In a year where Honda Cars India has suffered flat sales growth in a growing market, Chief Executive Yoichiro Ueno believes that tight excise norms are preventing the company from launching a wider range of cars. ‘While it is commendable that the Indian Government wants to promote small car ownership, the excise benefits for smaller cars are preventing companies such as ourselves from launching more products from our global range.” The former UPA Government had put in place four different rates of taxation for vehicles.
In fact, Ueno believes that with stronger safety norms coming in from mid-2017, carmakers such as Honda will face a challenge to conform to safety while still offering passenger comfort. “You will need to account for structural safety but also keep cabin space. And customers will also want cars to look good.” Pointedly, he mentioned that the Indian car market, which was the fifth largest in the world in 2015 and is expected to be the fourth largest in 2016 overtaking Germany had very low variation in terms of types of cars offered, “The Indian market is still very monotone, and that must change as buyers demand different things of their cars.” He also expressed some apprehension and lack of clarity about the new GST as rates for passenger cars were yet to be announced, “that has led to much uncertainty in the industry.”
Speaking on Honda’s lacklustre performance this fiscal, Ueno admitted that a major wholesale push last fiscal had led to increased dealer stocks, “we have corrected that situation and reduced stocks at dealers.”
Jnaneswar Sen, Senior Vice-President, Marketing and Sales, Honda cars India said that the carmaker was adding 45 new dealerships in 2016-17 from 295 at the end of March 2016. “We are currently at 309 dealers in 197 cities and we will add 21 more by the end of the year.”
Another reason for the slow pace of sales this year for Honda, Ueno said has been the uncertainty around diesel. While Honda has petrol-engine products across its range, diesel-engine versions accounted for a third of sales before rulings from the Supreme Court and National Green Tribunal. Honda’s diesel engine on the City and Amaze was below 2000cc thus not impacted by the SC ruling, but the NGT ruling on deregistering 10-year old diesel cars adversely impacted demand.
“In the October-December quarter, 64 per cent of demand for the Honda City was for petrol engines. In the subsequent January-March quarter that number went up to 72 per cent even though the ruling only impacted the NCR”, Sen mentioned. Sen added that the carmaker has been able to adjust to shifting demand patterns now and was not adversely impacted, although “some suppliers have been affected.”
However, Ueno expected that the second half of the year will be more positive for Honda, with the new Accord on the way and with India continuing to grow.
“India is a major market for Honda globally, it is now our largest two-wheeler market and our fourth-largest car market. The Indian economy is showing stable growth and the Indian car market is also growing steadily. I believe the second half of this year will be very positive for us.”