Amaze, the compact sedan, has helped Honda climb to the third spot
Honda Motor Company (Honda) may have cracked the formula for success in India: A diesel-powered compact sedan. The Amaze, introduced in April, fueled the Japanese automaker's sales to a record the following month and propelled Honda to the third spot among carmakers in Asia's third-biggest market from as low as the eighth in 2011. After denting sales of Maruti Suzuki India's (Maruti) best-selling sub-compact Swift DZire in May and June, Honda is doubling capacity and planning more models, says Jnaneswar Sen, senior vice president for sales and marketing at Honda Cars India.
"We've never faced this happy situation," Sen says in an interview at the company's factory in Noida, near New Delhi. "We will grow fast and we are working towards becoming the most trusted brand in India."
Honda, which was the only automaker in India that did not offer a diesel-engine car until March, is catching up with its rivals to benefit from the popularity of a fuel that is 26 per cent cheaper than petrol. The Amaze will hurt Maruti, which is seeking to shield its market and margins amid the worst slump in more than a decade in Asia's third-biggest economy, according to Mayur Milak, an analyst with Dolat Capital Market.
"The launch of the Amaze has given people an opportunity to look beyond the DZire," says Mumbai-based Milak. "Having a Honda badge helps and going forward, growing competition will hamper Maruti."
Fuel Subsidies
The share of diesel cars sold in India swelled to 47 per cent in the year ended March 31, from 40 per cent in the previous 12 months, as the government subsidises the fuel to benefit farmers and freight operators. Petrol at a New Delhi pump costs Rs 68.58 ($1.15) a litre, while diesel sells for Rs 50.84.
The Amaze sub-compact, which is the Brio hatchback with a boot, has a four-five month waiting period, Sen says. The diesel variant starts from Rs 6.02 lakh in the nation's capital, while the DZire equivalent sells for Rs 5.99 lakh.
Sales at Honda's Indian unit, including those of the City, Accord and CR-V, reached 11,342 units in May and jumped 248 per cent to 9,297 cars in June (over sales in June, 2012), versus as few as 1,072 in December 2011, according to data provided by the Society of Indian Automobile Manufacturers (SIAM).
Suzuki Motor's local unit sold 12,548 DZire cars in June, down almost 9 per cent from a year earlier. The dispatches declined 2.5 per cent in the previous month. Mayank Pareek, Maruti's head of sales, did not answer two calls made to his mobile phone.
'Significant Pull'
"Honda does have a significant amount of pull as far as the Indian buyer is concerned," says Mohit Arora, executive director at J.D. Power Asia Pacific in Singapore. "Clearly, with a slowdown in the market, the largest player is bound to be hit. There would be impact on Maruti if it doesn't come up with a new model."
The slowdown for Maruti's DZire comes at a time when industry-wide car sales are on course for the eighth consecutive monthly decline in June, as decelerating economic growth and high interest rates keep buyers from showrooms. Annual sales in the year ended March 31 fell 6.7 per cent to 1.89 mn units, the biggest decline since 2001, according to SIAM. India's $1.8 trillion (about Rs 11 lakh crore) economy expanded at the weakest pace in a decade in the period, hurt by an uneven global recovery and moderating investment.
To boost demand in the current economic environment, carmakers from General Motors to Volkswagen AG and Ford Motor are introducing new models and offering discounts to induce buyers. Rising competition from global carmakers has eroded Maruti's market share from about 60 per cent a decade ago to 39 per cent last year. Now, Honda may challenge it further.
Double Capacity
The automaker will add a seven-seat minivan based on the same platform as the Amaze next year that will compete against Maruti's Ertiga model, followed by a compact sport-utility vehicle, a new version of the Jazz hatchback and the City sedan, Sen says. The automaker will also open a 120,000 car-a-year factory in the western state of Rajasthan next year that will double its capacity in India, he says.
Suzuki Motor, which sells about 40 per cent of its annual deliveries in India, will open a sixth plant this year at Manesar, near New Delhi, that will raise its capacity to 1.75 mn units. The company is also building a new factory in the western state of Gujarat that will add a further 250,000 car capacity.
Best Performer
Maruti's net income in the three months ended March 31 rose to Rs 1,240 crore from Rs 640 crore as a weaker yen reduced the cost of components, and sales of its Ertiga minivan and revamped DZire increased. The earnings margin before interest, taxes, depreciation and amortisation widened to 9.82 per cent, the highest since 2011.
Maruti's shares have risen 6 per cent this year, making it the best performer on the 10-member S&P BSE Auto Index.
Honda is targeting to sell a record number of vehicles this year due to demand in the U.S., its biggest market, as well as a cheaper yen that makes exports competitive. In India, Sen says that Honda expects to sell over 120,000 cars this year, half of which will be the Amaze.
