Honda prepares to weather diesel car storm

Honda is gearing up for a tough drive in India with the market rapidly moving to diesel cars.

“Our small diesel engine is still over two years away and we will have to make good with our petrol (engine) portfolio till then. It is going to be a challenge but we are ready for it,” Mr Jnaneswar Sen, Senior Vice-President (Sales & Marketing), Honda Siel Cars India, told Business Line .

At present, diesel is Rs 30 a litre cheaper than petrol and this price differential has grown rapidly over the last 12-18 months. “The pace of change caught us by surprise and we were not quite prepared for it,” he said. This also explains why the City is gradually losing out in the mid-size segment to rivals with diesel options.

Sales surge

Though a diesel price hike is expected in the coming days, it will not be over Rs 4 a litre which means the gap with petrol will continue to be considerable.

Little wonder that carmakers such as Maruti, Ford, Volkswagen and Skoda have been seeing a surge in sales of their compact diesel models. General Motors believes that a diesel Beat could have made a big difference to its numbers had it been launched a lot earlier.

However, the exception has been Hyundai whose petrol-driven compacts continue to have a good run in the market. This could also change once diesel options are offered in the not-so-distant future once its Rs 400 crore plant is up and running.

Toyota, similarly, could also go ahead with a diesel alternative for the Liva hatchback due to debut next month though there has been no official confirmation yet.

The company's diesel Corolla has been clocking good numbers and this could spawn a similar script for the Liva and Etios sedan.

Honda's strategy

Honda, though, will have to contend with a longer wait and this could be quite risky if the shift to diesel gathers greater momentum. In the process, the petrol pie will only shrink rapidly and the company will have to pull out all stops to ensure that numbers do not go wildly off the mark.

All this is happening at a time when Honda globally slashed production in the aftermath of the tsunami in Japan which caused havoc at suppliers' plants. In the Indian context, the Brio hatchback, scheduled to be launched during Diwali, is expected to be a big game-changer though the absence of a diesel engine will be felt.

While conceding that this is going to be a handicap in the short-term, Honda plans to make the most of what is on offer till then.

“Our dealers will take pains to explain the many benefits of a petrol engine to customers. The Honda brand is synonymous with top-class engines and we have shown that over the years in India,” Mr Sen said.

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