The new generation City will be exported from India to close to half a dozen new markets, where Honda Cars India has never shipped vehicles before. These include, among others, left-hand drive markets in West Asia. With the start in shipments of the new City by the end of the year, the exports volumes and revenues of Indian subsidiary are expected to double in the ongoing fiscal year.
Honda Cars India Chief Executive Officer (CEO) Gaku Nakanishi said efforts have always been there to boost exports as well as sales in the domestic market. “As always, be it before or after (the outbreak of the) coronavirus pandemic, we are not only focussing on domestic sales but also trying to maximise exports for the benefit of the country”, Nakanishi told ET.
Honda Cars India plans to sell about 90000 units (including exports) in the ongoing fiscal year, said people in know of the company’s plans. Once the shipment of the new City starts, the share of exports in total production is likely to increase to 8-10%. Exports accounted for about 4% of Honda Cars India’s total production in 2019-2020.
For a global car maker that has manufacturing plants in over a couple of dozen countries, producing for the local market has been the Honda’s core strategy. The ability to take responsibility for exports in this new era and especially to left-hand drive markets (which will be a first for the company) has been due to the negotiating ability of the company with the headquarter and more importantly because of the cost competitiveness of India as a manufacturing base, say people in the know.
Honda Cars India also has a thriving auto parts exports, which clocks annual sales of Rs 1500-2000 crore. The venture has also served as a good tool to de-risk itself the company from forex fluctuations.
As regards imports, Nakanishi said the company does not have much exposure to China. Honda does import high end models Civic and CRV as a completely knocked down units, however, key volume models Amaze and City have high localisation content in excess of 90%. Parts supplies too have stabilised post lockdown, thereby negating any need to re-examine the company’s sourcing strategy.
Production, wholesale and retail volumes in the local market though had been severely affected on account of the covid-induced lockdown through March and April. Nakanishi said, “We are one of the manufacturers most affected by the coronavirus outbreak. Our BSVI production was to start just from the end of March. However, due the nationwide lockdown, we had to stop our operations. So in June, in unlockdown phase, we just started BSVI production, recovery will start from now on.”
The company is relying on the new City priced between Rs 10.90-14.65 lakh (ex-showroom, Delhi) to revive momentum for the brand in the domestic market, which has almost halved in the last three years. In what is another first for Honda, the company will be continuing with the previous generation City along with the 5th Generation City to offer a wider price point and a broader product range to its prospective buyer.
From selling close to 200,000 units per annum, the sales for the maker of Jazz and City has more than halved in the last couple of years. The renewed focus on exports may offer some cushion, but the company needs to re-force its domestic product portfolio to compete hard against its South Korean and Indian rivals who are more aggressive. In FY-20, Honda Cars India’s sales fell 45% to 102,016 units, the company’s market share stood at 3.6%. With sales of 114,081 units, Japanese rival Toyota in fact edged ahead of Honda to grab the fifth position in the domestic market last financial year.
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