also being made constantly to keep pace with buyer preferences in an automobile market that is perhaps the most competitive in the world.

What is welcome news to Honda is that the average age of its City buyers is falling. This is a big deal in a country where two-thirds of the population is under 35 years old. “With the third generation City, the average customer age was perhaps around 40 but with the diesel coming in 2014, this is now 33,” says Sen. “This is good for us since India is a young country.”

Likewise, where automatics took up merely 5 per cent of sales a decade ago, this portion has grown substantially to 30 per cent today. Honda believes this will grow even further in the coming years. After all, the automatic option does not compromise on mileage and becomes the best option for crowded roads.

There have been other noticeable changes with the City’s retail dynamics over the years. Where sales in tier II/III regions has grown to 20 per cent from just 2 per cent 10 years ago. Honda has also been increasing its network in smaller cities and towns to keep pace with demand for its cars.

Interestingly, demand for automatics is higher in tier I cities while diesel is not a big draw. However, tier III regions prefer diesel to petrol. Even nationally, while 78 per cent of City sales are driven by its petrol versions, there are places, which sell over 50 per cent diesel. “India is a diverse country and we see this diversity reflected in the City,” observes Sen.

Thus far, Honda has sold about 1.4 million cars during its India tenure of which the City takes up 50 per cent at seven lakh units. However, the current composition of sales for this fiscal has the City only taking up a third. The WR-V accounts for a third of sales too with the Jazz and Amaze making up the balance.

There have been blips along the way and Honda is now keen on setting things right.

“We want to build our portfolio and not be a one-model company, which is too reliant on the City,” says Sen. Yet, the fact remains that the brand is still going strong and Honda is already working on its evolution for the future.

Despite its huge success, there is no taking away the grim market reality that Maruti and Hyundai account for over two-thirds of the car market in India. Honda has been around for two decades but its numbers do not reflect that tenure with the City being the exception to the rule.

Sen believes that there are some legacy issues on pricing, which also need to be dealt with. “People assume we are expensive when we are not and some don’t even come to us,” he says. Perhaps this has to do with the fact that some years back, the lineup comprised pricey options such as the City, Civic, CR-V and Accord.

Perhaps this is where help can be sought from the more successful two-wheeler operations where HMSI (Honda Motorcycle & Scooter India) has been growing by leaps and bounds. Honda Cars is now exploring synergies where it could use two-wheeler sales data to access customers for entry-level options such as the Brio. Sharing distribution could also be contemplated though this is not easy in small towns where space is a constraint.

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