Honda Siel unveils plan to sell 5 lakh cars in 4 years

Written by fe Bureau | New Delhi | Updated: May 30 2012, 09:07am hrs
After a tough year that saw sales dip, Japanese major Honda Siel has unveiled an ambitious plan of selling 5 lakh cars within the next four years. The announcement comes in the wake of a top-level reshuffle that saw Hironori Kanayama, a Honda veteran with experience in 19 international markets, taking charge as president & CEO of Honda Siel Cars.

It shouldn't be difficult for the company to meet the new target as it has an annual capacity to manufacture 1 lakh cars at its Greater Noida plant and another 60,000 units at Tapukara in Rajasthan.

But, according to analysts, the feat looks daunting if one were to plainly go by the sales figures of its existing portfolio, ranging from the hatchback Brio to the petrol-engine powered utility vehicle CRV. After peaking at 61,000 units in 2009-10, Hondas sales fell to 58,951 units in 2010-11, but 2011-12 saw sales sales dip further to 54,108 as its supply chain was disrupted, first due to the earthquake in Japan and, later, because of floods in Thailand, which disrupted supply of components.

For the company to sell around 1.25 lakh cars a year to reach a cumulative figure of 5 lakh units over the next four years, it would need more than 50% surge in sales.

However, even Kanayama agreed that economic environment was challenging with rising inflation and perpetually rising petrol prices, which have dented its market share in favour of diesel-powered vehicles. For the record, the company, which started selling its cars in India in 1997, took 15 years to touch a cumulative figure of 5 lakh units.

Still, the company is banking on sales of Brio, which has notched up good numbers ever since its launch in September 2011 and the popular sedan City. Kanayama said that Brio and Honda City, the company's most popular sedan would drive its future growth.

We have had an excellent response to Brio, which, since its launch in November, sold more than 17,000 units, Kanayama said.

In order to reach those numbers, the company needs to get its product mix right. The market is growing and the pie would continue to enlarge, but for its share to increase, the company would need the right product strategy,said Abdul Majeed of PwC.

The market has the capacity to absorb, but the company needs that little extra push, which would come with a more mass-market car than Brio and, even City for that matter, analysts maintain. In such a scenario, the only way forward for the company would be a product at new price and entry point or a price cut in its existing products.

However, Kanayama has ruled at any price cut at this point of time, which leaves the company with only one option. The other option, which would take time, is to get into manufacturing diesel models. While Kanayama didn't rule out any new launches, he refused to divulge any details on the timing. A lot of things are under consideration, is all he said.