Honda Cars gets into consolidation mode

Yoichiro Ueno laughs when asked if he can replicate his Malaysia experience in India.

It was during his tenure as head of Honda’s car operations that market share more than doubled to 16 per cent. Ueno recently took charge as President and CEO of Honda Cars India after the successful Malaysia stint but is only too aware that this part of the world is a different ballgame.

The interview is happening at a time when Hyundai is celebrating its 20{+t}{+h} anniversary in India. Not too many people knew this Korean brand at the time of its entry but it has now emerged the closest rival to market leader, Maruti Suzuki which has had a vice-like grip here for decades.

Steady does it Hyundai’s success contrasts sharply with Honda which has been around nearly as long in India but still has a single digit market share. Does that worry Ueno? “We are competing too but do not worry so much about the overall pace. Each company’s situation and strategy are different,” he says.

However, Ueno admits that attaining a “certain market share” is important to achieve “some kind of presence” which is more than welcome. Press him further on the ideal number and the Honda chief says that it is his personal view that a company’s “presence suddenly increases” if market share exceeds 10 per cent. “There is no scientific basis for this but achieving 10 per cent is a first goal clearly,” he says. So, will there be a Malaysia encore in India eventually?

Ueno laughs again but the message is loud and clear: Honda means business. “Like the US, China and Japan, India is very important to us for future growth. There are lots of expectations here and it is in the top priority list for our global operations,” he says.

Honda has zeroed in on four countries in Asia as its key growth engines which are India, Thailand, Indonesia and Malaysia. The other three recently exceeded ten per cent market share which means India is the odd one out, something that the company is keen to set right.

“India is growing and we expect motorisation to take time,” says Ueno, an obvious reference to the fact that penetration levels for cars is still less than 20 per thousand people. “It is perhaps not necessary to chase volumes at this point but focus on building our brand to be prepared for the takeoff stage. In a way, we are in consolidation mode,” he adds.

Honda is also equally aware that the market has new buyers coming which means that they are the ones who need to be wooed aggressively. “Premium does not come from price but the experience we offer by the end of the day. Something different will do the trick with buyers who welcome the premium experience,” says Ueno.

This is apparent with cars like the new-generation City which does not come in cheap but still draws 10 per cent new/first-time car buyers. Clearly, the City has more than done its bit in establishing the premium perception of Honda. The Brio and Amaze extend this role at the hatchback and sedan ends. “We should not throw this advantage away and need to maintain the premium feel,” insists Ueno.

Making an impact Yet, will this focus not come in the way of attaining volumes and growing market share? After all, this is a country where the ‘value-for-money’ quotient is critical in the car space. Maruti has proved this time and again and this has spurred rivals like Renault to thrown down the gauntlet with products like the Kwid.

“Of course, numbers are critical and India is on course as one of the largest car markets. While we do not chase volumes, we are aware that production efficiency improves with more numbers and costs also go down. It is equally important to see brand image and margins enhanced too,” explains Ueno. The other interesting customer behavioural pattern playing out in India is the rapid emergence of the Ubers and Olas which are tilting the balance in favour of cabs. It was not too long ago when Anand Mahindra, Chairman of the Mahindra Group, observed that this would have its impact on vehicle buying.

From Ueno’s point of view, the car still remains an aspiration purchase even while the Olas and Ubers are putting the pressure on ownership. While this trend is apparent back home in Japan too, India is still different due to its sheer size, diverse income levels and the constant pressure on public transport.

These are the factors which fuel the need to own private vehicles which also explains why the country has emerged the largest two-wheeler producer in the world with 17 million units annually. “Tokyo and Osaka have good public transport and people do not need to buy a car whereas this is not the case in small towns in Japan,” says Ueno.

Quite unlike its relatively sedate car business in India, Honda is a lot more aggressive in two-wheelers where its Activa has emerged the top brand in scooters. The biggest spin-off here is that this has only enhanced Brand Honda which could hopefully be leveraged to boost volumes in cars.

“Thanks to two-wheelers, the awareness of Honda is high and we can use our strengths mutually,” admits Ueno.

COMMENT NOW