Honda drafts roadmap for cars, 2-wheelers in India

Shinji Aoyama is no stranger to India. He led Honda’s two-wheeler operations here some years ago and spearheaded its aggressive expansion strategy soon after the split with Hero in December 2010.

Today, Aoyama has a much bigger role as Honda Motor Company’s Chief Officer, Regional Operations (Asia and Oceania) as well as President & CEO, Asian Honda Motor. He is based in Thailand but keeps a close eye on India, which is the company’s most strategic market, both for cars and two-wheelers.

We are seated in a private room at the Honda pavilion in Greater Noida, hosting the Delhi Auto Expo. Aoyama is here with the global leadership team, which includes President & CEO, Takahiro Hachigo. Their presence clearly reflects the importance of India in the Honda roadmap.

“Since I have been working for many years with two-wheeler operations, I did not recognise very well the other part of Honda, which is cars,” says Aoyama. “Today, I am working for both and can recognise how efficient motorcycle operations are, especially from the viewpoint of attraction to the people.”

Design and style

The message coming through is that even minor tweaks and modifications in styling and design in scooters or motorcycles end up hitting the bull’s-eye with young Indian buyers. And for a successful brand like Honda, which has truly led the way in scooters with Activa, the effect is magic. “Attraction level in motorcycles/scooters is high, which tells me that two-wheeler operations are efficient,” explains Aoyama.

This clearly is an India phenomenon considering that in countries like Japan, people have a greater attention span for automobiles and not two-wheelers, where the market is much smaller than India. After all, this part of the world churns out over 18 million motorcycles and scooters every year while the output of cars and SUVs is a sixth of this tally.

This analogy holds good for Honda too where it is the closest rival to former partner, Hero, in two-wheelers but is still way behind Maruti and Hyundai in cars. Despite this contrasting picture, Aoyama believes that there is “much bigger space” for Honda to expand in its automobile operations.

Potential for growth

“Overall car volumes in India make it number five in the world but very soon it will climb to number three after China and the US,” he says. “Honda will therefore work on increasing its presence with this level of growth in cars.” The task is a lot easier, of course, in its two-wheeler business where the company is confident of reaching leadership position a lot quicker.

According to Aoyama, this will, in all likelihood, happen in 2020-21 when the country is ready with its new emission norms. “How to meet BS VI norms is one of the big challenges in technology for us and will give Honda the opportunity to take the next big leap,” he says. “This particularly pertains to technology for fuel injection.”

There is no question that this is an expensive proposition but Honda’s biggest plus in its two-wheelers lies in the staggering volumes of over six million units annually. “Based on these levels, we can introduce fuel injection, which is expensive otherwise but we may be able to launch products keeping affordable price levels,” says Aoyama.. “In this connection, I am very sure we can take a lead in the two-wheeler market by 2020 or ’21.”

Hero still number one

For the record, Hero is still ahead by a million units annually and it will be interesting to see how the scenario pans out in the next two-three years. Since the two parted ways over seven years ago, the Indian company has continued to lead the market even while Honda has been going flat out in increasing capacity from 1.6 million to nearly 6.4 million units.

“While I am reasonably sure (of reaching number one) for two-wheelers, this cannot be said for our automobile operations with players such as Maruti and Hyundai, which are strong competitors,” says Aoyama. This is where new products such as the second generation Amaze, whose global unveiling happened at the Expo, and “upcoming models over the next five-six years will see something very new for the Indian market”.

Aoyama believes Honda will then be able to “take a much better position” in India for cars. While he does not get into specifics, it is quite apparent that the Japanese automaker is of the view that motorisation will truly take off in the subcontinent only by 2025. In the process, the market will move from predominantly compact cars to larger and premium offerings thanks to better roads and higher disposable incomes.

Pinning hopes

“With the second generation Amaze, it is time to push aggressively for volumes. Once we cannot catch up with the pace of market growth, it becomes very difficult to make up in India,” admits Aoyama. The success of the all-new Amaze is, therefore, “very critical” to Honda Cars, which will be looking at volumes of one lakh units annually. “I hope the Amaze will grip the hearts of Indian customers,” he adds.

For a brand that is setting sales charts afire in two-wheelers but not cars, can synergies help to set the balance right, at least in part? After all, Honda has an enormous base of two-wheeler customers, which can hopefully be tapped to grow its car base.

This is not so easy, says Aoyama, since it will involve rapid expansion of cars and SUVs into tier II and tier III regions. “We are not really bad in tier I cities for cars while for tier II/III , we are still on the way of creating a dealer network. Simply thinking of using our two-wheeler dealer channel is not so easy,” he reiterates.

For instance, even if Honda wishes to sell cars through its two-wheeler channels, there are bigger challenges to handle in after-sales facilities arising from size, number of technicians and so on.

Likewise, the large two-wheeler customer base becomes irrelevant without a sizeable dealer network for cars in smaller regions. “The solution is obviously not easy and the most important thing is to have a convenient dealer location for potential buyers,” says Aoyama.

Honda Cars India has a production capacity of three lakh units at its two plants in Greater Noida and Rajasthan, of which two lakh is being used right now. It is only a matter of time before the company optimises its capacity and prepares for the next phase of growth.

“Once we reach the three lakh unit level, what to do next is the big question. What happens if we want to exceed and move on to four and lakh cars annually?” asks Aoyama. At one level, this is hardly an issue considering that Honda has already identified land in Gujarat for its third plant but its Asia chief obviously has other concerns in his mind.

“In case of automobiles, unless we become very sure of doing four or five lakh units, it is not easy to invest in new capacity. This means how to feel confident with bigger numbers becomes very important,” elaborates Aoyama. The underlying message is meticulous preparation with the dealer network coupled with good products. Clearly, Honda does not want to put the cart before the horse in its India car business.

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