Even though the demand for cars and two-wheelers has sharply slowed down in the last year, Japanís Honda Motor has been one of the few players to go against the tide and record strong performance for both the businesses. Between April and August this fiscal, volumes for its car business rose over 64% at 49,263 units ó an all-time high, while two-wheeler sales went up 21% at 12.78 lakh units. While announcing plans to expand capacity through fresh investments, Honda has also bought out its local partners ó the Munjals-led Hero Group in two-wheelers and Siddharth Shriramís Usha International ó helping it gain greater control of its local subsidiaries. In an interview with Roudra Bhattacharya, Honda Motor chairman and representative director Fumihiko Ike talks about the optimism for India and its long-term promise despite the current slowdown. Ike, who took over as chairman of the group this April, plans to make India an export hub for emerging markets with diesel engines taking the lead. Edited excerpts:
Does the slowdown in the Indian car market worry Honda?
Yes, it is the biggest concern. Globally, the financial situation is getting worse, especially in the emerging markets. Itís very ironical because the US economy is recovering ó earlier because of a difficult financial situation they were spreading out the money by giving loans for cheap, but now they are planning to tighten up. That affects the emerging markets. The other concern is the Chinese economy and this combination affects the emerging markets.
Will Honda delay its investment plans for the two-wheeler and car businesses?
In fact, we have a very aggressive investment plan regardless of the uncertainties of growth of the Indian economy. I am encouraged by participating in the dialogue between the two countries. Anand Sharma (Union minister for commerce and industry) has expressed a strong commitment to expedite the Delhi Mumbai Industrial Corridor (DMIC) and the Japanese government has promised utmost support for the joint development.
Will you look at the DMIC for Hondaís next plant, maybe because it will be closer to the ports for exports?
We are very interested in the DMIC, but we need infrastructure. There are some bottlenecks in terms of infrastructure. For example, if we want to expand our volumes in Tapukara (existing two-wheeler and upcoming car plant), we cannot because of limited supply of water. So we have to find another place. There are problems in logistics, so even if we expand capacities to meet the demand, the problem is how to deliver these vehicles in time.
We havenít decided on more plants yet, but if demand becomes larger than what we can supply, of course we have to consider more plants. To build a factory is easy, it is just about spending money. So far we have built factories every other year, but what we need is trained people.
Does Honda Motor plan to make India an export hub?
Yes, we have plans for two-wheelers, cars and generators. So for any product we are producing in this country, we have plans to distribute outside India. India will be a export hub mainly for emerging markets, but for diesel engine exports it will be Europe where there is the largest demand. We may assemble these engines in Europe, but send parts from India.
Introduction of a diesel engine has led to a dramatic turnaround for Hondaís car business in India. Does this encourage you to launch more diesel cars?
Yes, we have been improving drastically especially after we introduced the Brio Amaze diesel version this year. We are also planning to re-model the City sedan with diesel in the near future, though even today itís a nice car and I personally love it. We are very confident of having a strong product pipeline and we will have diesel engines on nearly every new car.
The industry has said that the government has been slow with reforms. What needs to be done to encourage fresh investments?
The plans are always promising but the actual implementation is very slow. We expect a very strong initiative to materialise the number of good projects in the pipeline. Strong leadership is needed.