Honda plans to add 10 dealers this year in India, and further increase localisation on its models, Sen says.
"Honda has been resurgent throughout the world," says J.D. Power's Arora. "The challenge was the availability of diesel products, and that is clearly behind them."
"We've never faced this happy situation," Sen says in an interview at the company's factory in Noida, near New Delhi. "We will grow fast and we are working towards becoming the most trusted brand in India."
Honda, which was the only automaker in India that did not offer a diesel-engine car until March, is catching up with its rivals to benefit from the popularity of a fuel that is 26 per cent cheaper than petrol. The Amaze will hurt Maruti, which is seeking to shield its market and margins amid the worst slump in more than a decade in Asia's third-biggest economy, according to Mayur Milak, an analyst with Dolat Capital Market.
"The launch of the Amaze has given people an opportunity to look beyond the DZire," says Mumbai-based Milak. "Having a Honda badge helps and going forward, growing competition will hamper Maruti."
Fuel Subsidies
The share of diesel cars sold in India swelled to 47 per cent in the year ended March 31, from 40 per cent in the previous 12 months, as the government subsidises the fuel to benefit farmers and freight operators. Petrol at a New Delhi pump costs Rs 68.58 ($1.15) a litre, while diesel sells for Rs 50.84.
The Amaze sub-compact, which is the Brio hatchback with a boot, has a four-five month waiting period, Sen says. The diesel variant starts from Rs 6.02 lakh in the nation's capital, while the DZire equivalent sells for Rs 5.99 lakh.
Sales at Honda's Indian unit, including those of the City, Accord and CR-V, reached 11,342 units in May and jumped 248 per cent to 9,297 cars in June (over sales in June, 2012), versus as few as 1,072 in December 2011, according to data provided by the Society of Indian Automobile Manufacturers (SIAM).
Suzuki Motor's local unit sold 12,548 DZire cars in June, down almost 9 per cent from a year earlier. The dispatches declined 2.5 per cent in the previous month. Mayank Pareek, Maruti's head of sales, did not answer two calls made to his mobile phone.
'Significant Pull'
"Honda does have a significant amount of pull as far as the Indian buyer is concerned," says Mohit Arora, executive director at J.D. Power Asia Pacific in Singapore. "Clearly, with a slowdown in the market, the largest player is bound to be hit. There would be impact on Maruti if it doesn't come up with a new model."
The slowdown for Maruti's DZire comes at a time when industry-wide car sales are on course for the eighth consecutive monthly decline in June, as decelerating economic growth and high interest rates keep buyers from showrooms. Annual sales in the year ended March 31 fell 6.7 per cent to 1.89 mn units, the biggest decline since 2001, according to SIAM. India's $1.8 trillion (about Rs 11 lakh crore) economy expanded at the weakest pace in a decade in the period, hurt by an uneven global recovery and moderating investment.
To boost demand in the current economic environment, carmakers from General Motors to Volkswagen AG and Ford Motor are introducing new models and offering discounts to induce buyers. Rising competition from global carmakers has eroded Maruti's market share from about 60 per cent a decade ago to 39 per cent last year. Now, Honda may challenge it further.
Double Capacity
The automaker will add a seven-seat minivan based on the same platform as the Amaze next year that will compete against Maruti's Ertiga model, followed by a compact sport-utility vehicle, a new version of the Jazz hatchback and the City sedan, Sen says. The automaker will also open a 120,000 car-a-year factory in the western state of Rajasthan next year that will double its capacity in India, he says.
Suzuki Motor, which sells about 40 per cent of its annual deliveries in India, will open a sixth plant this year at Manesar, near New Delhi, that will raise its capacity to 1.75 mn units. The company is also building a new factory in the western state of Gujarat that will add a further 250,000 car capacity.
Best Performer
Maruti's net income in the three months ended March 31 rose to Rs 1,240 crore from Rs 640 crore as a weaker yen reduced the cost of components, and sales of its Ertiga minivan and revamped DZire increased. The earnings margin before interest, taxes, depreciation and amortisation widened to 9.82 per cent, the highest since 2011.
Maruti's shares have risen 6 per cent this year, making it the best performer on the 10-member S&P BSE Auto Index.
Honda is targeting to sell a record number of vehicles this year due to demand in the U.S., its biggest market, as well as a cheaper yen that makes exports competitive. In India, Sen says that Honda expects to sell over 120,000 cars this year, half of which will be the Amaze.
Honda plans to add 10 dealers this year in India, and further increase localisation on its models, Sen says.
"Honda has been resurgent throughout the world," says J.D. Power's Arora. "The challenge was the availability of diesel products, and that is clearly behind them."
