Lack of SUVs, stiff competition from rivals makes Honda Cars’ drive tough

The company has now decided to phase out three more of its models — Jazz, WR-V and fourth-generation City — by the end of the current fiscal, according to sources.

Honda Cars India has been one of the early entrants in the Indian market — way back in 1997 — but the company seems to be on an uphill drive when it comes to facing the competitive landscape of the domestic market which is crowded and successful players have carved out their niches. Analysts maintain that Honda has been unsuccessful in launching right products at the right time at right pricing.

The company has now decided to phase out three more of its models — Jazz, WR-V and fourth-generation City — by the end of the current fiscal, according to sources. This comes after it discontinued two of its premium models — Civic and CR-V — in December 2020.

Lack of sport utility vehicle (SUV) options in a market in which preference for such models has increased manifold and stiff competition from rivals have resulted in Honda consistently losing share in the passenger vehicle (PV) segment. The company had a share of 5.44% in the country’s PV market in FY19. It dropped to 3.67% in FY20, 3.02% in FY21 and 2.79% in FY22.

The major reason for this decline is the company not having the right product in the right segment at the right time, an industry expert told FE. Honda does not have a strong contender in the sub-four metre compact SUV segment, which accounted for 21.7% of the PV volumes in FY22, and the mid-size SUV segment, which had a share of 17.5% during the same fiscal.

However, it is developing a new India-focused SUV, which will be launched in CY23. Also, stronger rivals like a resurgent Tata Motors and Kia India, with their robust SUV portfolio, have eaten into the market share of Honda. Tata’s share in the PV segment increased from 8.26% in FY21 to 12.16% in FY22, while that of Kia improved to 6.08% in FY22 from 5.74% in FY21.

Though Honda has a strong presence in the sedan segment with models like Amaze and fifth-generation City, the sedan segment’s share itself declined to merely 10.2% of the overall PV market in FY22 from 14.3% in FY20.

Apart from Jazz, WR-V and fourth-generation City, the company’s product portfolio includes Amaze, fifth-generation City and City e:HEV (hybrid). The automaker now manufactures all the vehicles at its Tapukara plant in Rajasthan. In December 2020, it completely stopped production at its plant in Greater Noida, Uttar Pradesh.

The supply of components for Jazz, WR-V and fourth-generation City from different warehouses to the Tapukara plant has also slowed down, sources told FE. While components for these models would be furnished on almost a daily basis before the pandemic, the frequency has now decelerated to once in 10-15 days, they said.

When contacted, Honda said, “As a policy, we don’t comment on market speculation”. Launched in India in June 2009, Jazz was too expensive and didn’t attract many buyers. In almost four years, Honda was able to sell only 23,170 units of Jazz and discontinued it in February 2013.

In July 2015, the company re-launched the new-generation Jazz, but it ran into stronger rivals such as Maruti Suzuki Baleno and Hyundai i20, and couldn’t attract substantial buyers either. The premium hatchback’s sales stood at 5,840 units in FY20, 5,724 units in FY21 and 5,913 units in FY22.

WR-V was launched in March 2017 and was based on the Jazz platform. While Honda promoted it as an alternative to sub-four metre compact SUVs, customers didn’t buy that argument. Honda sold 11,926 units of WR-V in FY20, 9,538 units in FY21 and 6,086 units in FY22.

The industry experts FE spoke with said that both Jazz and WR-V are now at the end of their lifecycle, and Honda may not be able to recover the heavy investment into developing their new generations because of their low sales.
Honda launched the fifth-generation City in July 2020. However, it did not discontinue the fourth-generation model and kept selling both from its showrooms across India.

The customers are preferring the fifth-generation City over the fourth-generation City as the former is a far bigger car and the price difference between the two is just about Rs 2 lakh, said an expert. Besides, the customers want to buy the latest product and not a generation old model, he added.

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