IT IS VERY DIFFICULT TO COMPLETELY COMMIT TO INDIAN MARKET: HONDA CARS’ UENO
Honda commands fourth position in India's car market. How important is it to retain the position?
Our position is fourth but the market share is only five-six per cent, almost negligible. There are only two major players, Maruti Suzuki and Hyundai; the others are niche operators. The position does not make a lot of meaning at this moment...three, four or five, it is all the same. If you cannot exceed a 10 per cent share, you are a minor player. India has only two players with over 10 per cent, which is a bit unhealthy.
What are the possibilities for Honda? Can it have a larger market size?
Volume-wise we are okay but struggling as far as market share is concerned. Our growth will depend on the government policy on car manufacturing. The tax structure here is different and makes it difficult for major global players. A sub-four metre regulation exists here (cars below four metres in length are subject to only 12.5 per cent excise duty, as compared to 24 per cent on cars with the same engine capacity of less than 1,500 cc) but the market below four metres is limited in other countries. Therefore, most global manufacturers do not have a lot of cars in that segment. In India, this segment is strongly promoted. If this is not changed, the big global players will keep on struggling here.
By 2020, India poised to emerge as the third largest car market in the world. What will
Volume-wise, no one doubts the country’s growth potential. But, commitment-wise, there is a challenge due to the regulations and restrictions like sub-four metre taxation. The market is skewed towards a specific segment and is not really open. It is very difficult to completely commit to this market. There is no clarity on whether such regulations will continue.
It is not that customers are very happy with small cars. People aspire for bigger cars for space and comfort. The current tax structure makes this market artificially skewed to small models. I am not sure who is benefiting from this. Usually, small cars have fewer technologies and are basic. The government should review its policy. It is important to promote an affordable market but the size is getting bigger and people want larger vehicles. Some global players can make commitments if the structure changes.
How will Honda’s product line evolve in the next two to three years?
We are not planning to bring exclusive models for the Indian market. Our volume does not justify that. We can bring cars that are shared with other markets. All our small compact models are already here. We can now bring a bit of upscale models. We see interest for the Civic.
The company saw a sustained decline in sales last year. With the new City and WR-V, is the worst behind you?
Our dealers had high inventory of slow moving models last year. Then, we saw demonetisation. Both led to a decline. The situation has improved. The recovery is supported by the new City and WR-V. But, after a few months, their impact might decline. We are monitoring the situation and planning activities to sustain growth.
How is there search and developmentset-uphereplaced to play a bigger role in global development of products?
The initial focus for R&D was localisation. They found suppliers here and redesigned parts for local manufacturing. Of late, they are also contributing to new car development. The WR-V was developed in collaboration with R&D of Japan. Such activities can continue. Our engineers are accumulating experience and getting more capable.
How did Honda Cars perform financially in FY17?
It was a difficult year, as volume was down. The amortisation from earlier investments and impact of labour cost increase made it financially tough. However, we made profits. We are working to reduce unnecessary expenses. We can now produce the same number of vehicles with less people, due to productivity improvement.