Honda is confident the recent price cuts on its City and Jazz models will not affect its brand image as a premium carmaker.

“We were aware of this reality and a lot of thought went into the move. From our point of view, it was important to ensure that both in terms of product and sales and service, the brand would never be compromised,” Mr Jnaneswar Sen, Senior Vice-President (Sales and Marketing) of Honda Siel Cars India, told Business Line .

Price cuts in premium cars are fraught with risk as their brand equity could be hit in the process. When something exclusive becomes accessible overnight, the magic is all gone. Further, it leaves existing owners disgruntled as it could also affect resale prices.

The Daewoo effect

In fact, Daewoo experienced this over a decade ago in India when it slashed prices of its top-end Cielo. Maruti, likewise, had gone in for a selective price cut to counter the Tata Indica in the late-1990s. However, there was no visible impact as there were fewer rivals, with Maruti leagues ahead of the rest.

Experts also believe the Tata Nano and (the erstwhile Mahindra Renault) Logan lost out on the initial momentum owing to the ‘cheap' tag. Further, the constant message of ‘frugal engineering' did little to entice the interested Logan customer.

“Nobody likes to be associated with a cheap product and this is true across India. It is wrong to assume that the customer in the heartland will accept anything you offer him. By the end of the day, he likes to feel special about his car or bike,” an automobile executive said.

Competition from diesel-drives

The entry-level Jazz still remains the most expensive option in the premium hatchback segment even after the Rs 1.5 lakh price-cut. While Honda R&D played a key role in the exercise, Mr Sen said the fact that it shares a common platform with the City was a big bonus. The Brio, likewise, shares the same 1.2-litre petrol engine with the Jazz and the market is abuzz that it could sport a competitive price tag when launched next month.

Honda Siel is confident these moves will help offset the drawback of not having a diesel engine. The fact that the fuel is substantially cheaper than petrol in India is weighing on the City, which is up against the diesel-driven Volkswagen Vento and Hyundai Verna.

Incidentally, the company had gone in for a dramatic price cut for the Civic Hybrid - by Rs 8 lakh to Rs 13 lakh - in November 2008. There was a heavy duty on the directly imported car and the Rs 21-lakh tag proved unattractive to many. Honda Siel decided to take the hit and slash price to liquidate stocks.

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